Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillate markets started the week of Oct. 19 a tad lower, as increasing movement restrictions due to a resurgence of COVID-19 infections fuelled demand concerns.

ICE December Brent crude futures edged lower by 5 cents/b on the day to $42.80/b at 0300 GMT Oct. 19, from $42.85/b at the 0830 GMT Asian close on Oct. 16.

JET FUEL/KEROSENE

**The jet fuel/kerosene complex kicked off the week on a slightly weaker note on tepid air travel demand amid the coronavirus pandemic. At 0300 GMT Oct. 19, brokers pegged the front month November-December jet fuel timespread at minus 65 cents/b, which is 4 cents/b wider from minus 61 cents/b at the 0830 GMT Asian close on Oct. 16.

** The mild bearish sentiment came as experts reported that global air traffic was years away from returning to pre-COVID-19 levels. According to a recent report by Fitch ratings, air traffic is not expected to return until 2024, adding that passenger traffic was expected to remain well below 2019 levels in 2021, except for China and Vietnam which have seen rapid recoveries as a result of low infection rates.

** FOB Singapore jet fuel/kerosene cash differential fell in the previous week and was assessed at a discount of 66 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments on Oct. 16, widening 16 cents/b, or 32%, week on week, Platts data showed.

** FOB Singapore jet fuel/kerosene cracking margin against front month cash Dubai also trended lower, albeit remaining in positive territory, and was assessed at plus 89 cents/b on Oct. 16, falling 18 cents/b week on week, Platts data showed.

** According to a S&P Global Platts Analytics report on Oct. 15, Asian oil demand had weakened over the past two months, with an uptick in COVID-19 cases and lockdown measures in some countries, adding that the Asian jet fuel/kerosene demand is expected to decline by 940,000 b/d in 2020. "Overall, Asian product demand is expected to contract by 1.7 million b/d in 2020, before growing by 1.6 million b/d in 2021," Platts Analytics added.

GASOIL

** Front-month November-December gasoil market structure was valued at a contango of minus 41 cents/b at 0300 GMT Oct. 19, unchanged from Oct. 16, Platts data showed.

** The November Exchange of Futures for Swaps spread was pegged at minus $1.50/mt at 0300 GMT Oct. 19, steady from the Oct. 16 Asian close.

** Singapore maintained its position as a net exporter of gasoil in the week to Oct. 14 with outflows of 317,892 mt, down 12.01% on the week against imports of 284,407 mt, up 40.19% over the same period, Enterprise Singapore data released late Oct. 15 showed. In spite of gasoil outflows outpacing that of inflows, onshore commercial middle distillate stockpiles in the city-state edged up 1.96% week on week to 15.13 million barrels over Oct. 8-14, rebounding above the 15 million-barrel mark due to a persistently stubborn backlog of gasoil and jet fuel inventories.

** Arbitrage economics to move Asian and Persian Gulf gasoil barrels to the west of Suez remain unviable, and has trapped gasoil barrels within the region, further exacerbating mounting inventory pressures.

** Industry sources said activity in the Asian gasoil market remained muted due to poor regional demand as movement restrictions remained in place due to spiralling coronavirus infections. Reduced gasoil exports from Japan and South Korea due to curtailed output, is helping to keep a floor for prices, they added.