Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillate complex is expected to diverge in the week starting Oct. 26 as gasoil remains pressured by limp demand even as supply tightens due to curtailed production, while jet fuel/kerosene finds support in seasonal restocking ahead of winter.

ICE December Brent crude futures stood at $41.13/b at 0300 GMT Oct. 26, down $1.30/b from the 0830 GMT Asian close on Oct. 23.

JET FUEL/KEROSENE

** The jet fuel/kerosene market was steady in mid-morning trade Oct. 26 from the previous session amid expectations that heating oil demand will gain momentum as winter approaches. Brokers pegged the front-month November-December jet fuel timespread at minus 59 cents/b at 0300 GMT, unchanged from the 0830 GMT Asian close on Oct. 23.

** Japan's kerosene demand is set to pick up from November as most of the country is forecast to face colder-than-usual temperatures in the next three months, the Japan Meteorological Agency said Oct. 23. Temperatures in 10 of Japan's 12 regions are forecast to be below the 30-year average over November-January, the JMA said in a three-month weather forecast.

** Japan's estimated weekly kerosene shipments more than doubled to 3.91 million barrels in the four weeks to Oct. 17 from 1.78 million barrels in the previous four weeks to Sept. 19, according to S&P Global Platts calculations based on Petroleum Association of Japan data. Estimated four-week kerosene shipments were also up 22.5% year on year, according to Platts calculations.

** The FOB Singapore jet fuel/kerosene cash differential rose 13 cents/b or 16.25% on week to settle at a discount of 67 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Oct. 23, Platts data showed.

** The FOB Singapore jet fuel/kerosene crack for physical cargoes against front-month cash Dubai was assessed at plus 77 cents/b Oct. 23, up 21 cents/b from Oct.19.

GASOIL

** The front-month November-December gasoil market structure stood at a contango of minus 57 cents/b at 0300 GMT, down slightly from minus 55 cents/b at the Asian close Oct. 23, Platts data showed.

** The November Exchange of Futures for Swaps spread was pegged at minus $1.75/mt at 0300 GMT, widening from minus $1.23/mt at the Oct. 23 Asian close. The wide EFS spread has stymied arbitrage efforts to move surplus Asian and Persian Gulf gasoil barrels to the West.

** Asian market participants are awaiting the start of term gasoil talks, which are expected to begin end October or early November.

** Amid the wait, industry sources said the pace of demand recovery in the region for gasoil has been slow, with high inventory levels reflecting the persistent lack of appetite.

** Still, some demand outlets remain. Australia continues to absorb gasoil barrels due to consistent demand from its mining industry, which has continued to operate through the coronavirus pandemic.

** Australia received the lion's share of Singapore's gasoil outflows in the week ending Oct. 21 at 122,226 mt, followed by Malaysia at 106,454 mt and Myanmar at 68,145 mt, Enterprise Singapore data showed. Singapore maintained its position as a net exporter of gasoil in the week, with exports jumping 37.42% to 436,844 mt, far outpacing imports at 126,773 mt, the data showed.