Asia middle distillates: Key market indicators for Nov 8-12

Asian middle distillates are likely to remain supported into the Nov. 8-12 trading week on the back of good demand and limited supply, which have shored up prices for both gasoil and jet fuel/kerosene.

At 10:25 am Singapore time (0225 GMT), the ICE January Brent crude oil futures contract stood at $83.78/b, up $2.65/b (3.27%) from $81.13/b at the Nov. 5 Asian close.

Jet fuel/Kerosene

** Brokers pegged balance month November-December jet fuel/kerosene time spread at plus 43 cents/b at 0225 GMT Nov. 8, up 2 cents/b from the 0830 GMT Asian close Nov. 5, Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus 22 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Nov. 5, down 7 cents/b from the start of the week, Platts data showed.

** Market participants maintained an optimistic outlook on the Asian jet fuel/kerosene market, with incremental demand from the downstream aviation sector and heating oil requirements in the run up to peak winter season helping to buoy sentiment.

** Global air travel in September picked up from August, the International Air Transport Association said Nov. 3, on the back of the recovery in domestic markets, particularly in China, when selected travel restrictions were lifted in August. But levels were still 53% below September 2019, IATA said, adding that travel bookings point to further passenger growth across domestic and international markets, but any significant improvement looks unlikely in the near-term.

** Regional jet fuel/kerosene supply is expected to remain tight as Japanese refiners continue to stockpile heating kerosene ahead of peak winter season, keeping a lid on exports. Data released Nov. 3 by the Petroleum Association of Japan showed the country exported 644,731 barrels of jet fuel over Oct. 24-30, down 2.5% on the week. Meanwhile, there were no kerosene exports in the same week.

** The Q1-Q2 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus $2.13/b over Nov. 1-5, down from plus $2.30/b the week before.

Gasoil

** Brokers pegged balance month November-December gasoil market structure at plus 99 cents/b at 0225 GMT Nov. 8, up from plus 93 cents/b at the 0830 GMT Asian close Nov. 5.

** The November Exchange of Futures for Swaps spread was pegged at minus $15.58/mt at 0225 GMT Nov. 8, widening from minus $14.28/mt at the Nov. 5 Asian close, Platts data showed.

** Sentiment for the Asian gasoil complex remains supported over the coming week, with lean supply and good demand pillaring an upswing in prices. Traders said with regional and Western demand for gasoil continuing to improve as more countries move towards reopening business, travel and tourism sectors, the pace of demand recovery for the middle distillate will pick up, even as supply remains constrained through to the end of the year.

** Market participants will also be keeping an eye on term gasoil negotiations, with Taiwan's Formosa Petrochemical Corp. kicking off the annual year-end discussions. The refiner issued a tender on Nov. 2 offering term 10 ppm and 500 ppm sulfur gasoil supplies for the 12 months beginning January 2022. The tenders closed Nov. 5.

** The Q1-Q2 2022 gasoil swap spread averaged plus $2.24/b over Nov. 1-5, down from plus $2.35/b the week before.