Asia middle distillates - Key market indicators this week

Singapore — Asia's middle distillate markets are expected to be steady to slightly firmer in the week starting Nov. 16 as sentiment for jet fuel remains firm on the back of heightened heating demand, while gasoil is likely to remain supported due to curtailed refinery production which has led to a crimp in supplies.

ICE January Brent crude futures stood at $43.19/b at 0300 GMT Nov. 16, up 5 cents/b from the 0830 GMT Asian close on Nov. 13.

JET FUEL/KEROSENE

** The jet fuel/kerosene market was a tad weaker during mid-morning trade Nov. 16 from the previous session, but sentiment remained firm on heightened heating demand amid lower temperatures in North Asia. Brokers pegged the front month December-January jet fuel timespread at minus 48 cents/b at 0300 GMT on Nov. 16, widening 3 cents/b from the 0830 GMT Asian close on Nov. 13.

**Strong prompt kerosene demand is slowing Japan's stockpiling of kerosene despite an uptick in the product's output in recent weeks. Kerosene stocks edged up 0.5% week on week to 18.31 million barrels on Nov. 7, while output jumped 11.3% over the same period to 1.8 million barrels, data from the Petroleum Association of Japan showed.

** Japan's top two refiners ENEOS and Idemitsu Kosan said they expect to see strong kerosene demand this winter, with the latter planning to raise its refinery runs to around 80% over October-March from 70% over April-September to lift winter fuel production.

** That said, the Asian aviation sector remained lackluster amid the coronavirus pandemic and the FOB Singapore jet fuel/kerosene cash differential fell 45 cents/b week on week to minus 58 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Nov. 13, Platts data showed.

** The FOB Singapore jet fuel/kerosene crack spread for physical cargoes against front-month cash Dubai also trended lower and was assessed lower week on week at plus $1.44/b Nov. 13, slipping 55 cents/b from Nov. 6.

GASOIL

** The December-January gasoil market structure stood at minus 15 cents/b at 0300 GMT, narrowing slightly from minus 16 cents/b at the Asian close Nov. 13, Platts data showed.

** The December Exchange of Futures for Swaps spread was pegged at plus $4.50/mt at 0300 GMT, widening from plus $4.03/mt at the Nov. 13 Asian close.

** The EFS has hit a seven-week high on the back of refinery run cuts, which have tightened supply balances in the region. This has worked to attract some gasoil volumes from India and the Persian Gulf towards Singapore, due to the higher prices that gasoil can command in Asia.

** Despite the inflows, the Asian gasoil market was expected to remain largely stable to slightly firmer this week, with traders saying that tight supply balances would continue to provide support to the complex.

** Market participants are also keeping a keen eye on outward flows of gasoil towards the West. A strong diesel market in the US, due to a crunch in supply following hurricane season, had resulted in the middle distillate being pulled towards the Americas. But some sources said Nov. 16 that the diesel arbitrage to New York does not currently work, with demand in the East strengthening.