Asia middle distillates - Key market indicators this week

Singapore — The Asian middle distillates complex is expected to hold steady to slightly firmer in the week starting Dec. 7, with tighter supply and fresh spot demand buoying the gasoil market, while less availability of jet fuel/kerosene and positive indicators on COVID-19 vaccines injected a fresh wave of optimism on the aviation front.

ICE February Brent crude futures were down 62 cents/b to $49.06/b at 0300 GMT Dec. 7 from $49.68/b at the 0830 GMT Asian close on Dec. 4.

JET FUEL/KEROSENE

** The jet fuel/kerosene market was a tad firmer in mid-morning trade Dec. 7 from the previous session. Brokers pegged the front month January-February jet fuel timespread at minus 25 cents/b at 0300 GMT, narrowing 1 cent/b from the 0830 GMT Asian close on Dec 4.

** FOB Singapore jet fuel/kerosene is witnessing strengthening market fundamentals on optimism from COVID-19 vaccines and tighter supply.

** The FOB Singapore jet fuel/kerosene cash differential flipped into premium territory and was assessed at 7 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment on Dec. 4. This marked an 18 cents/b day-on-day rise, and the last time the cash differential was in positive territory was on Feb. 28, 2020, when it was assessed at plus 1 cent/b, S&P Global Platts data showed.

** Japan's kerosene demand for heating is set to pick up further with the latest weather outlook released by the Japan Meteorological Agency on Dec. 3, showing that Japan is forecast to experience below 30-year-average temperatures across the country over Dec. 19-Jan. 1.

** Reflecting the improved sentiment, the Q1/Q2 quarterly jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus $1.12/b for the week ended Dec. 4, up from the prior week's average of minus $1.29/b.

GASOIL

** The balance December-January gasoil market structure stood at minus 11 cents/b at 0300 GMT, widening from minus 6 cents/b at the Asian close Dec. 4, Platts data showed.

** The December Exchange of Futures for Swaps spread was pegged at plus $1.50/mt at 0300 GMT, widening from plus 45 cents/mt at the Asian close Dec. 4.

** The Asian gasoil market may find firmer support in the week ahead, with sentiment underpinned by a flow of VLCCs moving Asian gasoil out of the region. Singapore has already seen two VLCCs, the Halcyon and the Yuan Gui Yang, arriving in early December before heading to the West, while another VLCC, the Sur, is currently on its way to the city-state with an estimated arrival date of Dec. 12. Market participants said these outflows of gasoil, coupled with lower-than-expected gasoil exports from China in December, have lent support to the middle distillate.

** India's Hindustan Petroleum Corp. Ltd. issued buy tenders seeking two cargoes of 10 ppm sulfur gasoil, each 65,000 mt, for delivery into Mundra and Visakhapatnam over December.

** Reflecting the improved sentiment, the Q1/Q2 quarterly gasoil swap spread -- an indication of near-term sentiment -- averaged minus 78 cents/b for the week ended Dec. 4, up from the prior week's average of minus 88 cents/b.