Asia Middle Distillates: Key market indicators this week

Singapore — The Asian middle distillate complex in the week that began May 16 will likely face pressure from tepid demand amid a resurgence in COVID-19 cases.

Regional gasoil demand is set to slow down as local governments in southeast Asia reimpose movement restrictions but strong buying interest coupled with hopes of a demand recovery in Europe will help buoy sentiment. Meanwhile, the jet fuel/kerosene sector also faces headwinds as rising infections suppress appetite for aviation fuels.

Jet fuel/Kerosene

**The front-month June-July jet fuel/kerosene time spread widened 8 cents/b on the day to minus 16 cents/b at 0300 GMT May 17, Platts data showed.

**The FOB Singapore jet fuel/kerosene cash differential was seen lower in the previous week, and was assessed at plus 6 cents/b to Mean of Platts Singapore jet fuel/kerosene assessments on May 14, marking a 4 cents/b decline on the week. The cash differential flipped into premium territory on May 3 and rose to a 14-month high of MOPS jet fuel/kerosene assessments plus 13 cents/b on May 5, Platts data showed.

**In India, jet fuel demand has declined amid rising infections in the country. According to the latest data from the Petroleum Planning and Analysis Cell, jet fuel demand backpedaled from a 12-month high of 475,000 mt in March and was registered at 409,000 mt in April, falling 66,000 mt, or 13.89%, on the month. The country now has 24.68 million COVID-19 infections, with 270, 284 deaths, the latest data from Johns Hopkins University as of 0200 GMT May 17 showed.

**Singapore was a net exporter of aviation fuels and kerosene in the week ended May 11, with outflows, of which all were from Malaysia, totaled 24,203 mt. Meanwhile, outflows of aviation fuel and heating oil registered at 23,862 mt in the week, down 13.74% on the week. Exports were highest to Hong Kong and Vietnam at 12,822 mt and 11,036 mt, respectively

**The Q3-Q4 jet fuel/kerosene swap spread -- an indication of near-term sentiment -- averaged minus 17 cents/b May 10-14, widening 6 cents/b from the previous week's average of minus 11 cents/b.

Gasoil

**Strong buying interest and hopes of a demand recovery in Europe, which could translate to a stronger pull for surplus barrels from Asia and the Middle East, are helping to shore up sentiment for the middle distillate complex, industry sources said.

**Reflecting the uptick, the front-month June-July gasoil market structure was pegged at plus 9 cents/b at 0300 GMT May 17, widening 8 cents/b from the plus 1 cent/b assessed at the Asian close on May 14, Platts data showed.

**The June Exchange of Futures for Swaps, or EFS, spread was pegged at minus $4.50/mt at 0300 GMT May 17, narrower than the May 14 assessment of minus $5.43/mt, Platts data showed.

**Still, several industry sources said that looming concerns over a resurgence in coronavirus infections, particularly in southeast Asia and India, could slow down regional demand and result in more surplus gasoil barrels spilling into the spot market in the near term. Market participants were also digesting headlines of the rollout of consumption tax on imported light cycle oil with effect from June 12 from China's finance ministry.

**The Q3-Q4 gasoil swap spread -- an indication of near-term sentiment -- averaged plus 33 cents/b May 10-14, narrowing 2 cents/b from the previous week's average of plus 35 cents/b.