Asia middle distillates: Key market indicators for Aug 30-Sep 3

Asian middle distillate markets started the Aug. 30-Sept. 3 trading week on a steady to firmer note as easing freight rates reignited hopes for more trade flow activity in the gasoil sector, while positive indicators on the air travel front continue to provide support for jet fuel prices.

At 10:20 am Singapore time (0220 GMT), the ICE October Brent crude futures contract was up 6 cents/b (0.08%) from the Aug. 27 close at $72.70/b.

Essential Insight: Asia sees revival of jet fuel hedging, but rising infections stall aviation recovery

Jet fuel/kerosene

** Brokers pegged front-month September-October jet fuel/kerosene spread at plus 3 cents/b at 0220 GMT Aug. 30, widening slightly from plus 2 cents/b at the 0830 GMT Asian close Aug. 27, Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential flipped into discount territory in the week ended Aug. 27, and was assessed at minus 8 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments on Aug. 27, falling 16 cents/b from the start of the week, Platts data showed.

** Asia Pacific airlines saw little respite in July and carried only 1.5 million international passengers, which is 4.6% of pre-pandemic July 2019 levels, the Association of Asia Pacific Airlines said in its latest report. Over January-July, the total number of passengers plunged 86.5% year on year to 8.75 million.

** Japan's oil product stocks rose 5.2% on the week to 70.02 million barrels as of Aug. 21, amid a build in middle distillate stocks. Jet fuel stocks registered at 5.09 million barrels in the week, inching up 0.9% week on week, while kerosene stocks rose 3.7% over the same period to 13.12 million barrels, data from the Petroleum Association of Japan showed.

** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 33 cents/b over Aug. 23-27 from plus 4 cents/b the week before.

Gasoil

** The September-October gasoil market structure was pegged at plus 25 cents/b at 0220 GMT Aug. 30, marginally weaker from the plus 26 cents/b assessed at the 0830 GMT Asian close Aug. 27, Platts data showed.

** The September Exchange of Futures for Swaps, or EFS, spread was pegged at minus $14.75/mt at 0220 GMT Aug. 30, widening from minus $12.99/mt at the Aug. 27 Asian close, Platts data showed.

** The week ahead will likely see Asian gasoil buoyed on open arbitrage lanes to move Asian gasoil to the West, with this likely to lend support to the complex. The September EFS has moved deeper into negative terrain, and sources said this has worked to ensure that arbitrage economics remain viable. Traders are hopeful of more market activity should shipping costs remain within a steady range, with most keeping a watchful eye on developments in the US Gulf Coast following Hurricane Ida making landfall on Aug. 29.

** Singapore's middle distillate stockpile was marginally higher in the week ended Aug. 25, veering away from a 19-month low, as rising delta variant infections sapped demand for middle distillates. Gasoil, jet fuel and kerosene stocks at Asia's main trading hub of Singapore rose 228,000 barrels, or 2.14%, week on week to 10.87 million barrels over Aug. 19-25, up from the 19-month low of 10.64 million barrels recorded a week earlier, Enterprise Singapore data released late Aug. 26 showed.

** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 80 cents/b over Aug. 23-27 from plus 61 cents/b the week before.