Asia middle distillates: Key market indicators for Sept 20-24

Asian middle distillate markets started Sept. 20-24 trading week on a steady note, as supply-side factors continue to boost sentiment in the gasoil sector while market participants in the jet fuel/kerosene segment await fresh pricing cues.

At 10:00 am Singapore time (0200 GMT), the ICE November Brent crude futures contract was down 52 cents/b (0.69%) from the Sept. 17 close at $75.31/b.

Jet fuel/Kerosene

** Brokers pegged the October-November jet fuel/kerosene spread at plus 14 cents/b at 0200 GMT Sept. 20, widening from plus 8 cents/b at the 0830 GMT Asian close Sept. 17, S&P Global Platts data showed.

** The FOB Singapore jet fuel/kerosene cash differential flipped to a premium in the week ended Sept. 17, and was assessed at plus 9 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Sept. 17, rising 15 cents/b from the start of the week, Platts data showed.

** Regional demand is gradually seeing progress, albeit amid a choppy recovery, with some countries opting to reopen borders even as the spread of the delta variant of the coronavirus lingers. This came as ongoing vaccination campaigns are underway and a shift to 'zero-COVID' policy by some countries were likely to have a positive knock-on effect on jet fuel demand, sources added.

** Industry sources remain cautious over additional support expected to arrive from Northeast Asia in the fourth quarter with Japan starting its seasonal stockpiling of kerosene ahead of the winter. Traders told Platts they don't expect the impact of pre-winter kerosene imports to be felt before November due to milder temperatures in Northeast Asia this year.

** The Q4 2021-Q1 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus 24 cent/b over Sept. 13-17 compared with plus 22 cents/b the week before.

Gasoil

** The October-November gasoil market structure was pegged at plus 53 cents/b at 0200 GMT Sept. 20, widening from the plus 51 cents/b assessed at the 0830 GMT Asian close Sept. 17, Platts data showed.

** The October Exchange of Futures for Swaps, or EFS, spread was pegged at minus $15.25/mt at 0200 GMT Sept. 20, largely steady from minus $15.27/mt at the Sept. 17 Asian close, Platts data showed.

** Supply-side factors and expectations of improving demand continued to lend support to the ultra low sulfur diesel complex, market sources said. Chinese exports volumes remained lackluster, while supplies from the Persian Gulf continued to be diverted to other regions due to favorable arbitrage economics.

**Prices are also being supported by improving demand sentiment. Traders expect economic activity in Southeast Asia to rebound due to easing coronavirus-led movement restrictions, while the lifting of the seasonal fishing ban in the South China Sea mid-September is also set to boost demand for medium sulfur gasoil, sources said.

** Singapore's middle distillate stocks rebounded 10% on the week over Sept. 9-15, easing off from a 20-month low to breach past the 10 million-barrel mark. Enterprise Singapore data released late Sept. 16 showed that gasoil, jet fuel and kerosene stocks at Asia's main trading hub rose 939,000 barrels week on week to 10.86 million barrels for the week ended Sept. 15. Stocks had tumbled to 9.92 million barrels over Sept. 2-8.

** The Q4 2021-Q1 2022 gasoil swap spread, an indication of near-term sentiment, averaged plus 99 cents/b over Sept. 13-17 compared with plus 93 cents/b the week before.