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Highlights

The Singapore front-month jet fuel/kerosene crack spread against Dubai swaps -- which measures the relative value of the product to crude oil -- has slumped to a 19-month low, and this trend looks set to continue until the summer travel season kicks off.

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At the Asian close Tuesday, the April jet fuel/kerosene swaps crack against Dubai swaps was assessed at $12.55/b, marking the lowest level since August 23, 2017, when it was assessed at $12.20/b, S&P Global Platts data showed.

Market participants said the weakening crack was reflective of the broader bearishness in the physical jet fuel complex -- with barrels struggling to find outlets in the shoulder season.

Platts assessed the FOB Singapore spot jet differential at minus 39 cents/b Tuesday, down 25 cents/b over the last two weeks.

While the market would sometimes rebalance itself, traders said that various exacerbating factors made the odds of an imminent recovery unlikely.

"It is the usual seasonal pattern," a Northeast Asian refiner said, adding that this bout of weakness was likely to persist till at least the summer travel season.

A Singapore-based trader noted that Middle Eastern and Indian cargoes were now swinging to Far East ports, overwhelming an already-oversupplied Asian market that cannot digest any more product.

While cargoes from these regions are usually bound West, poor European demand and unattractive arbitrage economics have forced market participants to turn East instead. According to shipping sources, at least 150,000 mt of March-loading jet from the Middle East and India is headed to Singapore.

A second Northeast Asian refiner said the recent startup of several refineries in China and Vietnam had worked to worsen the regional supply glut in the months between winter and summer.

"There are more cargoes available this year [compared to the last], and China is continuing to export jet," he said.

Platts assessed the FOB Singapore jet fuel/Dubai physical crack spread at plus $11.86/b Tuesday, $2.98/b lower on a year-on-year basis.

Industry sources also attributed uncertainty in crude prices to falling crack values.

"Oil prices, though supported by OPEC-led supply cuts, have faced severe headwinds on slower growth prospects and rising US shale production in the current term," Benjamin Lu, commodities analyst at Phillip Futures said Wednesday.

"Though we continue to assess for a continuation in positive trend scenario, we remain measured on upside gains amidst potential weakness in global oil demand. Thus we urge caution as severe headwinds might drive a potential correction in oil prices for the coming term," Lu added.

REGRADE REMAINS BELOW MINUS $1/B MARK ON FIRMER GASOIL OUTLOOK

The front-month Singapore April regrade swap -- a measure of the relative strength of jet/kerosene to gasoil -- remained below the minus $1/b mark Tuesday on optimism of a firmer gasoil market.

Over in the Asian gasoil market, some traders remained optimistic that there was still upside to be seen in the region, especially once the Q2 regional refinery turnaround season begins in earnest.

While the gasoil market structure is currently in a contango, which points to weakness at the front of the curve, traders said that future trading sentiment remains firm.

"I actually think gasoil is strong, but it's not being shown, especially in Singapore, but [further out we are looking at] peak season, peak demand and it will also be the peak of turnaround [season]," a source said late Tuesday.

Other industry participants agreed, saying that the current contango was a reflection of ample supplies being seen in Singapore, which was weighing down the market.

S&P Global Platts reported last week that there were two newbuild VLCCs -- the Front Defender and the Amyntas -- filled with ultra-low sulfur gasoil parked in Malacca, Malaysia. Some traders had said that the gasoil volumes would be sold into Singapore, but others disagreed, saying they did not see much volumes moving into Singapore tanks at the time.

A VLCC can carry around 280,000 mt of gasoil, or 2.05 million barrels.

Early this week, shipping sources said the Front Defender left over the weekend for Ras Tanura after discharging all its cargo. The Amyntas, meanwhile, had moved to east Singapore's outer port limits, with shipping data showing that the vessel was still laden. Sources said it was likely the vessel would discharge gasoil volumes at the outer port limits.

At the Asian close Tuesday, the FOB Singapore 10 ppm sulfur gasoil cash differential closed up 3 cents/b to minus 20 cents/b to the Mean of Platts Singapore Gasoil assessments, while the April/May gasoil timespread inched up a cent to minus 17 cents/b.

--Ng Jing Zhi, jz.ng@spglobal.com

--Clarice Chiam, clarice.chiam@spglobal.com

--Zameer Yusof, zameer.yusof@spglobal.com

--Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com