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Singapore cracking margin edges up from near 9-month low

Singapore — The Singapore cracking margin against Dubai crude recovered slightly Monday after hitting a near nine-month low in the previous trading session under pressure from middle and light distillate cracks, Platts data showed.

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The Singapore netback cracking margin edged up 6 cents/barrel to $2.10/b Monday from last Thursday's Asian close at a near nine-month low of $2.04/b, with the Singapore market closed Friday for a public holiday.

The refining margin was last lower on October 29, 2014, at $1.97/b.

The Singapore 500 ppm sulfur gasoil swap to front-month Dubai crude swap was down 46 cents/b Monday from the previous session at $9.35/b.

The gasoil crack has averaged $11.19/b in July to date, down $2.23/b for the same period of June, as the gasoil market continued to be pressured by surplus volumes and an absence of strong demand.

Supply of benchmark 500 ppm grade gasoil overwhelmingly exceeds demand, market sources said.

Exports of gasoil continue to stream out of China as domestic consumption is tepid amid slowing economic growth.

Asian refineries have also been running at relatively high rates since the end of turnaround season, spurred by attractive gasoline margins.

On the demand side, requirements for gasoil for power generation in the Middle East have slowed with the passing of summer.

The Yasref refinery in Yanbu has also been pushing out tonnes of ultra-low sulfur diesel, with at least 2.8 million barrels of ULSD offered in tenders for loading in late July and the first week of August.

Most of the barrels are provisionally booked for Europe despite high freight rates.

However traders said the reasonably wide East-West spread meant the prompt cargoes were workable to send to Europe.

The physical crack for FOB Singapore 500 ppm gasoil against front-month cash Dubai crude fell to the lowest level in more than five years at $8.27/b at Monday's close.

The crack was last lower on February 2, 2010, at $7.67/b.

In addition, slower spot demand from the Middle East and surplus product output this summer has left that region more or less self sufficient, which has left East Asian suppliers keeping barrels in the region.


The jet fuel crack was down 80 cents/b from the previous session at $10.54/b Monday and has averaged at $11.78/b to date in July, down from $13.50/b in June.

The Asian jet fuel/kerosene market remained weak for the most of the second quarter as weak underlying demand lagged ballooning regional supply amid greater outflows from North Asia and the Middle East due to an increase in refining capacity.

A slight uptick in demand for jet fuel in recent weeks, propelled by record-low prices, has failed to lift sentiment.

Efforts to move surplus jet fuel/kerosene barrels to Europe and the US have proven challenging, hampered by low requirements, poor arbitrage economics and rising freight rates.

However several market sources said the jet fuel/kerosene market could see demand increase in the near term as the deep contango could spur buying interest to store the heating oil ahead of winter in the Northern Hemisphere.

In addition, China's Q3 export quotas for jet fuel are down 93% from Q2 at 200,000 mt.

CNOOC received a quota for 150,000 mt and PetroChina's 21.5 million mt/year Dalian Petrochemical refinery 50,000 mt for Q3, while Sinopec's refineries did not apply.

The 2015 export quotas to date for jet fuel/kerosene are down 5% over the same period at 8.77 million mt.

Singapore's refining margins for gasoline have also fallen in July.

Slowing spot gasoline demand in Asia has left the market with limited support, and the US RBOB has weakened in recent sessions.

"In June, the market was supported by increased demand from Indonesia for July [delivery]," a trader in Singapore said. Indonesia's state-owned Pertamina was expected to import 11.6 million-12.4 million barrels of gasoline in July, up from 11.3 million barrels in June, Platts reported earlier.

Gasoline demand in Indonesia, Asia's largest gasoline importer, typically picks up during Ramadan.

The gasoline crack, the spread between front month 92 RON gasoline swaps and front-month cash Dubai crude swaps, widened $1.54/b from the previous close to $15.80/b Monday.

Platts margin data reflects the difference between a crude's netback and its spot price.

Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

--Jonathan Nonis,
--Wendy Cheong,
--Su Yeen Cheong,
--Edited by Wendy Wells,