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Asian regrade widens as China demand drives up gasoil, jet exits peak season

Singapore — Asian gasoil is poised to stay in the bull market throughout August with Chinese demand rising against tightening supply, while co-distillate jet fuel/kerosene is transitioning out of the peak summer travel demand season, leading to a widening of the regrade.

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The swap regrade -- which measures the price jet fuel commands over 10 ppm sulfur gasoil -- was pegged at minus 62 cents/b at 0300 GMT, widening from last Friday when the spread was at minus 60 cents/b.

GASOIL FIRMS ON HIGHER DEMAND, AWAITS FURTHER CLARITY

The Singapore gasoil market is expected to strengthen on an increase in buying interest and China's domestic demand for gasoil.

"Domestic demand [for gasoil] is really good in China now," a Singapore-based trader said.

"Light cycle oil is currently a very big business now too, and some buyers blend some of it into gasoil and sell them into the domestic market," he added.

As of 0300 GMT, brokers pegged the front month September/October Singapore gasoil swaps at plus 24 cents, down 3 days from Friday's Asian close.

The front month September/October timespread had widened to as high as plus 52 cents/b last Thursday amid higher buying interest in the physical market, but narrowed to plus 27 cents/b the day after, S&P Global Platts data showed.

JET FUEL LACKS SUPPORT

The weakness was similarly reflected in the jet fuel derivatives market where industry sources pegged front month September/October jet fuel/kerosene timespread at plus 10 cents/b as of 0300 GMT Monday, steady from last Friday's Asian close of 11 cents/b.

The jet fuel market continued to give up its gains after soaring to a one-year-high of plus 40 cents/b on July 29 on weaker demand with the conclusion of peak travel season.

Market sources noted lackluster activity on cross-regional flows, and this has also taken a toll on the jet fuel market.

"The lower stocks may boost some buying interest from US, but so far we haven't seen that happening yet. The arb is still closed," a regional trader based in Singapore said.

(Corrects value of swap regrade in second paragraph)

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

--Su Yeen Cheong, suyeen.cheong@spglobal.com

--Melvin Goh, melvin.goh@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com