Singapore — Indian gasoil barrels are shunning Westward moves in favor of the East, with FOB Singapore cash differentials hitting a one-year high amid a bull run, and traders expect this strength to stay in the near-term amid refinery turnarounds in Asia.
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"The arbitrage is coming East, because Singapore premiums are so strong," a Singapore-based trader said.
The upward streak in the FOB Singapore 10 ppm sulfur gasoil cash differential has continued unabated over the past eight trading sessions, according to S&P Global Platts data. At the Asian close Tuesday, the FOB Singapore 10 ppm sulfur gasoil cash differential climbed 7 cents/b to finish at a one-year high of plus $1.02/b to the Mean of Platts Singapore Gasoil assessments. This marks a sharp rise of more than threefold in the cash differential since September 26, when it was assessed at plus 33 cents/b.
Platts data showed that the cash differential for the FOB Singapore 10 ppm sulfur gasoil grade was last higher on October 29, 2018, at plus $1.65/b to MOPS Gasoil assessments, FOB.
Shipping sources said Monday that the Cedar Express was fixed for a voyage from India's Visakhapatnam port to Singapore, with a loading laycan of October 11-12 for 35,000 mt. Fixture reports list Vitol as the charterer, but this could not be confirmed late Tuesday.
"The October EFS [Exchange of Futures for Swaps] is valued at around minus $17-$18/mt [as of early this week], but no cargoes from Singapore are going West, not that I can see," a trader with a European trading house said.
The EFS -- the spread between front-month 10 ppm gasoil Singapore swaps and the corresponding ICE low sulfur gasoil futures -- measures the relative strength between the Asian and European gasoil markets. The East-West arbitrage is typically workable when the EFS is less than minus $12/mt, traders said. Even though the EFS is currently weaker than minus $12/mt, the strong FOB Singapore cash differentials are deterring the barrels from moving to the West, they added.
At the Asian close Tuesday, the front-month October gasoil EFS was at minus $19.73/mt, Platts data showed.
Latest data from the city-state's government agency Enterprise Singapore also suggests the same trend, showing higher inflows from India in recent weeks.
Singapore imported 103,398 mt of Indian gasoil for the week ended October 2. This was up from the preceding two weeks, when gasoil barrels from India for the weeks ended September 25 and September 18 were registered at 73,067 mt and 77,357 mt, respectively.
ASIAN GASOIL MARKET SEEN FIRM
Regional refinery turnarounds, the transition to the International Maritime Organization's low sulfur requirement ahead of the January 2020 implementation, and firmer sentiment after the September 14 attacks on Saudi Arabia's key oil facilities have given the Asian gasoil market a boost, traders said.
The derivatives market has also showed strength, with the front-month November/December gasoil spread rising 5 cents to be assessed at plus 97 cents/b Tuesday, Platts data showed.
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