Singapore — Tight supply in the Asian middle distillates market has boosted jet fuel and gasoil prices, but looming concerns of a spike in COVID-19 infections could cap demand and price upside, industry sources said July 6.
September ICE Brent crude futures climbed 29 cents/b to $42.96/b at 0300 GMT on July 6, from $42.67/b at the 0830 GMT Asian close on July 3.
**The balance month July/August Singapore jet fuel timespread kicked off the week on a firmer note, narrowing 15 cents/b from July 3 to minus 70 cents/b at 0300 GMT on July 6.
**The Asian jet fuel/kerosene sector saw some support in the week ended July 3 amid firmer procurement appetite on increased domestic and international flight capacities in the region.
**The FOB Singapore jet fuel/kerosene cash differential registered a discount of 44 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment on July 3, rising 24 cents/b or 35% week on week.
**The FOB Singapore jet fuel/kerosene outright price also saw an uplift as a result, and was assessed at $42.94/b at the 0830 GMT Asian close on July 3, rising $1.16/b week on week.
**In June, the flat price averaged at $41.19/b, rising $12.30/b from May's average of $28.89/b, Platts data showed.
**Market participants pointed out that the resurgence of coronavirus infections could hit the aviation sector once again.
**According to CAPA India, the outlook on India's aviation sector remains soft, and airlines may be reluctant to increase capacity given the weak demand outlook until the end of August. CAPA added that while international flight operations may resume in August, it is not "not expected to reach any meaningful scale."
**The backwardation in the Singapore balance July/August structure was valued at plus 55 cents/b at 0300 GMT on July 6, inching down slightly from plus 56 cents/b on July 3.
**The balance month July Exchange of Futures for Swaps spread was pegged at $3.61/mt at 0300 GMT on July 6, narrowing from $4.79/mt assessed at the July 3 Asian close.
**An ongoing supply crimp due to North Asian sellers slashing gasoil production on a combination of refinery run cuts, maintenance and idling of refinery units have tightened balances, even as regional demand has improved.
** A raft of spot buy tenders issued over the past week has lent further support to the Asian gasoil market, with traders keeping a keen eye on award levels. India's Hindustan Petroleum Corp. Ltd. canceled a tender to buy 65,000 mt of either 8 ppm or 10 ppm sulfur gasoil for delivery over July 11-15 into Visakhapatnam, industry sources said late July 3, citing high offer levels. But the refiner quickly issued another tender to buy a similar gasoil cargo for July 16-20 delivery into Mundra.
**Pockets of concern remain for the future outlook of the middle distillate product: fears of a second wave of coronavirus cases with some countries opting to rollback lockdowns and restrictions in favor of restarting battered economies even though local transmission rates remain high; and China's gasoil exports are likely to increase in the second-half of the year, which may exert downward pressure.