Asia Distillates-Gasoil cracks drop to 3-week low as lockdowns hammer demand

Asian refining margins for 10 ppm gasoil on Monday plunged to their weakest level in three weeks, as renewed lockdown measures to contain surging COVID-19 infections in several markets dented regional demand for the industrial and transportation fuel.

Refining profit margins, also known as cracks, for 10 ppm gasoil fell for a third consecutive session on Monday to $7.58 per barrel over Dubai crude during Asian trading hours, the lowest since May 7. The cracks were at $8.02 per barrel on Friday.

Gasoil demand is taking a beating as lockdowns remain in place in Japan and India, while Malaysia is entering a nationwide total lockdown from June 1-14 in an effort to curb the spread of the virus.

China has also reported a sudden surge in infections in the country’s southern city of Guangzhou, while Vietnam’s business hub Ho Chi Minh City will begin social distancing measures for 15 days starting Monday.

The gasoil market is expected to remain under pressure in the near term as some refineries returning from scheduled maintenance would add to supplies, and demand typically takes a hit during monsoon months in key markets such as India and Vietnam, trade sources said.

But the comparatively faster pace of demand recovery in western markets would provide opportunities for arbitrage shipments, bringing some support to the gasoil market fundamentals in Asia, trade sources said.

The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe for July, traded around minus $21 a tonne on Monday – a level that typically makes it profitable for arbitrage shipments.

Gasoil arbitrage to the west is usually workable when the EFS trades at about minus $15 a tonne or below, although it also depends on factors such as freight rates, according to trade sources.

Cash differentials for gasoil with 10 ppm sulphur content GO10-SIN-DIF were at a narrow premium of 3 cents per barrel to Singapore quotes, while its front-month spread stayed in a backwardated structure to trade at 9 cents per barrel on Monday.


Three gasoil trades, one jet fuel deal


Oil prices firmed on Monday, with Brent trading near $70 a barrel, underpinned by the bright outlook for fuel demand growth in the next quarter, while investors looked ahead to the OPEC+ meeting this week to see how producers will respond.

 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               73.02     0.25       0.34       72.77  GO-SIN
 GO 0.5 Diff                     -2.41     0.01      -0.41       -2.42  GO-SIN-DIF
 Spot Gas Oil 0.25%              73.23     0.25       0.34       72.98  GO25-SIN
 GO 0.25 Diff                     -2.2     0.01      -0.45       -2.21  GO25-SIN-DIF
 Spot Gas Oil 0.05%              73.34     0.25       0.34       73.09  GO005-SIN
 GO 0.05 Diff                    -2.09     0.01      -0.48        -2.1  GO005-SIN-DIF
 Spot Gas Oil 0.001%             75.46     0.22       0.29       75.24  GO10-SIN
 GO 0.001 Diff                    0.03    -0.02     -40.00        0.05  GO10-SIN-DIF
 Spot Jet/Kero                   72.72     0.26       0.36       72.46  JET-SIN
 Jet/Kero Diff                   -0.26    -0.02       8.33       -0.24  JET-SIN-DIF
 Brent M1                                                                              
 Gasoil M1                                                                             
 Gasoil M1/M2                                                                          
 Gasoil M2                                                                             
 Regrade M1                                                                            
 Regrade M2                                                                            
 Jet M1                                                                                
 Jet M1/M2                                                                             
 Jet M2                                                                                
 Gasoil 500ppm-Dubai                                                                   
 Cracks M1                                                              
 Gasoil 500ppm-Dubai                                                                   
 Cracks M2                                                              
 Jet Cracks M1                                                                         
 Jet Cracks M2                                                                         
 East-West M1                                                                          
 East-West M2                                                                          
 LGO M1                                                                                
 LGO M1/M2                                                                             
 LGO M2                                                                                
 Crack LGO-Brent M1                                                                    
 Crack LGO-Brent M2

Source: Reuters (Reporting by Koustav Samanta; Editing by Devika Syamnath)


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