Asian middle distillate markets started the Nov. 29-Dec. 3 trading week on a softer note as news of increasing supplies amid an unviable arbitrage economics, and concerns over the new Omicron variant of the coronavirus weighed on sentiment in the gasoil and jet fuel/kerosene sectors.
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At 10 am Singapore time (0200 GMT), the ICE January Brent crude oil futures contract stood at $76.02/b, up $3.30/b (4.53%) from the plunge at Nov. 26 Asian close.
** Brokers pegged the December-January jet fuel/kerosene time spread at plus 3 cents/b at 0200 GMT Nov. 29, down 12 cents/b from the 0830 GMT Asian close Nov. 26, S&P Global Platts data showed.
** The FOB Singapore jet fuel/kerosene cash differential was assessed at plus 24 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments Nov. 26, up from plus 20 cents/b Nov. 22, Platts data showed.
** Market sentiment softened amid expectations of higher jet fuel exports from China in December, industry sources said. China’s Ministry of Commerce Nov. 10 approved the transfer of 969,000 mt of key oil product export quotas allocated to PetroChina, Sinopec and Sinochem from the processing trade route to the general trade route. Heating requirements during the Northern hemisphere winter are expected to maintain a floor under jet fuel/kerosene prices, sources added.
** One positive indicator emerged with the Civil Aviation Authority of Singapore announcing an extension of its quarantine-free entry requirements for vaccinated travelers to six more countries from Dec. 16, taking the total to 27 countries and potentially increasing demand for flights and by extension, jet fuel, sources added.
** The Q1-Q2 2022 jet fuel/kerosene swap spread, an indication of near-term sentiment, averaged plus $1.21/b over Nov. 22-26, down from plus $1.36/b the week before.
** Brokers pegged the December-January gasoil market structure at plus 27 cents/b at 0200 GMT Nov. 29, down 7 cents/b from the 0830 GMT Asian close Nov. 26.
** The December Exchange of Futures for Swaps spread was pegged at minus $9.75/mt at 0200 GMT Nov. 29, narrowing from minus $11.76/mt at the Nov. 26 Asian close, Platts data showed.
** The near-term outlook for Asian gasoil markets was subdued, industry sources said, with the backwardation structure flattening further following demand concerns over news of new coronavirus variant Omicron as well as increasing supplies which have helped to ease previously tight regional balances. In addition, traders said that with East-West arbitrage economics currently unviable, more resupply barrels, especially from India, are being seen pointed towards the East.
** Singapore middle distillate stocks fell 7.72% week on week to a three-year low of 8.45 million barrels Nov. 18-24, Enterprise Singapore data released late Nov. 25 showed. Gasoil export and import volumes in Singapore, the main trading hub in Asia, were almost at parity in the week ended Nov. 24 at 328,481 mt and 328,020 mt, respectively. Gasoil outflows were highest to Australia at 122,430 mt, followed by Malaysia and Indonesia at 66,066 mt and 45,029 mt, respectively.
** The Q1-Q2 2022 gasoil swap spread averaged plus $1.33/b over Nov. 22-26, down from plus $1.65/b the week before.