Asia Distillates-Gasoil cracks inch down, cash premiums rise


Persistently rising coronavirus cases in key markets including India, Vietnam, South Korea and Malaysia are weighing heavily on regional industrial activity, market watchers said.

SINGAPORE: Asian refining margins for 10 ppm gasoil inched lower on Thursday, despite weaker feedstock crude prices, as lingering COVID-19 concerns continued to weigh on market sentiments.

Refining margins for 10 ppm gasoil dipped by a cent to $8.62 per barrel over Dubai crude during Asian trade even as crude oil prices fell for the first session this week, cutting short a three-day rally.

Persistently rising coronavirus cases in key markets including India, Vietnam, South Korea and Malaysia are weighing heavily on regional industrial activity, market watchers said. Arbitrage demand from the West, however, is supporting the Asian market to an extent, according to trade sources.

The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe, traded around minus $30 a tonne on Thursday, a level at which the arbitrage is usually profitable.

Re-supply volumes into the Singapore straits have been low in recent weeks as the arbitrage to the west is currently open, a Singapore-based trader said.

"Assuming no return to wide-scale lockdowns, we would expect demand-side support to have endured since, with our forecast for European gasoil/diesel demand over Q3-Q4 roughly on par with its 2019 levels," research consultancy JBC Energy said in a note.

"What is more, gasoil/diesel demand in Europe is heading for its seasonal peak over September, helping to pull in additional barrels," the Vienna-based consultancy said. Cash premiums for gasoil with 10 ppm sulphur content rose to 7 cents per barrel to Singapore quotes on Thursday, compared with a 3-cent premium on Wednesday.

INVENTORIES - Singapore's middle distillate inventories rose 2.1% to a two-week high of 10.9 million barrels in the week to Aug. 25, according to Enterprise Singapore data. - Weekly Singapore middle distillate inventories have averaged 13.1 million barrels this year, compared with an average of 13.9 million barrels in 2020, Reuters calculations showed.

This week's stocks were 24.3% lower than a year earlier. - U.S. distillate inventories, which include diesel and heating oil, rose by 0.6 million barrels in the week to Aug. 20, versus expectations for a 0.3 million-barrel drop, the Energy Information Administration said on Wednesday. - Reuters
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