Asian Middle Distillates: Key Market Indicators July 19-23

Asian middle distillate markets enter July 19-23 trading week on a stable to firmer note, with tighter supply balances supporting the diesel sector as a COVID-19 resurgence in Asia continues to influence the demand for jet fuel / kerosene.

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At 10:00 a.m. Singapore time (02:00 GMT), the ICE August Brent crude futures contract was down $ 1.14 / bbl (1.55%) to $ 72.45 / bbl, from $ 73.59 / b at the end of July 16.


** The jet fuel-to-kerosene time gap from the first month of August to September was set at minus 22 cents / bbl at 0200 GMT on July 19, narrowing 3 cents / bbl from the Asian close as of July 16, according to data from S&P Global Platts.

** The FOB Singapore jet fuel / kerosene cash differential extended declines and ended the week minus 42 cents / bbl compared to Platts Singapore’s average jet fuel / kerosene valuations on July 16, down 4 cents / b week to week, based on Platts data.

** The aviation sector in Asia continues to brace for headwinds as the peak in COVID-19 infections in the region darkens travel prospects, causing lockdowns in many countries.

** The bearish situation was also seen in Japan, where industry sources said the COVID-19 state of emergency in Tokyo would have a significant impact on demand for jet fuel for summer travel. “The demand for domestic travel typically increases during the peak summer travel season in Japan; However, Japan has just announced a state of emergency in the greater Tokyo area due to the increase in COVID-19 cases, and the new measure will have a big impact on domestic travel. travel because 10% of the Japanese population resides in Tokyo, ”said a source for a Japanese airline, adding that flight capacity in Japan is likely to remain low, with little increase until 2022.

** The Q4 2021-Q1 2022 jet fuel / kerosene trade spread, an indication of short-term sentiment, averaged over 52 cents / bbl July 12-16, widening 14 cents / b compared to an average of over 38 cents / b the one week before.


** The August-September diesel market structure was pegged at plus 7 cents / bbl at 0200 GMT on July 19, stable from the Asian close of 0830 GMT on July 16, according to Platts data.

** The July forward swap spread, or EFS, was pegged at minus $ 6.00 / mt at 0200 GMT on July 19, dropping from minus $ 6.24 / mt at close Asian July 16, according to data from Platts.

** The Asian diesel market could benefit from some support this week, with some traders saying the complex could move to firmer ground due to a combination of factors. “The diesel market is expected to tighten in the future. We have news that the Chinese have very low export volumes. [of gasoil], Japan’s exports are also lower, [South Korea’s] GS Caltex has so far only shown two spot cargoes of diesel for the August load and the Taiwanese have yet to show spot cargoes, ”said a trader, adding that if demand is not strong, at the same time “there aren’t many molecules being seen in the physical pool either.”

** In addition, a marginally open arbitration to send barrels of Asian diesel to the West could provide additional support to the market. The first month of trading futures for swaps, or EFS spreads, is currently at its lowest for a month, which, combined with lower freight rates, could help open avenues for Eastern arbitrage. West which have been closed for an extended period. of time.

** The spread on Q4 2021-Q1 2022 diesel swaps – an indication of short-term sentiment – averaged over 96 cents / bbl from July 12 to 16, widening 4 cents / bbl from the average of 92 cents / bbl the previous week.

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