May 6, 2020 / 11:19 AM / 2 months ago

Asia Distillates-Gasoil reels under pressure as lockdown-mode India pumps out barrels

    SINGAPORE, May 6 (Reuters) - Asian refining margins for 10 ppm gasoil edged higher on
Wednesday, but stayed within close sight of a record low hit in the previous session as traders
expect more supplies to emerge from India, where an extended coronavirus lockdown continues to
dampen domestic demand.
    India uses much more diesel for personal transportation compared with other countries, which
means demand there is likely to fall more than elsewhere and refiners would be pushing a higher
share of their diesel output into the regional market, analysts said.
    Two Indian gasoil traders said they expect Indian domestic demand to remain weak in May,
which will continue the trend of Indian supply flooding the regional market.
    "Demand in India is massively down, and of course the lockdown extension doesn't help. But
refiners there appear to be cutting runs on a substantial scale... having been arguably too slow
to cut to begin with," Kostantsa Rangelova, lead Asia analyst at JBC Energy said.
    Refining margins, also known as cracks for the benchmark gasoil grade with 10 ppm sulphur
content in Singapore, were at $3.76 a barrel over Dubai crude on Wednesday. The
cracks on Tuesday had slid to $1.77 a barrel over Dubai crude on Tuesday, the lowest on record
according to Refinitiv Eikon data that goes back to January 2014.
    Cash discounts for 10 ppm gasoil GO10-SIN-DIF were at $1.49 per barrel to Singapore quotes
on Wednesday, 3 cents wider from Tuesday.
    Meanwhile, refining margins for jet fuel were at a discount of $4.24 a barrel
to Dubai crude during Asian trade on Wednesday, compared with a record low of minus $7.23 a
barrel on Tuesday.
    Cracks for the aviation fuel have crashed in recent weeks as airlines were forced to ground
most of their flights due to coronavirus-led travel restrictions.
    With the refining margins mostly in negative territory for over a month now, refiners have
been cutting their jet fuel yields as much as possible to mitigate losses.
    "Jet fuel cracks have fallen sharply and for crude distillation units (CDUs), we've adjusted
jet-fuel production mode," Lee Dong-yeol, SK Energy's head of corporate planning office, said on
a call with analysts on Wednesday.
    "Through adjustments, we are producing kerosene at the minimum level and blending kerosene
with low sulphur fuel oil (LSFO). And these are the ways we're responding to market conditions,"
Lee added.
    Helped by a slight uptick in buying interest for physical cargoes on Wednesday, cash
discounts for jet fuel JET-SIN-DIF narrowed to $3.58 a barrel to Singapore quotes, compared
with $4.29 per barrel on Tuesday.
    
    SINGAPORE INVENTORIES
    - Singapore onshore middle distillate stocks dropped 5.9% to 14 million barrels in the week
ended May 5, Enterprise Singapore data showed.
    - Weekly middle distillate inventories have averaged at 12.1 million barrels so far in 2020,
compared with 11.1 million barrels in 2019, Reuters calculations showed.
    - Overall, onshore middle distillate inventories were 45.7% higher year-on-year.
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone rose 17.8% to 4.9 million
barrels in the week to May 4, data via S&P Global Platts showed.
    - Stocks of middle distillates in the Fujairah oil hub have averaged 3.2 million barrels so
far in 2020, compared with a weekly average of 2.4 million barrels in 2019, Reuters calculations
showed.
    - The weekly Fujairah middle distillate stocks were 88% higher as compared with a year
earlier.
    
    API INVENTORY DATA
    - U.S. crude oil and distillate stocks rose while gasoline stocks fell, data from industry
group the American Petroleum Institute showed on Tuesday.
    - Distillate fuel inventories, which include diesel and heating oil, rose by 6.1 million
barrels, compared with expectations for an increase of 2.9 million barrels.
    
    SINGAPORE CASH DEALS
    - No jet fuel trades, one gasoil deal
    - For more information, click
    
    OTHER NEWS
    - Oil markets are at the beginning of a fragile recovery as coronavirus lockdowns ease,
though long-term peak demand may be permanently eroded, Vitol's chief executive told Reuters.
    Russell Hardy, CEO of the world's biggest oil trader, said global oil demand sank by 26-27
million barrels per day (bpd) in April and predicts a year-on-year drop of over 8 million bpd.

    - Oil rose above $31 a barrel on Wednesday as hopes for a recovery in demand as some
countries ease coronavirus lockdowns offset a report showing a higher-than-expected rise in U.S.
inventories.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                          
 CASH ($/T)              ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                 29.95     3.61      13.71       26.34  GO-SIN
 GO 0.5 Diff                       -4.70    -0.13       2.84       -4.57  GO-SIN-DIF
 Spot Gas Oil 0.25%                30.44     3.61      13.46       26.83  GO25-SIN
 GO 0.25 Diff                      -4.21    -0.13       3.19       -4.08  GO25-SIN-DIF
 Spot Gas Oil 0.05%                30.54     3.61      13.41       26.93  GO005-SIN
 GO 0.05 Diff                      -4.11    -0.13       3.27       -3.98  GO005-SIN-DIF
 Spot Gas Oil 0.001%               33.16     3.71      12.60       29.45  GO10-SIN
 GO 0.001 Diff                     -1.49    -0.03       2.05       -1.46  GO10-SIN-DIF
 Spot Jet/Kero                     21.71     5.85      36.89       15.86  JET-SIN
 Jet/Kero Diff                     -3.58     0.71     -16.55       -4.29  JET-SIN-DIF
                                                                                          
 For a list of derivatives prices, including margins, please double                       
 click the RICs below.                                                    
 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                                                                       
 
 (Reporting by Koustav Samanta, Additional reporting by Jane Chung in Seoul; Editing by Supriya
Kurane)
  
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