December 19, 2019 / 11:00 AM / a month ago

Asia Distillates-Gasoil cash premiums gain, traders eye IMO 2020 demand boost

    SINGAPORE, Dec 19 (Reuters) - Asia's cash premiums for 10 ppm gasoil rose for a fifth
straight session on Thursday, amid steady buying interest in the physical market, while refining
margins for the industrial and transportation fuel dipped, partly due to firmer crude prices.
    Cash premiums for 10ppm gasoil GO10-SIN-DIF were at 74 cents per barrel over Singapore
quotes, up from 70 cents per barrel on Wednesday.
    Refining margins, also know as cracks, for gasoil with 10 ppm sulphur content
slipped to $15.20 per barrel over Dubai crude on Thursday, still within the sight of a near
six-week peak of $15.99 touched in the previous session.
    The gasoil market in the region is expected to get a major boost, especially in the first
half of 2020, as a section of ship-owners switch to marine gasoil (MGO) to comply with
International Maritime Organization (IMO) rules for using cleaner marine fuels from next year.
    The new IMO rules prohibit ships from using fuels containing more than 0.5% sulphur,
compared with 3.5% through the end of December. 
    But in the switch so far, very low sulphur fuel oil (VLSFO), which is a cheaper alternative,
has outperformed market expectations and has been the primary choice of shippers, eating into
the demand pool for MGO as a replacement for high-sulphur fuel.
    Total sales of low sulphur marine fuels came in at 2.076 million tonnes in November, well
above the previous record of 915,000 tonnes set in October and more than the 1.871 million
tonnes sold in all of 2018, data from the Maritime and Port Authority of Singapore (MPA) showed
last week.
    "Distillate traders are turning their focus to Q2 20 as the IMO 2020 focus shifts away from
the early MGO trade that has so far not panned out," consultancy Energy Aspects said in a
monthly note.
    "Traders are now wondering if the depletion of VLSFO stocks built up this year and refinery
turnarounds in the spring will either push shippers into the MGO market or at least pull diesel
molecules into the VLSFO pool to meet demand. So diesel should tighten, the reasoning goes." 
    The front-month time spread for 10 ppm gasoil, which has widened its
backwardated structure by 67% over the past couple of weeks, traded at a premium of 35 cents a
barrel.
    Meanwhile, cash discounts for jet fuel JET-SIN-DIF widened to 12 cents per barrel to
Singapore quotes, compared with a 8-cent discount on Wednesday.
    Refining profit margins for jet fuel fell to $14.72 per barrel over Dubai
crude, compared with $15.49 per barrel in the previous session.
    
    SINGAPORE INVENTORIES
    - Singapore onshore middle distillate stocks rose 1.5% to a three-week high of 10.9 million
barrels in the week ended Dec. 18, Enterprise Singapore data showed.
    - Weekly middle distillate inventories have averaged 11.1 million barrels so far this year,
having averaged 9.6 million barrels a week in 2018, Reuters calculations showed.
    - Overall, onshore middle distillate inventories were 2.2% lower year-on-year.
    - Light distillate stocks dropped 657,000 barrels to a two-week low of 12.3 million barrels
in the week ended on Wednesday, while fuel oil stocks fell 1.6 million barrels to a 11-week low
of 19.7 million barrels, Enterprise Singapore data showed.
    
    EIA INVENTORIES
    - U.S. crude stocks fell while gasoline and distillate inventories rose, the Energy
Information Administration said on Wednesday, in a report largely in line with analyst
expectations.
    - Crude inventories fell by 1.1 million barrels in the week to Dec. 13 to 446.8
million barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel
drop.
    - Distillate stockpiles, which include diesel and heating oil, rose by 1.5
million barrels in the week to 125.1 million barrels, versus expectations for a 312,000-barrel
rise, the EIA data showed.

    SINGAPORE CASH DEALS
    - One gasoil trade, no jet fuel deals.
    - For more information, please click
    
    OTHER NEWS
    - Oil prices remained atop three-month peaks, extending a robust streak that began a week
ago, as thawing trade relations between the United States and China supported global markets.

    - Chevron Corp's Australian unit said it would buy the domestic commercial and
retail fuels business of Puma Energy for A$425 million ($288 million), marking a return to the
country's fuel distribution market.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                        
 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                77.56    -0.44      -0.56       78.00  GO-SIN
 GO 0.5 Diff                      -2.29    -0.02       0.88       -2.27  GO-SIN-DIF
 Spot Gas Oil 0.25%               78.16    -0.44      -0.56       78.60  GO25-SIN
 GO 0.25 Diff                     -1.69    -0.02       1.20       -1.67  GO25-SIN-DIF
 Spot Gas Oil 0.05%               79.39    -0.44      -0.55       79.83  GO005-SIN
 GO 0.05 Diff                     -0.46    -0.02       4.55       -0.44  GO005-SIN-DIF
 Spot Gas Oil 0.001%              80.59    -0.38      -0.47       80.97  GO10-SIN
 GO 0.001 Diff                     0.74     0.04       5.71        0.70  GO10-SIN-DIF
 Spot Jet/Kero                    79.23    -0.44      -0.55       79.67  JET-SIN
 Jet/Kero Diff                    -0.12    -0.04      50.00       -0.08  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; editing by Uttaresh.V)
  
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