December 31, 2019 / 8:23 AM / 19 days ago

Asia Distillates-Gasoil cracks hover near 7-week high; traders eye IMO 2020 demand

    SINGAPORE, Dec 31 (Reuters) - Asian refining margins for 10ppm gasoil dipped on Tuesday, but
still lingering close to a multi-week high touched in the previous session, as traders remained
optimistic about firmer upcoming demand with new marine fuel rules aimed at cutting pollution
from ships kick-starting Wednesday.
    From January 2020, ships must use fuel with a sulphur content of 0.5%, down from 3.5%
through Tuesday, and a section of ship-owners are expected to switch to marine gasoil (MGO) to
comply with the new International Maritime Organization (IMO) regulations.
    Refining profit margins or cracks for gasoil with 10 ppm sulphur content were
at $15.99 per barrel over Dubai crude during Asian trade on Tuesday, slightly down from a more
than seven-week high of $16.06 per barrel a day earlier.
    Cracks for the benchmark gasoil grade in Singapore have averaged $15.49 per barrel over
Dubai crude in 2019, 0.6% lower than an average of $15.59 in 2018, Refinitiv Eikon data showed.
    The gasoil cracks, however, are currently at their highest level for this time of the year
since 2014, Refinitiv Eikon data showed.
    Cash premiums for 10 ppm gasoil GO10-SIN-DIF were at 77 cents per barrel over Singapore
quotes on Tuesday, compared with 85 cents per barrel on Monday.
    The January/February time spread for 10 ppm gasoil widened its backwardated
structure by 2 cents to trade at a premium of 72 cents per barrel on Tuesday.
    In backwardation, the front-month contract is more expensive than subsequent months and it
is usually seen as a sign that prices are likely to head higher in future months.
    Traders expect the gasoil market to get a boost, especially in the first half of 2020, with
more ships switching to MGO next year, while initial stocks for the cheaper alternative very
low-sulphur fuel oil (VLSFO) shrink. So far, shippers have appeared to be favouring VLSFO mixes
over distillate fuels.
    Scheduled spring maintenance at some regional refineries would also help tighten supplies to
support the gasoil market, trade sources said.
    Meanwhile, refining margins for jet fuel eased to $14.56 per barrel over Dubai
crude on Tuesday, down from $14.61 a barrel on Monday.
    Cracks for the aviation fuel, which also determines the profitability of closely-related
kerosene, have averaged $14.94 in 2019, compared with an average of $15.61 last year.
    Cash premiums for jet fuel JET-SIN-DIF rose to 26 cents per barrel to Singapore quotes on
Tuesday, compared with a 20-cent premium on Monday.
    
    CHINA 2020 FUEL EXPORT QUOTAS
    - China has increased the amount of oil products that it will allow oil companies to export
in its first batch of quotas for 2020, boosting the level by 53% from a year earlier to about 28
million tonnes, according to a document outlining the quotas.
    - The new quotas were shared among five state oil companies --PetroChina,
Sinopec, China National Offshore Oil Corp, Sinochem Corp and China National Aviation
Fuel Corp, according to the document reviewed by Reuters on Tuesday.
    - In a change to its practice in recent years, the government did not give a breakdown of
exports by products - usually of gasoline, diesel and jet kerosene - but left it to the
companies to decide what products to export.
    
    SINGAPORE CASH DEALS
    - Three gasoil trades, two jet fuel deals.
    - Trafigura sold two separate cargoes of 150,000 barrels of 10ppm gasoil each to Winson Oil
for Jan. 21-25 loading at a premium of 75 cents per barrel to Singapore quotes.
    - Trafigura sold another 150,000 barrels of 10ppm gasoil to Winson Oil for Jan. 26-30
loading at a premium of 70 cents a barrel to Singapore quotes.
    - Unipec sold two separate cargoes of 100,000 barrels of jet fuel each to Singapore trader
Hin Leong for Jan. 26-30 loading at a premium of 36 cents a barrel to Singapore quotes.
    - For more information, please click
    
    OTHER NEWS
    - FACTBOX-Global refiners raise cleaner shipping fuel output ahead of IMO 2020
    - Oil prices held steady on the last day of the year, heading for their biggest annual rise
since 2016, supported by a thaw in the prolonged U.S.-China trade dispute and supply cuts.
    - Indian Prime Minister Narendra Modi's office has proposed waiving a tax on coal to help
finance pollution-curbing equipment, according to documents, but the move would also make coal
more competitive in price with solar and wind energy.

    
    ASSESSMENTS
 MID-DISTILLATES                                                        
 CASH ($/T)             ASIA CLOSE       Change  % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                79.54   -0.50      -0.62       80.04  GO-SIN
 GO 0.5 Diff                      -2.05    0.01      -0.49       -2.06  GO-SIN-DIF
 Spot Gas Oil 0.25%               80.17   -0.50      -0.62       80.67  GO25-SIN
 GO 0.25 Diff                     -1.42    0.01      -0.70       -1.43  GO25-SIN-DIF
 Spot Gas Oil 0.05%               81.49   -0.45      -0.55       81.94  GO005-SIN
 GO 0.05 Diff                     -0.10    0.06     -37.50       -0.16  GO005-SIN-DIF
 Spot Gas Oil 0.001%              82.36   -0.60      -0.72       82.96  GO10-SIN
 GO 0.001 Diff                     0.77   -0.08      -9.41        0.85  GO10-SIN-DIF
 Spot Jet/Kero                    80.54   -0.42      -0.52       80.96  JET-SIN
 Jet/Kero Diff                     0.26    0.06      30.00        0.20  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 Shailesh Kuber)
  
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