January 29, 2020 / 11:16 AM / 23 days ago

Asia Distillates-Jet cash premiums drop, China virus outbreak hurts aviation demand

    SINGAPORE, Jan 29 (Reuters) - Asia's cash premiums for jet fuel dropped on Wednesday, while
demand for the aviation fuel has slumped as worries over a spreading coronavirus from China has
led to flight cancellations during a peak travelling season of Lunar New Year.
    Industry analysts are lowering their forecasts for jet fuel demand as airlines and
passengers stay on guard against the respiratory virus that originated in the central Chinese
city of Wuhan, killing more than 130 people in China so far and spreading to over a dozen
countries.
    "It's going to be a dampener on jet fuel demand... For one, Russian tour operators have
stopped marketing tours to China. Airlines, tourism, hospitality industries, all will be
impacted," a Singapore-based trader said.
    Some tour operators in Europe are cancelling trips to China and offering customers refunds
for bookings as concerns grow, triggering a rout in major travel and airline stocks.

    Cash premiums for jet fuel JET-SIN-DIF were at 30 cents per barrel over Singapore quotes
on Wednesday, compared with a premium of 36 cents per barrel on Tuesday.
    Refining margins or crack spreads for jet fuel climbed to $11.04 a barrel over
Dubai crude during Asian trade on Wednesday, compared with $9.67 per barrel on Tuesday.
    Meanwhile, refining margins for gasoil with 10 ppm sulphur content were at
$11.92 per barrel over Dubai crude on Wednesday, up from $10.76 a barrel in the previous
session.
    Cash premiums for 10 ppm gasoil in Singapore GO10-SIN-DIF fell to 13 cents a barrel to
Singapore quotes on Wednesday, down from Tuesday's 23 cents per barrel.
    
    CHINA VIRUS OUTBREAK SLAMS AIRLINES
    - China's growth has helped power a global aviation boom over the last decade, but as the
country curtails travel due to the virus, a slowdown could hit the industry harder than ever
before.
    - United Airlines Holdings, Air Canada Cathay Pacific Airways and
Finnair are among the carriers that have already cancelled some flights to China as
countries expand travel warnings and demand plummets.
    - The virus appears to represent the biggest epidemic threat to the airline industry since
the SARS outbreak, which at its peak in April 2003 led to a 45% plunge in passenger demand in
Asia, analysts said.
    
    CHINA JET FUEL FLOWS
    - Analysts expect China's exports of diesel, gasoline and jet fuel combined to maintain
double-digit growth in 2020.
    - Aviation fuel is set to lead exports with a 20% increase, due to faster expansion in
domestic production versus declining demand growth, said Wang Yanting, Shandong-based analyst at
consultancy JCL Network Technology.
    - Curbs on air travel will further dampen jet fuel consumption, which an executive with
China National Aviation Fuel Company told Reuters grew at 6.2% last year, down from 7% in 2018.
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone rose 26.6% from a week
earlier to 4 million barrels in the week to Jan. 27, data via S&P Global Platts showed.

    - Stocks of middle distillates in the Fujairah oil hub have averaged 3.8 million barrels so
far in 2020, compared with a weekly average of 2.4 million barrels in 2019, Reuters calculations
showed.
    
    API INVENTORY DATA
    - U.S. crude oil stocks fell in the most recent week, while gasoline inventories rose and
distillate stocks fell, data from industry group the American Petroleum Institute showed on
Tuesday.
    - Crude inventories fell by 4.3 million barrels in the week to Jan. 24, to 429 million
barrels, compared with analysts' expectations for a build of 482,000 barrels.
    - Distillate fuel inventories, which include diesel and heating oil, fell by 141,000
barrels, compared with expectations for a 1 million-barrel draw, the data showed.
    
    SINGAPORE CASH DEALS
    - Three gasoil trades, one jet fuel deal.
    - For more information, click
    
    OTHER NEWS
    - Asia's benchmark gasoline price fell the most in nearly four years on Tuesday, while
refiners' profits in making the motor fuel hit seven-month lows as a fast-spreading virus in
China sparked worries about demand from the world's No. 2 oil consumer, sources said.

    - Oil prices rose for a second day on Wednesday, recouping some losses after a five-day rout
on talk that OPEC could extend oil output cuts if a new coronavirus hurts demand, while data
showing a decline in U.S. stockpiles helped steady prices.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                         
 CASH ($/T)              ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                 68.32     2.20       3.33       66.12  GO-SIN
 GO 0.5 Diff                       -2.01    -0.01       0.50       -2.00  GO-SIN-DIF
 Spot Gas Oil 0.25%                69.03     2.20       3.29       66.83  GO25-SIN
 GO 0.25 Diff                      -1.30    -0.01       0.78       -1.29  GO25-SIN-DIF
 Spot Gas Oil 0.05%                70.17     2.20       3.24       67.97  GO005-SIN
 GO 0.05 Diff                      -0.16    -0.01       6.67       -0.15  GO005-SIN-DIF
 Spot Gas Oil 0.001%               70.45     2.10       3.07       68.35  GO10-SIN
 GO 0.001 Diff                      0.13    -0.10     -43.48        0.23  GO10-SIN-DIF
 Spot Jet/Kero                     69.75     2.33       3.46       67.42  JET-SIN
 Jet/Kero Diff                      0.30    -0.06     -16.67        0.36  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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