November 20, 2019 / 10:53 AM / 17 days ago

Asia Distillates-Jet fuel differentials linger near widest discounts since Feb

    SINGAPORE, Nov 20 (Reuters) - Asia's cash differentials for jet fuel inched up on Wednesday
but still lingered close to their biggest discounts in more than nine months, touched in the
previous session, due to persistent weakness in the physical market and overall tepid demand
from the aviation sector.
    Cash differentials for jet fuel JET-SIN-DIF were at a discount of 61 cents per barrel to
Singapore quotes on Wednesday, compared with a discount of 63 cents per barrel a day earlier.
The discount level on Tuesday was the widest since early February. 
    Slowing economies, political unrest and trade tensions have all impacted the region's
aviation sector both in terms of passenger traffic and air cargo demand, which in turn is
hurting the jet fuel market, industry sources said.
    Refining margins or cracks for jet fuel, which also determines the
profitability of closely-related kerosene, slipped to $14.19 per barrel over Dubai crude during
Asian trading hours on Wednesday, the lowest since June 12. The jet fuel cracks were at $14.27 a
barrel on Tuesday. 
    Refining profit margins for the aviation fuel have fallen about 26% since hitting a 10-month
peak of $19.09 a barrel on Sept. 19, Refinitiv data showed.
    "Although strong demand from the U.S. West Coast could mop up some of Asia's jet surplus in
the short term, an unfavourable economic backdrop, uncertainty due to the trade war and the
protests in Hong Kong have all translated to weak regional aviation demand in the Asian market,"
consultancy Energy Aspects said in a monthly note.
    Winter in the northern hemisphere typically boosts demand for kerosene which belongs to the
same grade of oil products as jet fuel and is widely used for heating in some parts of northeast
Asia, especially Japan.
    Some traders were concerned winter will not bring extreme cold and temperatures will be
warmer than normal this year, leading to a weaker seasonal demand for kerosene.
    Temperatures in Tokyo are expected to stay mostly above-normal for the next couple of weeks,
while temperatures in Seoul and Shanghai would remain higher than normal at least until next
week, weather forecast models on Refinitiv showed.
    Meanwhile, refining margins or cracks for 10 ppm gasoil dropped 24 cents to
$14.13 per barrel over Dubai crude on Wednesday.
    Cash premiums for gasoil with 10 ppm sulphur content GO10-SIN-DIF were at 21 cents per
barrel to Singapore quotes on Wednesday, down from 28 cents a barrel on Tuesday.
    
    REFINERS RAISE CLEANER SHIPPING FUEL OUTPUT
    - Global oil refiners have upgraded processing units and adjusted operations to raise output
of low-sulphur residual fuels and marine gasoil (MGO) to prepare for stricter shipping fuel
standards that kick in on Jan. 1, 2020.
    - The new International Maritime Organization (IMO) rules prohibit ships from using fuels
containing more than 0.5% sulphur, compared with 3.5% through the end of December, unless they
are equipped with exhaust-cleaning "scrubbers".
    - The shipping industry consumes about 4 million barrels per day (bpd) of marine bunker
fuels, and the rule changes will impact more than 50,000 merchant ships globally, opening a
significant new market for fuel producers.
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone rose 8.8% from a week
earlier to 3.5 million barrels in the week to Nov. 18, data via S&P Global Platts showed.

    - Stocks of middle distillates in the Fujairah oil hub have averaged 2.2 million barrels so
far in 2019, Reuters calculations showed. This compares with a weekly average of 2.8 million
barrels in 2018.
    - Compared with year-ago levels, weekly Fujairah middle distillate stocks were 13% higher.
    
    API INVENTORY DATA
    - U.S. crude stocks rose last week while gasoline inventories increased and distillate
stocks drew, data from industry group the American Petroleum Institute showed on Tuesday.
 
    - Crude inventories rose by 6 million barrels in the week to Nov. 15 to 445.9 million,
compared with analysts' expectations for a increase of 1.5 million barrels.
    - Distillate fuels stockpiles, which include diesel and heating oil, fell by 2.2 million
barrels, compared with expectations for a 732,000-barrel drop, the API data showed.

    SINGAPORE CASH DEALS
    - One gasoil trade, no jet fuel deals.
    - Total bought 150,000 barrels of 10ppm gasoil from Unipec for Dec. 5-9 loading at parity to
the balance of November Singapore quotes.
    - For more information, please click
    
    OTHER NEWS
    - China's Sinopec Corp is set to launch a new $5.7 billion refining and petrochemical
complex in the south of the country in second-quarter 2020 using crude oil from Kuwait as a key
feedstock, industry officials with knowledge of the matter said.
    - Russia is unlikely to agree to deepen cuts in oil output at a meeting with fellow
exporters next month, but could commit to extend existing curbs to support Saudi Arabia, three
sources said on Tuesday.

    
    ASSESSMENTS    
 MID-DISTILLATES                                                                         
 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               69.34    -1.69      -2.38       71.03  GO-SIN
 GO 0.5 Diff                     -3.47     0.01      -0.29       -3.48  GO-SIN-DIF
 Spot Gas Oil 0.25%              69.63    -1.69      -2.37       71.32  GO25-SIN
 GO 0.25 Diff                    -3.18     0.01      -0.31       -3.19  GO25-SIN-DIF
 Spot Gas Oil 0.05%              72.44    -1.69      -2.28       74.13  GO005-SIN
 GO 0.05 Diff                    -0.37     0.01      -2.63       -0.38  GO005-SIN-DIF
 Spot Gas Oil 0.001%             73.02    -1.77      -2.37       74.79  GO10-SIN
 GO 0.001 Diff                    0.21    -0.07     -25.00        0.28  GO10-SIN-DIF
 Spot Jet/Kero                   72.24    -1.52      -2.06       73.76  JET-SIN
 Jet/Kero Diff                   -0.61     0.02      -3.17       -0.63  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 Rashmi Aich)
  
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