Asian middle distillates supply may balloon as refineries restart from maintenance
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The Asian middle distillates complex is likely to face headwinds thisweek as fresh barrels are expected to hit the spot market with the restart ofseveral regional refineries following completion of scheduled turnarounds. Meanwhile, weaker demand for middle distillate cargoes towards the end ofthe peak travel season could also weigh on prices, market participants said.
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GASOIL WEAKENS ON HIGHER RUN RATES, AWAITS FURTHER CLARITY
Bearish sentiment in the Singapore gasoil market may persist in the nearterm ahead of the emergence of fresh supply from refineries restarting aftermaintenance, industry sources said.
“I see quite a number of gasoil [cargoes] from India coming to Singapore,approximately 700,000-800,000 mt,” a Singapore-based trader said. “I don’thear a lot of buyers on the other hand,” he added.
The weaker fundamentals led the FOB Singapore cash differential to narrowto a slim 1 cent/b on Tuesday, the lowest since July 15, 2016 when it wasassessed at minus 4 cents/b to MOPS Gasoil assessments, S&P Global Platts datashowed. “It is hard to tell where the gasoil market is now … supply is nottight, and it’s expensive to place oil into the pricing zone,” a second tradersaid.
“At the same time, demand is not good, and people don’t know what to do,I think,” he added.
Additionally, an increase in run rates of Chinese refineries could alsoweigh on product prices. Combined average run rates at China’s independentrefineries in Shandong province recovered to around 60.2% in July, from 59.0%in June, according to Platts calculations based on data from JLC — aBeijing-based information provider, formerly known as JYD.
The run rates are likely to edge higher in August with more refineriesreturning from maintenance, S&P Global Platts reported.
JET FUEL DECLINES; FURTHER DOWNSIDE EXPECTED
The FOB Singapore jet fuel/kerosene spot market has been similarlyunderwhelming, with traders expecting the market to see further downside inthe week ahead as demand starts to taper near the end of the summer travelseason.
Further out, some quarters of the market said the recent weakening of theChinese yuan against the US dollar could open the door to a surge in Chinesejet fuel exports.
A Northeast Asian refiner noted that the relatively weak Chinese yuancould encourage Chinese exporters to maximize their oil products, which aretypically sold on a dollar-denominated basis.
He added that the potential supply glut could be a “nightmare”, withrefineries in Malaysia and Brunei set to come on line in Q4 as well.
On August 8, Platts assessed the jet fuel/kerosene cash differential 18cents/b lower from the start of the week at MOPS minus 3 cents/b. The lasttime spot cargoes were trading at a discount was on July 1, when thedifferential was assessed at MOPS minus 4 cents/b.
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