Asia Distillates: Jet fuel cracks gain; virus resurgence seen denting demand

SINGAPORE: Asia’s refining margins for jet fuel rose on Friday, climbing to their strongest level in more than two months, as pockets of demand led by China supported the aviation fuel market.

But traders were concerned the regional aviation sector would take a major hit in the near term from soaring COVID-19 cases in India and Japan.

Refining margins, or cracks, for jet fuel rose 45 cents to $5.69 per barrel over Dubai crude during Asian trading hours, a level not seen since Feb. 19.

The cracks, however, are still down more than 40%, compared with their five-year seasonal average for this time of the year, Refinitiv Eikon data showed.

Surging new waves of the virus in key markets would rattle the overall refining margins for the aviation fuel in Asia as travellers refrain from flying, prompting cancellations for domestic flights, market watchers said.

Several countries, including Australia, Britain, Canada, and the United Arab Emirates, have barred or cut flights from India.

India, which has imposed lockdowns and night curfews in many states, reported the world’s highest daily tally of coronavirus cases for a second day on Friday, while Japan declared a state of emergency in Tokyo, Osaka and two other prefectures on Friday in an attempt to combat the virus. Cash discounts for jet fuel were at 6 cents a barrel to Singapore quotes, compared with a 9-cent discount on Thursday.

Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub dropped 8.1% to a one-year low of 2.1 million tonnes in the week to April 22, data from Dutch consultancy Insights Global showed.

The data showed ARA jet fuel inventories rose 1.5% to 875,000 tonnes.

Sri Lanka’s Ceylon Petroleum Corp (Ceypetco) is seeking 280,500 barrels of 500 ppm gasoil for delivery in Colombo over June 1-2 on a DAP basis. The tender closes on May 4 and will remain valid for three days. No gasoil deals, no jet fuel trades

Indian Oil Corp Ltd’s (IOC) refineries are operating at about 95% of their capacity, down from 100% at the same time last month, two sources familiar with the matter told Reuters.

Oil prices climbed on Friday, buoyed by hopes demand will recover as economic growth picks up and lockdowns ease, but worries about India’s surging second wave of COVID-19 cases limited gains.