Asia distillates: Jet fuel cracks gain, cash premiums hit new all-time high

SINGAPORE: Asian refining margins for jet fuel rose on Wednesday, while cash differentials surged to an all-time high, lifted by a stronger deal in the physical market.

Refining margins, also known as cracks, for jet fuel climbed to $25.18 per barrel over Dubai crude during Asian trading hours, despite firmer feedstock crude prices on Wednesday. They were at $21.91 per barrel a day earlier.

The front-month time spread for jet fuel in Singapore widened its backwardated structure to trade at $7.40 a barrel, compared with $5.80 a barrel on Tuesday.

Cash premiums for jet fuel soared to $7.85 a barrel to Singapore quotes, the highest on record according to Reuters data that goes back to late 1998. They were at a premium of $5.31 per barrel in the previous session.

Some traders, however, remain concerned that China’s recent upsurge of coronavirus cases will partly weigh down the region’s aviation demand recovery in the near term.

Middle-distillate inventories in the Fujairah Oil Industry Zone rose 5% to a three-week high of 1.8 million barrels in the week ended March 21, data via S&P Global Platts showed.

Weekly stocks in Fujairah have averaged 1.9 million barrels so far this year, compared with 3.5 million barrels in 2021, Reuters calculations showed.

US distillate inventories, which include diesel and heating oil, rose by 826,000 barrels in the week ended March 18, according to market sources, citing American Petroleum Institute figures.

Oil prices rose on Wednesday amid volatile trading on increasing concerns of global supply tightness from sanctions imposed on Russia, the world’s second-largest oil exporter, and on signs that exports from Kazakhstan may be disrupted.

Energy and commodity markets are in shock after Russia’s invasion of Ukraine, the world’s top trading firms said on Tuesday, warning of gas and diesel shortages in Europe and economic recession if Russian flows fall further.