Asia Distillates: Gasoil spot differentials flip to premium after two weeks

SINGAPORE: Asia’s 10 ppm sulphur gasoil cash differentials recorded gains through the latter half of the week as buying interest for prompt material increased, given tighter regional supply expectations in June amid the maintenance season.

The market flipped to a premium of 6 cents at the close of Friday’s trading session, with Trafigura still bidding for June arrival parcels.

The paper swaps market turned back into a backwardated structure, with June prices higher than July prices, further showing expectations of tighter prompt supply.

Unexpected plant outages in the region contributed to these gains.

Cautious demand and a closed arbitrage to the West, however, led some players to stay on the bearish front and limited the overall amount of positive sentiment.

The 10 ppm sulphur gasoil refining margins were 1% firmer on week with plant troubles in the West and overall mixed demand-supply outlooks for June and July being the two key drivers for the week.

Jet fuel refining margins posted a third week of consecutive gains despite thin market liquidity, up by around 5.9% week on week.

Activity in the jet fuel market has been muted, with limited buying interest regionally and few enquiries from the US, said one northeast Asian producer.

Jet fuel exports from China are still likely to remain in the 800,000-900,000 tonne levels for May and June loading, some traders said.

Japanese trading house Toyota Tsusho Corp said it is shutting its Singapore unit Toyota Tsusho Petroleum but plans to continue to offer bunker fuel and possibly biofuel and liquefied natural gas in the city-statea bid to cut emissions from the sector.

Oil prices rebounded on Friday from losses of more than 1% the previous day as investors turned cautiously optimistic over the fading risk of a US debt default.