SINGAPORE: Asian refining margins for 10 ppm gasoil rose for a fourth consecutive session on Friday, surging to an all-time high on expectations for a tighter market in the near term.
Refining profit margins, or cracks, for 10 ppm gasoil soared to $25.95 a barrel over Dubai crude during Asian trading hours, up from the previous high of $23.09 per barrel a day earlier.
Cracks for the benchmark gasoil grade in Singapore have jumped 40% this week, their biggest weekly gain since October 2020, Refinitiv Eikon data showed.
Refining profits are surging globally on fears of a potential gasoil shortage, as buyers avoid Russian supplies, and an already tight Asian gasoil market is expected to attract even stronger arbitrage demand from the West in the coming days, trade sources said.
“Russia’s invasion of Ukraine has resulted in sanctions limiting its participation in the oil market and global financial system, potentially curbing its supply of 2 million tonnes per month of diesel to Europe and the Americas, resulting in an extremely bullish prompt spot market,” Zameer Yusof, senior analyst at Refinitiv Oil Research said in a note.
“This will likely lead to long-haul Westbound arbitrage runs to eventually pull barrels out of Asia, further tightening the cash market,” he added
Cash premiums for gasoil with 10 ppm sulphur content rose to $4.89 a barrel to Singapore quotes, a level not seen since Singapore’s benchmark gasoil grade was shifted to 10ppm in January 2018, from 500ppm earlier. They were at a premium of $4.45 per barrel on Thursday.
The March/April time spread for 10 ppm gasoil widened its backwardation further on Friday to trade at $6.50 per barrel, compared with $6 a barrel on Thursday.
Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp refining and storage hub rose 4.9% to 1.7 million tonnes in the week ended March 3, according to Dutch consultancy Insights Global.
Gasoil stocks have risen on the back of higher imports, Insights Global’s Lars van Wageningen said, adding that buyers were likely stockpiling on expectations of disruptions to Russian supplies.
ARA jet fuel inventories climbed 2.6% this week to 857,000 tonnes.
No gasoil deals, no jet fuel trades. Oil prices rebounded on Friday as fears of Western sanctions disrupted Russian oil exports, outweighing the possibility of more Iranian supplies, while reports of a nuclear plant fire in Ukraine spooked markets.
Indian refiner Nayara Energy, part-owned by Russian oil giant Rosneft, could find it harder to raise funds for expansion as a result of Western sanctions in response to Russia’s invasion of Ukraine, sources with direct knowledge of the matter said.