March 4, 2020 / 10:32 AM / a month ago

Asia Distillates-Gasoil cracks dive to lowest seasonal levels in 7 years

    SINGAPORE, March 4 (Reuters) - Asian refining margins for gasoil have plunged to their
lowest seasonal levels in the last seven years, weighed down by a supply glut amid muted
industrial activity as the region grapples with the coronavirus epidemic.
    The gasoil market has come under pressure as industrial activity took an unprecedented hit
from the virus outbreak in China that has brought one of the world's largest economies to a
halt.
    An earlier anticipated demand boost for marine gasoil (MGO) following a switch to cleaner
marine fuels this year never quite materialized as ship-operators preferred very-low sulphur
fuel oil (VLSFO) over MGO for better calorific properties and other technical advantages.
    Instead of strengthening as expected, gasoil profits have slumped 44% since the
International Maritime Organization (IMO) banned ships from using fuels with sulphur content
above 0.5%, effective Jan. 1, while bunkering demand crumpled under virus-led industrial
restrictions and port delays.
    Refining margins for gasoil with 10 ppm sulphur content edged higher to $9.03
per barrel over Dubai crude during Asian trading hours on Wednesday, up from $8.96 per barrel on
Tuesday.
    Singapore gasoil prices GO10-SIN have shed about 27% this year, while refining profit
margins or cracks for the benchmark gasoil grade collapsed to a near four-year low of $7.79 per
barrel over Dubai crude last week, Refinitiv Eikon showed.
    "The gasoil market has been under tremendous pressure from last year due to a gloomy global
economy and subdued industrial activities. On top of this, IMO 2020 did not offer the expected
support," said Sri Paravaikkarasu, director for Asia oil at consultancy FGE.
    "As a final nail in the coffin, the coronavirus outbreak has crippled industrial activities
in China... More exports will be seen from China. With this, we could see further downtrend in
gasoil cracks."
    China has ramped up fuel exports to compensate for losses to domestic demand amid the
outbreak, having been unable to prevent a surplus in the world's second-largest oil consumer
even with cutbacks in its refining output.
    Asia's gasoil length should increase by 230,000 barrels per day over the second quarter
year-on-year as refineries start to restore runs, according to FGE estimates.
    Cash premiums for 10 ppm gasoil GO10-SIN-DIF dropped to 2 cents per barrel to Singapore
quotes on Wednesday from 24 cents per barrel in the previous session. 
    Meanwhile, cash differentials for jet fuel widened their discounts to 32 cents per barrel to
Singapore quotes on Wednesday, compared with a discount of 19 cents per barrel on Tuesday.  
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone fell 42.3% to 1.96 million
barrels in the week to March 2, data via S&P Global Platts showed.
    - Stocks of middle distillates in the Fujairah oil hub have averaged 3.3 million barrels so
far in 2020, compared with a weekly average of 2.4 million barrels in 2019, Reuters calculations
showed.
    - The weekly Fujairah middle distillate stocks were 1% lower than a year earlier.
    
    API INVENTORY DATA
    - U.S. crude oil inventories rose in the most recent week, while gasoline and distillate
stocks fell, data from industry group the American Petroleum Institute showed on Tuesday.

    - Crude inventories rose by 1.7 million barrels in the week to Feb. 28 to 446.6 million
barrels, compared with analysts' expectations for a build of 2.6 million barrels.
    - Distillate fuel inventories, which include diesel and heating oil, fell by 1.7 million
barrels, compared with expectations for a 1.9 million-barrel draw, the data showed.
    
    SINGAPORE CASH DEALS
    - One gasoil trade, two jet fuel deals
    - For more information, click
    
    OTHER NEWS
    - Already-battered jet fuel refining margins in Asia may come under further pressure in
coming months as global airlines suspend more flights and more passengers cancel travel plans
due to the widening spread of the coronavirus.
    - China is to ramp up gasoline exports in March and April as its refiners rid themselves of
excess stock in the world's largest energy consumer after the coronavirus outbreak hit domestic
fuel sales.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                         
 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                58.05    -1.05      -1.78       59.10  GO-SIN
 GO 0.5 Diff                      -2.02    -0.10       5.21       -1.92  GO-SIN-DIF
 Spot Gas Oil 0.25%               58.32    -1.05      -1.77       59.37  GO25-SIN
 GO 0.25 Diff                     -1.75    -0.10       6.06       -1.65  GO25-SIN-DIF
 Spot Gas Oil 0.05%               59.01    -1.05      -1.75       60.06  GO005-SIN
 GO 0.05 Diff                     -1.06    -0.10      10.42       -0.96  GO005-SIN-DIF
 Spot Gas Oil 0.001%              60.09    -1.17      -1.91       61.26  GO10-SIN
 GO 0.001 Diff                     0.02    -0.22     -91.67        0.24  GO10-SIN-DIF
 Spot Jet/Kero                    57.31    -0.96      -1.65       58.27  JET-SIN
 Jet/Kero Diff                    -0.32    -0.13      68.42       -0.19  JET-SIN-DIF
                                                                                         
 For a list of derivatives prices, including margins, please double                      
 click the RICs below.                                                   
 Brent M1                                                                                
 Gasoil M1                                                                               
 Gasoil M1/M2                                                                            
 Gasoil M2                                                                               
 Regrade M1                                                                              
 Regrade M2                                                                              
 Jet M1                                                                                  
 Jet M1/M2                                                                               
 Jet M2                                                                                  
 Gasoil 500ppm-Dubai                                                                     
 Cracks M1                                                               
 Gasoil 500ppm-Dubai                                                                     
 Cracks M2                                                               
 Jet Cracks M1                                                                           
 Jet Cracks M2                                                                           
 East-West M1                                                                            
 East-West M2                                                                            
 LGO M1                                                                                  
 LGO M1/M2                                                                               
 LGO M2                                                                                  
 Crack LGO-Brent M1                                                                      
 Crack LGO-Brent M2                                                                      
 
 (Reporting by Koustav Samanta; Editing by Ramakrishnan M.)
  
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