April 29, 2020 / 11:00 AM / a month ago

Asia Distillates-Jet fuel cash differentials slip, front-month spread widens

    SINGAPORE, April 29 (Reuters) - Asia's cash differentials for jet fuel weakened on Wednesday
as the front-month spread widened its contango, while refining margins for the aviation fuel
remained negative and lingered close to record lows as most international flights stay grounded.
    Cash discounts for jet fuel JET-SIN-DIF widened to $4.47 a barrel to Singapore quotes on
Wednesday, compared with $4.38 per barrel a day earlier.
    The front-month time spread for jet fuel in Singapore traded at a discount of
$3.64 a barrel on Wednesday, compared with $3.20 on Tuesday, Refinitiv data showed.
    A contango market structure, where prompt prices are lower than those for future delivery,
tends to encourage holders of physical barrels to store the product for selling later to secure
higher prices. 
    Jet fuel is expected to take years to recover from the coronavirus crisis in terms of
passenger demand. The International Air Transport Association expects a 50% decline in passenger
demand for Asia-Pacific airlines this year.
    "The precipitous declines in global jet fuel demand will bottom out across April–May as
there is little room left to fall, with flight numbers in many markets falling to below 10% of
normal levels," consultancy Energy Aspects said in its April note.
    "The recovery in the third quarter of 2020 will likely be slow, and a return to pre-crisis
levels of consumption is unlikely this year."
    Refining margins, also known as cracks for jet fuel were at $4.07 a barrel
below Dubai crude on Wednesday, 70 cents lower than Tuesday. The cracks hit a record low of
minus $4.87 per barrel on Monday.
    Meanwhile, refining margins for gasoil with 10 ppm sulphur content in Singapore
 rose to $4.55 a barrel over Dubai crude during Asian trade on Wednesday, up from
$4.18 a barrel on Tuesday.
    Cash discounts for 10 ppm gasoil GO10-SIN-DIF were at a discount of $1.91 per barrel to
Singapore quotes on Wednesday, compared with a discount of $1.99 a barrel on Tuesday.
    
    CHINA TO ISSUE FIRST-EVER VLSFO EXPORT QUOTAS
    - China is set to release its first-ever quotas to export very-low sulphur fuel oil (VLSFO)
with total volumes of 10 million tonnes for this year, six industry officials with knowledge of
the matter said on Tuesday.
    - The quotas, which came in the wake of Beijing's policy in January to offer tax sweeteners
to boost local production of the fuel, paves the way for Chinese refiners to almost fully cover
the demand from its coastal bonded marine fuel market of 12-14 million tonnes annually.
    - The quotas will be issued to four state-run firms - Sinopec Group, CNPC, China National
Offshore Oil Company (CNOOC) and Sinochem Group - as well as private refiner Zhejiang
Petrochemical Corp (ZPC).
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone rose 16% to 4.1 million
barrels in the week to April 27, data via S&P Global Platts showed.
    - Stocks of middle distillates in the Fujairah oil hub have averaged 3.1 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 have more than doubled as compared with a
year earlier.
    
    API INVENTORY DATA
    - U.S. crude oil, and distillate stocks all rose while gasoline stocks fell, data from
industry group the American Petroleum Institute showed on Tuesday.
    - Distillate fuel inventories, which include diesel and heating oil, rose by 5.5 million
barrels, compared with expectations for an increase of 3.6 million barrels.
    
    SINGAPORE CASH DEALS
    - No jet fuel trades, no gasoil deals
    - For more information, click
    
    OTHER NEWS
    - China's Shanghai International Energy Exchange (INE) said on Wednesday it is considering
improving its crude oil futures delivery mechanism by allowing deliveries to fulfill contracts
into storage tanks and ships held by market participants.
    - Oil prices gained on Wednesday after U.S. stockpiles rose less than expected and gasoline
stocks fell and buoyed by hopes demand will improve as some European countries and U.S. cities
moved to ease coronavirus lockdowns.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                          
 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                23.34     2.37      11.30       20.97  GO-SIN
 GO 0.5 Diff                      -4.95     0.07      -1.39       -5.02  GO-SIN-DIF
 Spot Gas Oil 0.25%               23.60     2.53      12.01       21.07  GO25-SIN
 GO 0.25 Diff                     -4.69     0.23      -4.67       -4.92  GO25-SIN-DIF
 Spot Gas Oil 0.05%               24.14     2.37      10.89       21.77  GO005-SIN
 GO 0.05 Diff                     -4.15     0.07      -1.66       -4.22  GO005-SIN-DIF
 Spot Gas Oil 0.001%              26.38     2.38       9.92       24.00  GO10-SIN
 GO 0.001 Diff                    -1.91     0.08      -4.02       -1.99  GO10-SIN-DIF
 Spot Jet/Kero                    15.64     1.33       9.29       14.31  JET-SIN
 Jet/Kero Diff                    -4.47    -0.09       2.05       -4.38  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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