February 4, 2020 / 11:34 AM / 20 days ago

Asia Distillates-Jet fuel cash premiums dwindle, cracks climb

    SINGAPORE, Feb 4 (Reuters) - Asia's cash premiums for jet fuel slipped to their lowest in
over two weeks on Tuesday, hurt by muted buying interest for physical cargoes, while refining
profits for the aviation fuel lingered close to their weakest levels in more than
three-and-a-half years.
    Cash premiums for jet fuel JET-SIN-DIF fell to 15 cents per barrel over Singapore quotes
on Tuesday, down from 16 cents per barrel a day earlier.
    Refining margins or cracks for jet fuel were at $9.64 per barrel over Dubai
crude during Asian trade. On Monday, margins hit $8.64 a barrel, their lowest level since April
    The suspension of flights to China by global airlines due to the coronavirus epidemic
resulted in jet cracks posting their biggest monthly decline in a more than a decade in January.

    The margins dropped 34% in January, their biggest monthly drop on record, according to data
going back to as far as April 2009 on Refinitiv Eikon.
    The death toll from coronavirus in China rose to 425 as of the end of Monday, up by a record
64 from the previous day, the National Health Commission said on Tuesday.
    The World Health Organization (WHO) has declared the flu-like virus a global emergency,
while industry analysts estimate travel restrictions and flight cancellations due to the
epidemic would cause jet fuel demand to fall within a range of 170,000-300,000 barrels per day.

    The February/March time spread for jet fuel narrowed their backwardated
structure on Tuesday to trade at a premium of 7 cents a barrel, compared with 8 cents on Monday.
    In backwardation, the prompt-month contract is more expensive than subsequent months, which
makes it uneconomical to store the product and leads to a drawdown in inventories. It is usually
seen as a sign that there is demand for the product and the market is rebalancing.
    But a narrowing backwardation indicates the market may flip back into contango -- the
opposite of backwardation -- that tends to encourage holders of physical barrels to store the
product for selling later to secure higher prices.
    Meanwhile, cash premiums for 10 ppm gasoil in Singapore GO10-SIN-DIF climbed to 77 cents
per barrel to Singapore quotes on Tuesday, backed by firmer deal values in the Singapore
physical trade window. The premiums for the benchmark gasoil grade were at 48 cents per barrel
on Monday.
    Cracks for gasoil with 10 ppm sulphur content rose to $11.84 per barrel over
Dubai crude on Tuesday, up from $11.04 per barrel in the previous session.
    - Hong Kong's Cathay Pacific Airways Ltd plans to cut 30% of its global capacity
over the short-term, including 90% of capacity to mainland China as it grapples with a sharp
fall in demand due to the coronavirus epidemic, its chief executive officer said on Tuesday.

    - Meanwhile, China's civil aviation authority has urged domestic carriers to continue flying
international routes as they consider cuts in response to a drop in demand due to the
coronavirus outbreak, state news agency Xinhua reported on Tuesday.
    - The Indonesian Biofuel Producers Association (APROBI) said it is expecting 3.62 million
kilo litres (KL) of additional production capacity this year, which could support biodiesel
    - Indonesia currently has the capacity to produce 12 million KL of palm oil's fatty acid
methyl ester (FAME), the bio-content used in blending with fossil diesel fuel to make biodiesel.
    - However, in practice producers could only utilise up to 85% of the capacity, or around 10
million KL, APROBI's vice chairman Paulus Tjakrawan told reporters on Monday.
    - With the Indonesian government expanding its mandatory biodiesel programme, producers have
seen little room for exports of the fuel, Tjakrawan said.
    - Eight gasoil trades, no jet fuel deals.
    - For more information, click
    - Freight rates for supertankers on the Mideast Gulf and U.S. Gulf routes to Asia have
fallen to their lowest since mid-September as the coronavirus outbreak hit Chinese oil demand,
ship brokers told Reuters.
    - Buyers of liquefied natural gas (LNG) in China are bracing for demand to be shattered by a
virus epidemic that has wiped billions off the value of companies in the world's second largest
importer of the fuel and threatens its growth.
 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               63.95    -0.38      -0.59       64.33  GO-SIN
 GO 0.5 Diff                     -1.85     0.03      -1.60       -1.88  GO-SIN-DIF
 Spot Gas Oil 0.25%              64.66    -0.38      -0.58       65.04  GO25-SIN
 GO 0.25 Diff                    -1.14     0.03      -2.56       -1.17  GO25-SIN-DIF
 Spot Gas Oil 0.05%              65.77    -0.39      -0.59       66.16  GO005-SIN
 GO 0.05 Diff                    -0.03     0.02     -40.00       -0.05  GO005-SIN-DIF
 Spot Gas Oil 0.001%             66.57    -0.13      -0.19       66.70  GO10-SIN
 GO 0.001 Diff                    0.77     0.29      60.42        0.48  GO10-SIN-DIF
 Spot Jet/Kero                   63.25    -0.26      -0.41       63.51  JET-SIN
 Jet/Kero Diff                    0.15    -0.01      -6.25        0.16  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 Amy Caren Daniel)
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