January 13, 2020 / 10:29 AM / a month ago

Asia Distillates-Jet fuel cracks drop to over 8-month low

    SINGAPORE, Jan 13 (Reuters) - Asian refining margins for jet fuel slipped to their lowest in
more than eight months on Monday, hurt by weakness in the aviation sector and lacklustre
seasonal demand for the closely-related kerosene.
    Winter in the Northern hemisphere typically brings peak demand for kerosene, which belongs
to the same grade of oil products as jet fuel and is widely used for heating in Japan. But
warmer-than-usual winter temperatures have kept a lid on the usual demand surge so far this
    Refining margins, also known as cracks, for jet fuel plunged to $12.51 per
barrel over Dubai crude during Asian trading hours on Monday, their lowest since April 30 last
year. They were at $12.79 per barrel on Friday.
    Cracks for the aviation fuel, which also determines the profitability of kerosene, have
dropped 14% over the last two weeks, Refinitiv Eikon data showed.
    Traders were concerned the kerosene market would likely not see a demand surge due to the
ongoing mild winter, while weather forecast models on Refinitiv Eikon showed temperatures in
Tokyo would remain mostly above normal for the next couple of weeks.
    Jet fuel traders, however, expect the upcoming Chinese New Year holidays in January would
help support aviation demand to an extent. 
    Meanwhile, recent positive developments in the U.S.-China trade talks alongside signs of
improving business confidence could provide an uptick in aviation travel demand, the
International Air Transport Association (IATA) said in statement last week.
    Cash differentials for jet fuel JET-SIN-DIF flipped to a premium of 16 cents per barrel to
Singapore quotes on Monday, compared with a discount of 15 cents a barrel on Friday.
    The January/February time spread for jet fuel also returned to a narrow
backwardation on Monday to trade at a premium of 15 cents a barrel, compared with a discount of
6 cents per barrel on Friday.  
    In backwardation the front-month contract is more expensive than subsequent months, which
makes it uneconomical to store the product and results in a drawdown in inventories. It is
usually seen as a sign that prices are likely to head higher in future months.
    Cash premiums for 10 ppm gasoil GO10-SIN-DIF climbed to 43 cents per barrel over Singapore
quotes on Monday, up from 37 cents a barrel on Friday.
    Cracks for the benchmark gasoil grade in Singapore fell 26 cents to $13.72 per
barrel over Dubai crude on Monday.
    - No jet fuel trades, no gasoil deals.
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    - Oil prices held steady on Monday as fears of conflict between the United States and Iran
eased, with investors shifting their focus to this week's scheduled signing of an initial
U.S.-China trade deal, which could boost economic growth and demand.
    - State-owned oil company Saudi Aramco said on Sunday it had exercised its "greenshoe
option" to sell an additional 450 million shares, raising the size of its initial public
offering (IPO) to a record $29.4 billion.
 CASH ($/T)              ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%                 75.98    -0.67      -0.87       76.65  GO-SIN
 GO 0.5 Diff                       -2.06    -0.02       0.98       -2.04  GO-SIN-DIF
 Spot Gas Oil 0.25%                76.66    -0.64      -0.83       77.30  GO25-SIN
 GO 0.25 Diff                      -1.38     0.01      -0.72       -1.39  GO25-SIN-DIF
 Spot Gas Oil 0.05%                77.94    -0.65      -0.83       78.59  GO005-SIN
 GO 0.05 Diff                      -0.10     0.00       0.00       -0.10  GO005-SIN-DIF
 Spot Gas Oil 0.001%               78.47    -0.59      -0.75       79.06  GO10-SIN
 GO 0.001 Diff                      0.43     0.06      16.22        0.37  GO10-SIN-DIF
 Spot Jet/Kero                     76.91    -0.20      -0.26       77.11  JET-SIN
 Jet/Kero Diff                      0.16     0.31    -206.67       -0.15  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 Aditya Soni)
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