December 4, 2019 / 10:39 AM / 6 days ago

Asia Distillates-Jet fuel discounts flat, market eyes winter kerosene demand

    SINGAPORE, Dec 4 (Reuters) - Asia's cash discounts for jet fuel remained unchanged on
Wednesday amid muted demand for physical cargoes, but traders were hopeful the market would get
a boost in coming weeks as winter heating requirements prop up consumption of kerosene in some
parts of the region.
    Cash differentials for jet fuel JET-SIN-DIF stayed at a discount of 31 cents per barrel to
Singapore quotes as the physical market for aviation fuel in the Singapore trading window
remained muted with no bids or deals on Wednesday.
    Winter in the northern hemisphere typically bolsters demand for kerosene, which belongs to
the same grade of oil products as jet fuel, and is widely used for heating in some parts of
northeast Asia, especially Japan.
    Temperatures in Tokyo are expected to stay below normal at least for the next one week,
while temperatures in Seoul would remain mostly lower than normal for the next two weeks,
weather forecast models on Refinitiv Eikon showed.
    The jet fuel market has been weighed down by ample supplies over the last couple of months
as the aviation sector took a hit from slowing economic activity and U.S.-China trade tensions
took a toll on air freight demand.
    "Key drivers for jet fuel prices will remain the fluctuations in the price of oil as well as
the expectations for weak macroeconomic conditions hitting air freight demand," Fitch Solutions
said in a note this week.
    "Macroeconomic headwinds could mean more of a change in the composition of trade and air
transport demand, with less freight demand but less of an impact on passenger kilometres
travelled. This will be dependent on how elastic travel demand is to reduced economic activity
globally."
    Refining margins, also known as cracks, for jet fuel inched down one cent to
$14.77 per barrel over Dubai crude during Asian trading hours on Wednesday.
    Meanwhile, refining margins for 10 ppm gasoil slipped to $14.97 a barrel over
Dubai crude on Wednesday, down from $15.11 a barrel on Tuesday.
    Cash premiums for gasoil with 10 ppm sulphur content GO10-SIN-DIF rose to 43 cents a
barrel to Singapore quotes, compared with a premium of 34 cents a barrel on Tuesday.
    
    INDIA DIESEL DEMAND GROWTH SEEN SUBDUED
    - India's demand for diesel will remain subdued until the second half of 2020, when analysts
expect various policy measures aimed at stimulating industrial activity to kick in and soak up
excess fuel.
    - Until consumption picks up in Asia's third-largest economy, where economic growth has
slowed to six-year lows, refiners are likely to extend their recent stretch of rare diesel
exports, which have weighed on refining margins in the region.
    - Diesel exports could climb by up to 8 million tonnes in the 2019-20 fiscal year from the
28 million tonnes shipped the year before, said an executive at a state refiner who could not be
named due to company policy.
    - Ship-tracking data compiled by Refinitiv show India's diesel exports since the fiscal year
start in April have jumped 8.9% from the same period in 2018 to 17.7 million tonnes, the highest
for that time span since at least 2015.
    
    FUJAIRAH STOCKS
    - Middle-distillate inventories in the Fujairah Oil Industry Zone rose 11.7% from a week
earlier to 3.4 million barrels in the week to Dec. 2, data via S&P Global Platts showed.

    - Stocks of middle distillates in the Fujairah oil hub have averaged 2.2 million barrels so
far in 2019, Reuters calculations showed. This compares with a weekly average of 2.8 million
barrels in 2018.
    - Compared with year-ago levels, weekly Fujairah middle distillate stocks were 46% higher.
    
    API INVENTORY DATA
    - U.S. crude stocks fell while gasoline inventories rose and distillate stocks increased,
data from industry group the American Petroleum Institute showed on Tuesday.
    - Crude inventories fell by 3.7 million barrels in the week to Nov. 29 to 445.9 million,
compared with analysts' expectations for a fall of 1.7 million barrels.
    - Distillate fuels stockpiles, which include diesel and heating oil, rose by 794,000
barrels, compared with expectations for a 1.1 million-barrel gain, the data showed.

    SINGAPORE CASH DEALS
    - One 10ppm gasoil trade, no jet fuel deals.
    - P66 sold 150,000 barrels of 10 ppm gasoil to Unipec for Dec. 19-23 loading at a premium of
$1.20 a barrel to Singapore quotes.
    - For more information, please click
    
    OTHER NEWS
    - OPEC and its allies led by Russia are gearing up to approve deeper oil production cuts
this week to prevent a new glut and a collapse on oil prices with OPEC member Iraq saying the
move was supported by key members.
    - U.S. crude exports could touch 4 million barrels per day (bpd) for the first time ever in
coming months, thanks to rising demand for low-sulphur crudes and the completion of pipeline and
export projects along the U.S. Gulf Coast, traders, analysts and shipbrokers said.
    
    ASSESSMENTS
 MID-DISTILLATES                                                                        
 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               71.76     0.08       0.11       71.68  GO-SIN
 GO 0.5 Diff                     -3.06     0.04      -1.29       -3.10  GO-SIN-DIF
 Spot Gas Oil 0.25%              72.50     0.21       0.29       72.29  GO25-SIN
 GO 0.25 Diff                    -2.31     0.18      -7.23       -2.49  GO25-SIN-DIF
 Spot Gas Oil 0.05%              74.53     0.03       0.04       74.50  GO005-SIN
 GO 0.05 Diff                    -0.29    -0.01       3.57       -0.28  GO005-SIN-DIF
 Spot Gas Oil 0.001%             75.25     0.13       0.17       75.12  GO10-SIN
 GO 0.001 Diff                    0.43     0.09      26.47        0.34  GO10-SIN-DIF
 Spot Jet/Kero                   73.88     0.10       0.14       73.78  JET-SIN
 Jet/Kero Diff                   -0.31     0.00       0.00       -0.31  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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