July 8, 2020 / 11:25 AM / a month ago

Asia Distillates-Jet fuel refining margins slip to over 1-week low on sloppy demand

    SINGAPORE, July 8 (Reuters) - Asian refining margins for jet fuel dropped to their lowest
levels in more than a week on Wednesday, weighed down by sluggish demand, while the prompt-month
time spread for the aviation fuel in Singapore remained in a steep contango.
    The aviation market, grappling with coronavirus-related travel curbs especially over the
last quarter, is expected to remain under pressure for longer as majority of international
flights would likely stay grounded with many countries facing a resurgence of COVID-19 cases.
    Despite an uptick in number of flights in recent weeks, the overall aviation demand for jet
fuel has not found any sizeable boost as passengers are delaying travel plans to avoid
quarantine periods and countries are trying to control imported cases, trade sources said.
    "I think it will take two to three years before we see jet fuel demand catching up 2019
levels," a Seoul-based trader said.
    Refining profit margins or cracks for jet fuel, which are currently 85% lower
compared with the seasonal historical average for this time of the year, were at $1.48 a barrel
over Dubai crude during Asian trade on Wednesday, their lowest since June 30.
    Refiners are expected to continue optimising jet fuel production over the remainder of this
year at the expense of other transportation fuels such as gasoil, whose cracks are comparatively
stronger, analysts said.
    Cracks for gasoil with 10-ppm sulphur content were at $6.48 a barrel over
Dubai crude on Wednesday, as against $6.69 per barrel on Tuesday.
    Cash discounts for jet fuel JET-SIN-DIF were at a discount of 37 cents a barrel to
Singapore quotes on Wednesday, while Refinitiv Eikon data showed the July/August time spread for
jet traded at a discount of 68 cents a barrel.
    - Middle-distillate inventories in the Fujairah Oil Industry Zone dropped 6% to 3.9 million
barrels in the week ended July 6, data via S&P Global Platts showed.
    - The weekly stocks in Fujairah have averaged 3.9 million barrels so far in 2020, compared
with a weekly average of 2.4 million barrels in 2019, Reuters calculations showed.
    - Meanwhile, U.S. distillate fuel inventories fell by 847,000 barrels, compared with
expectations for a decrease of 75,000 barrels, data from industry group the American Petroleum
Institute (API) showed on Tuesday.
    - One gasoil deal, no jet fuel trades

 CASH ($/T)            ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%               48.17     0.01       0.02       48.16  GO-SIN
 GO 0.5 Diff                     -0.87    -0.03       3.57       -0.84  GO-SIN-DIF
 Spot Gas Oil 0.25%              48.81     0.01       0.02       48.80  GO25-SIN
 GO 0.25 Diff                    -0.23    -0.03      15.00       -0.20  GO25-SIN-DIF
 Spot Gas Oil 0.05%              49.50     0.01       0.02       49.49  GO005-SIN
 GO 0.05 Diff                     0.46    -0.03      -6.12        0.49  GO005-SIN-DIF
 Spot Gas Oil 0.001%             49.60     0.01       0.02       49.59  GO10-SIN
 GO 0.001 Diff                    0.56    -0.03      -5.08        0.59  GO10-SIN-DIF
 Spot Jet/Kero                   43.06    -0.07      -0.16       43.13  JET-SIN
 Jet/Kero Diff                   -0.37     0.05     -11.90       -0.42  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 Rashmi Aich)
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