Singapore — The Asian middle distillates markets started the week on a steady to slightly firmer note, extending some of last week's strength. But industry sources cautioned of headwinds arising from extended lockdowns around the region which will continue to sap demand and weigh on sentiment.
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JET FUEL/KEROSENE
**Singapore jet fuel front month May/June timespread opened Monday on a stable footing at minus $3.20/b, compared with Friday's Asian close of minus $3.21/b, amid conflicting indicators in the aviation sector.
**Market sources said while there have been positive indicators stemming from the slow and fragile recovery in China, it would take time to see the trickle-down effect into Asia, which has undergone prolonged bearishness given the chronic oversupply, coupled with extended lockdowns and grounding of planes.
**In Singapore, flagship carrier Singapore Airlines extended flight cancellations to June 1, 2020, with reduction of services amounting to 96% of its passenger capacity amid global travel restrictions as a result of the coronavirus pandemic, the company announced on its website on Friday.
**Most market participants said the chronic oversupply will weigh down on the aviation sector as supply outpaced demand. Making matters worse, Indian refineries are producing at full run rates despite the coronavirus pandemic. India's Hindustan Petroleum Corp Ltd, for one, has been running its Vizag refinery at full capacity despite the nationwide lockdown, S&P Global Platts reported.
**Looking ahead, further bearishness is expected as the Q3/Q4 quarterly spread -- an indication of near term sentiment -- remained in negative territory and was assessed at minus 5.32/b at the Asian close last Friday, down $1.37/b from the start of the month.
GASOIL
**Front month May/June Singapore gasoil timespread opened marginally higher Monday morning at minus $1.85/b, edging up 8 cents/b from Friday's close of minus $1.93/b.
**The front-month May Exchange of Futures for Swaps spread was pegged at plus $5.75/mt at 0300 GMT, narrowing from minus 54 cents/mt at the Asian close Friday.
**Middle distillate stockpiles in Singapore -- Asia's main trading hub -- remained at a near 43-month high of 14.44 million barrels for the week ended April 22 amid a build up in backlog from inflows in previous weeks, with unviable arbitrage economics and paralyzed demand due to the coronavirus trapping barrels within the region.
**In spot news, gasoil traders said that Bahrain Petroleum Co. or Bapco sold 40,000-60,000 mt of 10 ppm sulfur gasoil for loading from Sitra over May 1-4 at a discount of $1.20/b to the Mean of Platts Arab Gulf gasoil assessments, FOB. The buyer was reportedly Sahara Energy. Gasoil market participants have been eyeing spot award details from Bapco's tender to provide pricing indications for ultra-low sulfur diesel loading from the Persian Gulf.
**Extended lockdowns around the region, including India and Malaysia, are still expected to cap demand, keeping cash differentials in negative territory. The FOB Singapore cash differential for 10 ppm sulfur gasoil has weakened by more than 2.5 folds since the start of the month at minus $2.12/b to MOPS gasoil assessments on Friday, plunging from minus 84 cents/b on April 1.
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April 27, 2020 at 12:08PM
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Asia middle distillates - Key indicators this week - S&P Global
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