Singapore — The Asian middle distillate market is expected to carry on with its upward trend over June 8-12, propelled by tighter supply during the heavy turnaround season in the region.
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Register NowIn addition, industry sources expect firmer jet fuel demand as regional airlines ramp up flight frequency and capacity on the back of easing travel and border restrictions. Similarly,
sentiment in the gasoil arena is expected to gather support from emerging regional demand. Supply inflows from India and the Middle East to the main trading hub of Singapore due to
a still-strong Exchange of Futures for Swaps spread is, however, likely to cap the upside, sources added.
August ICE Brent crude futures climbed $2.22/b from June 5's Asian close to $42.85/b at 0300 GMT on June 8.
JET FUEL/KEROSENE
** The balance month June/July Singapore jet fuel timespread opened the week of June 8-12 on a relatively stable note at minus 57 cents/b, inching down 3 cents/b from minus 54 cents/b at the 0830 GMT Asian close on June 5.
** Sentiment in the Asian jet fuel market is supported as airlines gradually resume domestic and international flight capacities. According to Cirium, an aviation analytics company, the average number of China's domestic flights recovered to 7,734 per day in May, accounting for 78% of pre-COVID-19 levels. This compared to an average of 3,162 domestic flights per day in February.
** In South Korea, national carrier Korean Air, resumed international flight routes, albeit at a limited capacity, the airline updated on its website on June 5. According to its latest updated flight schedule, the airline will operate flights from Incheon to Los Angeles, New York, Bangkok, Manila and Japan's Narita Airport on a daily basis in June. Other flight destinations are either suspended or operating at a reduced capacity for June.
** As a result, the FOB Korea jet fuel cash differential rose above the minus $1/b mark to be assessed at a discount of 70 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment on June 5, S&P Global Platts data showed. The cash differential had fallen to a record low of minus $4.65/b on April 24, Platts data showed.
** The FOB Singapore jet fuel outright price also trended higher week on week as local flagship carrier Singapore Airlines announced plans to ramp up the frequency of its international flight plans over the next two months. The FOB Singapore jet fuel/kerosene outright price registered at $39.55/b on June 5, up $5.16/b or 15% week on week from $34.39/b on May 29, Platts data showed.
** A firmer outlook was also observed with the Q3/Q4 quarterly jet fuel/kerosene spread -- an indication of near-term sentiment -- narrowing to minus $2.82/b at the Asian close June 5, up 47 cents/b or $14.29% week on week, Platts data showed.
GASOIL
** The Singapore balance June/July gasoil timespread opened June 8 at 15 cents/b, up from the June 5 close of plus 8 cents/b.
** The front-month June Exchange of Futures for Swaps spread was pegged at plus $7.87/mt at 0300 GMT June 8, down from plus $9.12/mt at the June 5 Asian close.
** The firm EFS has worked to trap Asian gasoil barrels within the region, as well as direct gasoil volumes from India and the Persian Gulf into Singapore.
** This has been reflected in lofty middle distillate stock levels, with latest Enterprise Singapore data showing that gasoil and jet fuel barrels remain well above the 14-million-barrel mark.
** Over in the Persian Gulf, Bahrain Petroleum Co. has offered a 40,000-60,000 mt cargo of 10 ppm sulfur gasoil for loading from Sitra over June 17-18. The tender closes June 7, with validity till June 9.
** For the week ahead, traders are keeping a keen eye on incremental supply volumes of gasoil flowing towards the city-state. The additional supply has weighed on the Asian gasoil market, resulting in a choppy prompt gasoil timespread which has been balanced between a contango and backwardated structure.
** While regional gasoil demand has improved as countries slowly roll back coronavirus-related restrictions and lockdowns, overall demand is still below normal levels. Market participants are also expecting additional production flows with some refineries returning from turnarounds, while some have raised refinery run rates on the back of easing lockdowns and slowly improving demand.
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June 08, 2020 at 11:28AM
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