SINGAPORE: Asian refining margins for 10 ppm gasoil slipped on Monday as raw material crude prices kept surging, while traders were concerned higher pump prices might weigh on near-term demand even as COVID-19 restrictions ease further.
Refining margins, also known as cracks, for 10 ppm gasoil fell to $18.33 a barrel over Dubai crude during Asian trading hours, down from $18.48 per barrel on Friday.
Cracks for the benchmark gasoil grade in Singapore have averaged $17.79 a barrel in February, about 15% higher compared with an average of $15.51 per barrel in January, Refinitiv data showed.
The Asian gasoil market is expected to tighten further on increased arbitrage flows to the West as escalating sanctions against Russia over its invasion of Ukraine prompt Europe to draw more barrels from the East, trade sources said.
With currently low exports from India and China, if Arab Gulf/India send more barrels to the West, “the Singapore market will go crazy,” a gasoil trader said.
“Even the East market is short. So, both Singapore and Europe will have to compete for Middle East export cargoes,” he added.
The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe, traded around minus $42 a tonne on Monday, a level that typically makes the arbitrage profitable, although it also depends on factors such as freight rates.
Oil tanker rates have been soaring globally as traders scramble to cope with jitters over possible disruption in Russian supplies, as well as war risk premiums for ships plying the Mediterranean region following Moscow’s invasion of Ukraine.
Oil prices jumped on Monday as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system, which could cause severe disruption to its oil exports.
BP is abandoning its stake in Russian oil giant Rosneft in an abrupt and costly end to three decades of operating in the energy-rich country, marking the most significant move yet by a Western company in response to Moscow’s invasion of Ukraine.
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