SINGAPORE: Asian refining margins for 10 ppm gasoil slipped on Monday as feedstock crude prices gained, while cash premiums for the industrial fuel grade surged to their highest level in 18 months amid expectations for firmer demand this year.

Refining margins, also known as cracks, for 10 ppm gasoil dipped to $12.78 a barrel over Dubai crude, down from $12.83 a barrel on Friday, the last day of 2021.

Cracks for the benchmark gasoil grade in Singapore have averaged $9.10 per barrel in 2021, compared with an average of $6.78 a barrel in 2020, Refinitiv Eikon data showed.

They are expected to climb further this year as the regional market shrugs off the worst of the COVID-19 pandemic with India and China driving demand, market watchers said. But some analysts believe spare and increasing refining capacity in the region may drag on market sentiment if supplies start to outpace consumption.

Cash differentials for gasoil with 10 ppm sulphur content, which have more than trebled in December, were at a premium of 91 cents per barrel to Singapore quotes on Monday, a level last seen in June 2020. Indian state refiners’ daily gasoil sales rose in December from the previous month but a rapid surge in infections due to the Omicron coronavirus variant could hit fuel demand in Asia’s third largest economy.

State retailers sold about 208,150 tonnes of gasoil a day in December, up 8.75% from November and 1.48% higher than the same month last year, preliminary sales data compiled by the industry showed. No gasoil deals, no jet fuel trades. Oil prices firmed on Monday as the market kicked off 2022 on a positive note with suppliers in focus ahead of Tuesday’s OPEC+ meeting, although surging COVID-19 cases continued to dent demand sentiment.