SINGAPORE: Asia’s cash premiums for 10 ppm gasoil rose on Friday, posting a weekly gain of 32%, riding on tighter regional supplies amid recovering demand.
Cash premiums for gasoil with 10 ppm sulphur content climbed to $2 a barrel to Singapore quotes, while the Feb/March time spread for the benchmark gasoil grade in Singapore widened it backwardation to trade at $2.08 per barrel on Friday.
The regional gasoil market is also supported by firmer arbitrage demand from the West, market watchers said.
“We expect arbitrage demand to further tighten an already strong Asian spot market,” Zameer Yusof, senior analyst at Refinitiv Oil Research said in a weekly note.
“We anticipate some South Korea-UKC fixtures given the slate of newbuild Aframax vessels available from South Korea shipyards later this month,” he added.
The exchange of futures for swaps (EFS), which determines the gasoil price spread between Singapore and Northwest Europe, traded around minus $31 a tonne on Friday, a level that typically makes the arbitrage profitable.
Refining margins for 10 ppm gasoil were at $17.80 a barrel over Dubai crude during Asian trading hours, compared with $17.77 per barrel a day earlier.
The Asia-Pacific aviation industry’s slow recovery from the pandemic amid government restrictions will cast a shadow over the Singapore Airshow next week, though there are nascent signs of improvement as concerns over the Omicron variant recede.
International passenger travel in the region was down 93% from pre-pandemic levels last year, leaving airlines heavily reliant on freight for revenue, and the Chinese outbound tourism market remains closed.
But there are signs of a rebound this year, Skyscanner booking data shows, as countries such as Singapore, Thailand, the Philippines, Vietnam and Australia reopen to more vaccinated tourists without quarantine.
Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose 0.9% to 1.6 million tonnes in the week ended Feb. 10, according to Dutch consultancy Insights Global.
ARA jet fuel inventories slipped 1.3% this week to 830,000 tonnes.
One gasoil deal, two jet fuel trades. OPEC said on Thursday world oil demand might rise even more steeply this year as the global economy posts a strong recovery from the pandemic, a development that would underpin prices already at a seven-year high.