Singapore July-August gasoil timespread tumbles to 5-week low on demand concerns
22nd June 2021 05:03 GMT


The Singapore July-August 10 ppm sulfur gasoil derivative timespread fell to a 5-week low at the close of Asian trade June 21, as a resurgence of COVID-19 cases in the region weighed on market sentiment even as regional supply balances remained tight.

The July-August 10 ppm sulfur gasoil timespread or M1/M2 timespread was assessed at plus 2 cents/b at the 0830 GMT Asian close June 21, narrowing 3 cents/b from the previous session. This represented a 50% decrease in value from plus 4 cents/b at the start of June. The spread was last assessed lower on May 17, at 1 cent/b, S&P Global Platts data showed.

Sentiment in the gasoil market has been lackluster as regional demand has been wobbly due to a resurgence of COVID-19 infections, especially in Southeast Asia and India.

India's gasoil consumption slid to an eight-month low in May, as demand shrank amid tighter lockdowns across the country. Gasoil consumption fell 17.18% month on month to 5.54 million mt in May, but was up 0.76% year on year, provisional data from the Petroleum Planning and Analysis Cell showed. India's gasoil demand was last lower in September 2020, when it was at 5.49 million mt, PPAC's historical data showed.

In addition, the widening regrade -- the spread which measures the premium jet fuel commands over 10 ppm sulfur gasoil -- will see regional refiners maximizing gasoil output over its co-distillate jet fuel. The Singapore front-month regrade swap averaged minus $2.44/b on June 1-21 compared with an average of minus $2.10/b in May.

Still, some market participants said a leaner supply outlook could prop up the Asian gasoil market in the longer term outlook, with the support led by expectations of sharp cuts to gasoil exports from China.

Traders said regional supply may be hit by a reduction in Chinese refinery exports as well as a smaller Chinese export quota for key oil products in the second half of the year.

Platts earlier reported that Chinese refiners were likely to reduce gasoil exports following China’s announcement that it would levy a consumption tax on imports of light cycle oil, or LCO, a gasoil blendstock, as domestic demand for gasoil would likely grow with former LCO consumers flocking to use gasoil instead.

Further along the derivatives curve, the Q3/Q4 quarterly spread -- an indication of near-term sentiment -- was assessed at plus 56 cents/b at the Asian close June 21, down from plus 59 cents/b at the June 18 close.

Platts ,
22nd June 2021 05:03 GMT