Asia Distillates-Gasoil cracks post biggest weekly drop in over 3 years
SINGAPORE (Reuters) - Asian refining margins for 10 ppm gasoil fell on Friday, posting their biggest weekly decline in more than three years, weighed down by muted buying interest as the market awaits an expected demand boost following a switch to cleaner fuels in the shipping sector.
The International Maritime Organization (IMO) has banned ships from using fuels with a sulphur content above 0.5%, effective Jan. 1, and a section of ship-owners are expected to switch to marine gasoil (MGO) to adhere with the new rules. But some ship-owners and operators, especially those with larger ships, strongly prefer very low sulphur fuel oil (VLSFO) over MGO due to technical issues related to running on distillate fuel as opposed to heavy fuels. Traders, however, are optimistic that gasoil demand would pick up steadily over next few months as the availability of existing VLSFO supplies shrink. Refining margins, also known as cracks, for gasoil with 10 ppm sulphur content plunged to $13.98 per barrel over Dubai crude during Asian trade on Friday, down from $14.95 per barrel a day earlier. Cracks for the benchmark gasoil grade in Singapore have dropped about 13.4% this week in their steepest weekly decline since August 2016, Refinitiv Eikon data showed.
Cash premiums for 10 ppm gasoil <GO10-SIN-DIF>, which have dropped 59% over the last two weeks, were at 37 cents per barrel over Singapore quotes on Friday, 1 cent higher compared with Thursday. Meanwhile, cash differentials for jet fuel <JET-SIN-DIF> were at a discount of 15 cents per barrel to Singapore quotes, compared with a 11-cent discount in the previous session. Refining margins for jet fuel fell to $12.79 per barrel over Dubai crude on Friday, their lowest in more than eight months. They were at $13.55 a barrel on Thursday.
AIR PASSENGER DATA - IATA - Global air passenger traffic for November showed demand rose 3.3% compared with the same month a year earlier, but stayed below the long-term trend, the International Air Transport Association (IATA) said on Thursday. - "November's moderate result reflects the continuing influence of slower economic activity, geopolitical tensions and other disruptions, including strikes in Europe," Alexandre de Juniac, chief executive officer of IATA said in a statement. "On the plus side, positive developments in the U.S.-China trade talks, in tandem with signs of improving business confidence, could support an uptick in travel demand," he added. - Passenger traffic for Asia-Pacific airlines increased 3.9% in November compared with the year-earlier period, slightly lower than the 4.2% annual growth recorded in October, IATA said. The Asia-Pacific region makes up more than a third of the global aviation market. - Among domestic passenger markets, Indian airlines experienced a return to double-digit growth for the first time since January 2019, as traffic rose 11.3% compared to November 2018, IATA said. - Domestic traffic in Japan rose 3.7% in November year-on-year, while airlines in China posted a rise of 5.3% in domestic traffic for the same period.
TIGHTER SUPPLIES OF CLEANER MARINE FUEL - The price of very low-sulfur fuel oil (VLSFO) has risen in recent months, a sign of increasing worry there is not enough of the fuel to comply with new global shipping laws that took effect this year, market participants said. - Fuel oil's better calorific properties and better properties on engines as compared with MGO are making shippers reluctant to make the switch even though VLSFO prices are now marginally higher than gasoil, trade sources said. ARA STOCKS - Gasoil stocks independently held in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub <STK-GO-ARA> rose 3.5% to 2.6 million tonnes in the week to Jan. 9, data from Dutch consultancy Insights Global showed. - Gasoil stocks rose by around 3.5% to 2.57 million tonnes, despite improved demand from inland Rhine locations compared with the previous week, Insights Global's Lars van Wageningen said. - ARA jet fuel inventories <STK-JET-ARA> fell 3.6% to 563,000 tonnes, the data showed. - Compared with a year earlier, jet fuel stocks were 1.3% higher, while gasoil inventories were up 25.7%.
China has approved a long-awaited tax waiver on exports of cleaner ship fuel, paving the way for refiners to boost output, though Beijing may initially limit shipments to focus on growing its coastal marine fuel market, state refiner officials said. India's oil demand growth is set to overtake China by mid-2020s, priming the country for more refinery investment but making it more vulnerable to supply disruption in the Middle East, the International Energy Agency (IEA) said on Friday. Oil prices dropped on Friday extending days of losses as the threat of war in the Middle East receded and investors switched attention to economic growth prospects and the rise in U.S. crude oil and product inventories. Even as the United States and Iran appear to signal a keenness to avoid further conflict, oil and gas shipowners are bracing to pay a price for the war of words that culminated in rocket strikes in Iraq over the last week
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