Asia Distillates-Gasoil cracks drop as coronavirus hits demand
Asian refining margins for 10 ppm gasoil dropped, as demand for the industrial and transportation fuel remained under pressure due to lockdowns across the region to contain the coronavirus pandemic.
Refining profit margins, also known as cracks, for gasoil with 10 ppm sulphur content plunged to $6.59 a barrel over Dubai crude during Asian trading hours on Monday, down from $8.48 per barrel on Thursday.
The gasoil cracks had held their ground even a couple of weeks ago when jet fuel and gasoline margins turned negative, taking a hit from the virus outbreak, but traders said the overall industrial demand for gasoil or diesel has been fast waning.
Cracks for the benchmark gasoil grade in Singapore have shed over 48% since March 30, Refinitiv Eikon data showed.
"The recent weakness that has come into the diesel market is showing us that run cuts thus far have potentially not been severe enough, and the situation is made worse by India joining the lockdowns in the region," Kostantsa Rangelova, lead Asia analyst at JBC Energy said.
"India's personal travel has much more diesel demand than other countries in the region, meaning demand there is likely to fall relatively more than elsewhere, with refiners looking to push a higher share of their diesel output into the regional market where possible."
Indian refiners are likely to continue prompt export of refined fuels to avoid a complete shutdown after the coronavirus lockdown hit local demand, company officials said.
Cash discounts for 10 ppm gasoil GO10-SIN-DIF widened to $1.99 per barrel to Singapore quotes on Thursday, a fresh low since Singapore's benchmark was shifted to 10ppm gasoil in January 2018, from 500ppm earlier. They were at a discount of $1.67 a barrel on Thursday.
Meanwhile, cash discounts for jet fuel JET-SIN-DIF narrowed to $2.97 per barrel to Singapore quotes on Monday. The jet cash differentials were at a discount of $3.22 per barrel on Thursday, a level not seen since August 2008.
Refining margins for jet fuel in Singapore weakened on Monday to $2.46 a barrel below Dubai crude on Monday, compared with minus $1.02 per barrel in the last trading session on Thursday.
INDIA FUEL DEMAND
- India's fuel demand slid 17.8% in March compared with the same month last year, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Monday.
Consumption of fuel, a proxy for oil demand, totalled 16.08 million tons, the data showed.
- Consumption of diesel, which is widely used for transportation as well as for irrigation needs in India, was down about 24% in March year-over-year at 5.65 million tons.
- India's domestic consumption pattern typically impacts the volume of the country's exports, which in turn affects the overall supply in the wider Asian markets.
- Domestic jet fuel sales in March were at about 480,000 tons, compared with 690,000 tons in February, and 720,000 tons in March 2019.
REFINERY RUN CUTS CAN'T KEEP PACE WITH PLUNGING FUEL MARGINS
- Asia Pacific oil refineries are finding that processing cuts are not keeping pace with sharp drops in fuel margins, which hit record lows this month, caused by the demand decline from
the economic dislocations of the coronavirus outbreak.
- Analysts at Wood Mackenzie, JBC Energy, Energy Aspects, Rystad Energy, IHS Markit and FGE estimate that Asian refineries will cut their processing by between 2 million to 4 million barrels per day (bpd) in April. For the whole of the second quarter, the cuts will average between 2 million to 2.7 million bpd, the analysts said.
(Reporting by Koustav Samanta;)
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