Asia 10-ppm gasoil refining margins near 18-month low on clouded outlook
Asia's 10-ppm sulfur gasoil refining margins have slumped to a near 18-month low amid mixed market outlooks as well as softer ICE gasoil futures and prompt paper swaps, pricing data from LSEG showed on Wednesday.
Prompt-month September refining margins, or "cracks," for the transport and industrial fuel fell to around $12.40/bbl at the market close, down from around $14/bbl a day earlier, the data showed.
That level was last seen in early May 2023, the data showed.
Markets were mixed on the 4Q outlook, with paper swap price levels declining despite expectations of improving supply fundamentals.
This decline was mostly attributed to caution in the paper trading markets on demand prospects for the fourth quarter of this year, two Singapore-based trade sources said, adding recent macroeconomic drivers have not been particularly bullish.
"(ICE gasoil) Speculators increased their net short by 26,875 lots over the week to 27,207 lots. This is the largest net short that speculators have held in gasoil since May last year," said ING analysts in a client note dated Aug. 26.
On the physical market front, most traders remained slightly more bullish ahead of expected lower production levels, as some refineries globally start their scheduled maintenance from September, a third Singapore-based trading source said.
A handful of regional refineries in northeast Asia and Singapore are shut in September–October, with Russian refinery maintenance also likely to start in that time, which will tighten supplies, a fourth trade source said, adding that "some traders are also clueless why paper prices fell so quickly.”
Shell's Bukom refinery and Singapore Refining Co. are currently on scheduled overhauls, with Taiwan's Formosa Petrochemical Corp. to shut in mid-September, Reuters records showed.
"There could be some upside to market going into 4Q given there will be some schedule maintenance taking place, and refineries might be prompted to cut runs if margins continue to fall further, which could then help prop up the market," said LSEG analysts in an email reply.
Meanwhile, traders are awaiting Beijing's decision on a third batch of export quotas for China's refiners, which could tilt the market balance as well.
China's exports of diesel have mostly been decling year-on-year in the past three months amid volatile export margins and lowered crude runs.
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