Asia’s middle distillates market is experiencing thin liquidity with climbing gasoil futures. April offers from Chinese refiners are anticipated, with diesel exports estimated at 400,000 tons and jet fuel at 2.2 million tons. Refining margins have declined, and cash differentials reflect narrowing backwardation. Geopolitical factors and internal adjustments shape current oil price dynamics.
The middle distillates market in Asia has seen reduced liquidity following a recent surge of activity. The east-west front-month spreads remain tight, while ICE gasoil futures continue to exhibit an upward trend. Traders are keenly watching for upcoming offers from Chinese refiners as April sales begin to materialize, expecting around 400,000 metric tons of diesel and 2.2 million tons of jet fuel for April shipments.
Refining margins have declined for a second day, currently sitting at approximately $13.30 per barrel, coinciding with a rise in the crude market. Activity in the trading window remains limited, particularly with fewer bids for 10ppm sulphur gasoil. Cash differentials have also decreased, reflecting a tighter backwardation in the April-May paper timespreads.
For jet fuel, the arbitrage spread has widened significantly between Asia and the U.S. West Coast, prompting traders to anticipate discussions due to its profitability. However, the April regrade remains stable at a discount of about $1.2 per barrel. Understanding these market dynamics is crucial for traders as they navigate the current landscape.
In the realm of cash deals, there were no transactions recorded for either gasoil or jet fuel. Inventory levels appear to be fluctuating, with an anticipated increase in U.S. crude oil stockpiles while distillate and gasoline inventories are likely to have fallen, according to preliminary data.
Recent news highlights include minor damages to a single jet fuel tank after an incident involving a military-contracted tanker and a cargo ship near England. In Venezuela, PDVSA is preparing contingency plans to sustain oil production amid regulatory changes involving Chevron. Moreover, Chevron has acquired a stake in Hess Corp, signaling confidence in completing a significant acquisition.
Oil prices have appreciated over 1%, hitting their highest levels since the start of the month, influenced by geopolitical tensions and positive economic outlooks from China. Notably, Yemen’s Houthis have stated they will continue their actions against Israeli shipping despite external pressures.
As of market close, middle distillate prices were reported with various changes, indicating the fluctuating dynamics of spot gas oil and jet fuel. Spot gas oil 0.5% is at $80.44, showing a slight increase, while spot jet fuel reached $84.77, up from previous values. The market also reflects the variable cash differentials associated with these products as the trading day concluded.
In summary, the Asia middle distillates market is currently characterized by reduced liquidity, narrowing east-west spreads, and fluctuating refining margins. The outlook for April sales, especially from China, is crucial for market participants. Noteworthy developments include geopolitical influences on oil prices and adjustments in inventory levels within the U.S. These insights are vital for traders seeking to navigate this evolving market landscape effectively.
Original Source: www.tradingview.com
