Asia Distillates-Jet cracks ease; virus resurgence in China dims outlook

Asian jet fuel refining margins dropped on Wednesday

  

SINGAPORE- Asian jet fuel refining margins dropped on Wednesday, moving away from a multi-month high touched in the previous session, as traders were concerned near-term aviation demand would take a hit from a resurgence in China's COVID-19 infections.

Refining margins, also known as cracks, for jet fuel in Singapore dropped to $6.46 per barrel over Dubai crude during Asian trading hours, down from Tuesday's $6.75 per barrel, the strongest since March last year.

Cracks for the aviation fuel in Singapore have climbed nearly 15% in the last week, but they are still over 40% lower than their five-year seasonal average for this time of the year, Refinitiv Eikon data showed.

The Asian jet fuel cracks are expected to stay "range-bound in the near future ... at least for this quarter," said a Singapore-based trader.

China reported on Wednesday the most new locally transmitted COVID-19 cases since January as some cities stepped up restrictions and cut flights, while Australia's daily infections lingered near a 16-month high despite a lockdown in Sydney entering its sixth week. 

Cash discounts for jet fuel widened by a cent to 21 cents per barrel to Singapore quotes on Wednesday.

ASIA'S JET FUEL EXPORTS SURGE

- Jet fuel/kerosene exports from Singapore jumped to an eight-month high of 360,000 tonnes in July, riding on shipments to Europe and Africa, according to data analytics firm Vortexa.

- "The divergence of Europe's jet demand recovering and Asia's ongoing weakness has supported a re-opening of the East-West arbitrage last month that led to two LR2 (Long Range 2)and one MR (Medium Range) tankers loading jet fuel in Singapore and headed for Europe," Vortexa's Asia lead analyst Serena Huang said.

- South Korea's jet fuel exports to the United States rose to 490,000 tonnes in July, compared with 220,000 tonnes in the previous month, the data showed.

INVENTORIES

- Middle-distillate inventories in the Fujairah Oil Industry Zone rose 17.9% to 3.1 million barrels in the week ended Aug. 2, data via S&P Global Platts showed. 

- The weekly stocks in Fujairah have averaged 3.8 million barrels this year, compared with 4.2 million barrels in 2020, Reuters calculations showed.

- U.S. distillate fuel inventories, which include diesel and heating oil, fell by 717,000 barrels in the week to July 30, according to two market sources, citing American Petroleum Institute figures. 

SINGAPORE CASH DEALS O/AS

- One gasoil deal, no jet fuel trades

OTHER NEWS

- Oil prices edged higher on Wednesday, supported by a fall in U.S. inventories and Mideast geopolitical tensions, but the increasing spread of the coronavirus Delta variant in top consuming countries capped gains.

(Reporting by Koustav Samanta; Editing by Aditya Soni) ((koustav.samanta@thomsonreuters.com )( +65 6870 3503) (Reuters Messaging: koustav.samanta.thomsonreuters.com@reuters.net))


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