SINGAPORE- Asian refining margins for 10 ppm gasoil rose to a two-and-a-half-month high on Monday as spring refinery turnarounds tightened regional supplies and the prospect of a U.S. fuel shortage following a cyber attack on pipeline operator Colonial Pipeline added to the bullish sentiment.

Refining margins for 10 ppm gasoil climbed to $7.88 per barrel over Dubai crude during Asian trading hours, up from $7.57 a barrel on Friday and the highest since Feb. 23, Refinitiv data in Eikon showed.

The exchange of futures for swaps (EFS), the gasoil price spread between Singapore and Northwest Europe, dropped to a one-week low of around minus $15 a tonne on Monday, Refinitiv data showed, making arbitrage shipments to the West more economical.

Colonial Pipeline said on Sunday its main fuel lines remained offline after the attack that shut the system on Friday, but some smaller lines between terminals and delivery points were now operational. 

The gasoil market, however, is expected to come under pressure in the coming weeks as refineries returning from maintenance ramp up production, while coronavirus lockdowns in India and Japan dampen demand for the industrial fuel.

Indian coronavirus infections and deaths held close to record daily highs on Monday, increasing calls for the government of Prime Minister Narendra Modi to lock down the world's second-most populous country. 

"The bullish developments in the U.S. are hiding a worrying COVID-19 trend in Asia," said Rystad ENergy in a note on Monday.

"While some oil demand destruction in India is being registered and priced in, the pandemic is also hitting other southern and southeast Asian countries, where infections are on an alarming upward spiral," said the research consultancy.

"Before the U.S. pipeline hack, the worsening COVID-19 situation in Asia was set to have a bearish effect on prices and dominate the week, but now it is limiting the bullish effect of the U.S. pipeline hack instead."

ENEOS

Eneos Corp, Japan's biggest oil refiner, said it plans to restart its 145,000 barrel per day (bpd) Sendai refinery in the second half of May after it was shut down automatically during an earthquake earlier this month. 

The company also plans to restart its 127,500 bpd Wakayama refinery in western Japan around the same time. It closed down in March because of the failure of compressed air equipment and a fire at a building for an air supply device.

 

TENDERS

Taiwan's Formosa sold 750,000 barrels of gasoil with a 10ppm sulphur content loading from Mailiao over June 7-11 to an unknown buyer at a 35 cent per barrel discount to Singapore benchmark quotes on an FOB basis.

(Reporting by Roslan Khasawneh; Editing by Amy Caren Daniel) ((roslan.khasawneh@thomsonreuters.com; Reuters Messaging: roslan.khasawneh.thomsonreuters.com@reuters.net))