Singapore — The benchmark FOB Singapore 10 ppm sulfur gasoil cash differential sank to its lowest level this year as the middle distillate struggled to find positive headlines for support.
At the Asian close Tuesday, the cash differential dived 10 cents/b day on day to minus 82 cents/b to Mean of Platts gasoil assessment, on a FOB basis, S&P Global Platts data showed.
Platts gasoil benchmark was changed to reflect 10 ppm sulfur grade on January 1, from 500 ppm, and the differential at Tuesday's close is the lowest since the switch.
On the paper market, the front month January/February timespread remained in a contango structure at minus 66 cents/b, marking a 25 cents/b slide since the start of December.
Meanwhile, the Q1/Q2 Singapore gasoil quarterly spread remained embedded in negative territory at minus 97 cents/b Tuesday.
Market sources attributed the prolonged weakness to excess supply coupled with lackluster demand.
The gasoil market has witnessed higher exports from regional refiners in recent weeks, as a shut arbitrage from Asia, India and the Persian Gulf to west of Suez has forced suppliers to offer barrels in the region. Rising freight costs have also further dented cross-regional economics, they added.
The front-month EFS was assessed at minus $12.91/mt Tuesday, rising 41 cents/mt compared with Monday.
Looking west, healthy supplies and destocking activity with market participants keeping stock levels at a minimum has kept a lid on buying interest. Market observers added that the Northwest remained well supplied given a slew of arrivals in December. The volume of middle distillates scheduled to arrive in Europe from the US Gulf Coast in December is estimated to be at least 1.18 million mt, market sources added.
Prior to this, the Asian market has been swimming in supplies as regional refineries have been maximizing overall production for most of this year to capitalize on healthy refining margins.
In a span of just two months, the FOB Singapore 10 ppm sulfur gasoil crack against front-month cash Dubai crude rocketed to $17.41/b on September 4, from the $11.05/b low on July 3. Tighter-than-expected supply thanks to robust demand and limited re-supplies from Asia and the Middle East pushed cracks to hit a-2018 peak at $18.16/b on October 26, before burgeoning supplies finally took its toll on the gasoil market, resulting in the spread plummeting to $11.64/b on Tuesday.
Reflecting this, Singapore's commercial onshore stocks of middle distillates, which include gasoil, jet fuel and kerosene, grew to 10.92 million barrels for the period over December 6-12, according to the latest data from government agency Enterprise Singapore. This was up by 300,000 barrels from the previous week.
Elsewhere, China's social distributor gasoil stocks were estimated at 271,601 mt at end-November, accounting for around 18% of the total storage capacity of 1.78 million cu m, and up 7.7% month on month, according to Platts calculations based on latest data provided by JLC, a Chinese information provider.
Meanwhile, industry sources noted that the market was braced for further downside with scores of Chinese gasoil barrels expected to spill into the spot market in December as oil companies would try by all means to use up quotas with the new allocations in October and November.
In late November, China had surprised many in the market by releasing an oil product export quota allocation amounting to 2 million mt, of which gasoil comprised 1.3 million mt or 65% of the total, Platts previously reported.
"I think possibly still be bearish moving into January," a regional source said.
--Su Yeen Cheong, suyeen.cheong@spglobal.com
--Ng Jing Zhi, jz.ng@spglobal.com
--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com