Singapore (Platts)--27Mar2014/637 am EDT/1037 GMT
The April Singapore regrade swap -- a measure of the relative strength of jet/kerosene against gasoil -- plunged to an all-time low Wednesday, reflecting a jet/kerosene market mired by anemic demand and high stocks, against a firming gasoil market ahead of the upcoming Asian refinery turnaround season. The April paper regrade swap was assessed 1 cent/barrel lower at minus $2.08/b Wednesday -- the lowest since Platts reduced the sulfur content in its benchmark Singapore Gasoil assessment to 500 ppm on January 2, 2013. The second-quarter paper regrade spread was assessed 1 cent/b higher at minus $1.76/b, after having fallen to an all-time low of minus $1.77/b Tuesday. Reflecting the weakness, the physical regrade for cargoes loading from Singapore breached the minus $2/b mark, falling to minus $2.06/b at the close of Asian trade Wednesday. This was just a tad higher than its last low of minus $2.13/b on March 18, Platts data showed. FRAIL JET MARKET Traders said that the current weakness in demand was reflective of the jet/kerosene market transitioning out of an atypically lackluster winter heating demand season. Demand for jet/kerosene typically peaks from December to February during the winter season in North Asia, and tapers off until peak summer travel season arrives. 'It's been very tough for the market to rebound, especially when moving from a really poor peak demand season to a lull period,' said a Singapore-based middle distillates broker. A relatively mild winter in North Asia and high inventories led Japan -- the single-largest buyer of the middle distillate -- to export some 1.58 million barrels in the midst of winter in February. Other sources noted that persistent high regional stockpiles were continuing to weigh down on the market, pressuring prices. Data released Wednesday by the Petroleum Association of Japan showed a 5.3% rise in jet stocks to 4.73 million barrels, while kerosene inventories rose 4.1% to 8.03 million barrels in the week ended March 22. Adding to the bearishness, a shut East-West arbitrage window since October due to poor economics has exacerbated the buildup in regional stockpiles, further denting the already-weak sentiment. Despite languid buying appetite, cash differentials for jet/kerosene cargoes loading from Singapore has continued to gradually gain ground since March 18, buoyed by determined bids during the Platts Market on Close assessment process. Cash differentials soared to a premium of 29 cents/b to Mean of Platts Singapore jet/kerosene assessments on Wednesday from a discount of 19 cents/b in a span of one week. The outlook on jet fuel market in the months to come remained gloomy despite the approaching peak summer travel period in Europe and the US from June to September, as traders reiterated healthy stockpiles against slow drawdown in these markets. In addition, sources were skeptical if football's greatest event -- 2014 FIFA World Cup -- to held in San Paolo, Brazil, will be able to boost requirements. 'For sure there will be some impact [on jet fuel supply/demand fundamentals], but we see it as immaterial,' a Singapore-based trader said. 'It [peak summer travel period and FIFA World Cup] could quietly increase some imports, [we will] have to keep watch,' a regional trader said. FIRMING GASOIL Conversely, the Asian gasoil market has improved over the past weeks, supported by refinery maintenance and emerging demand from Southeast Asia. The market was saddled with heavy supplies of ultra-low sulfur diesel a few weeks ago, but some of the length appeared to have been shaved off after 10 ppm sulfur gasoil was blended to higher sulfur grades where more robust demand was seen, traders said. In addition, scheduled refinery maintenance across Asia Pacific in April and May has tightened gasoil supply. Up to 2.13 million b/d of crude refining capacity in the region is scheduled to go offline in May. Japan is expected to export about 10 MR-sized cargoes or less, of 10 ppm sulfur gasoil in April, as scheduled refinery maintenance and improved domestic demand ahead of the tax hike on April 1 reduced export availability, market sources said. Within Southeast Asia, demand for low sulfur gasoil emerged from Indonesia and Vietnam. Indonesia's Petral -- the region's biggest gasoil importer -- is looking to buy 300,000-400,000 barrels of 0.35% sulfur gasoil for April 5-7 delivery into Tuban. Vietnam's Petrolimex and Saigon Petro have also recently secured gasoil cargoes for the second quarter, ahead of a scheduled maintenance at Binh Son Refining's 148,000 b/d refinery between May and July. Reflecting the firmer physical market, gasoil cash differentials staged a rebound two weeks ago after hitting a one-and-a-half-month low on March 13, Platts data showed. Cash differentials of FOB Singapore 500 ppm sulfur gasoil rose from minus 4 cents/b to MOPS Gasoil assessment on March 13, to MOPS Gasoil assessment plus 29 cents/b on Wednesday, while cash premiums for FOB Singapore 10 ppm sulfur gasoil rose by 36 cents/b over the same period to MOPS Gasoil plus $1.29/b Wednesday. Gasoil margins also improved. The spread between 500 ppm sulfur gasoil and front-month cash Dubai crude widened to $17.63/b on Wednesday from $16.49/b on March 13.--Zameer Yusof, zameer.yusof@platts.com--Su Yeen Cheong, suyeen.cheong@platts.com--Wendy Cheong, wendy.cheong@platts.com--Edited by Irene Tang, irene.tang@platts.comSimilar stories appear in Asia Pacific/Arab Gulf Marketscan See more information at http://ift.tt/1loh3Iz
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