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Singapore Jan/Feb gasoil timespread extends losses on bearish fundamentals

Increase font size  Decrease font size Date:2018-12-20   Views:498
The Singapore front month January/February gasoil timespread extended losses and posted a fresh year-to-date low on Monday as tepid demand against a backdrop of plentiful supplies continued to erode sentiment.

At the Asian close Monday, the Singapore front month January/February gasoil timespread fell to a year-to-date low of minus 87 cents/b. This marked a 21 cents/b day-on-day slip, and the spread was last assessed lower on November 20, 2017 at minus 95 cents/b, S&P Global Platts data showed.
On the outright price, the Singapore January gasoil swap also marched lower to be assessed at $73.44/b Monday, marking an 83 cents/b decline day on day.

Market participants attributed the lower Singapore gasoil swap and timespread to lackluster trading activity amid a supply overhang coupled with sluggish demand in the physical spot market.

The Asian gasoil market remained on a downward trend as ballooning regional supplies coupled with tepid demand continued to erode sentiment.

Adding to the bearishness, anticipation of rising outflows from China in December could further derail any recovery in the gasoil market. Market sources said they expected product exports in December to rise sharply as oil companies would try by all means to use up quotas with the new allocations in October and November.

"We estimate product exports in November comprise around 700,000 mt of gasoline, 1.2 million mt of gasoil, 1.5 million mt of jet fuel and about 1 million mt of fuel oil," a Beijing-based analyst said.

All state-owned refiners polled by Platts said they have plans to lift their December exports sharply. The pick-up in export activity was also evident in November when the country's oil product exports rebounded by 11.7% to 4.5 million mt from an eight-month low in October, according to preliminary data from the General Administration of Customs.

Meanwhile, in a bid to tighten some of the length in the region, industry sources said that a trading house was eyeing to divert barrels out of the region on a newly build VLCC for January loading. Several sources however, were skeptical of the idea citing weaker European gasoil premiums, sluggish demand and challenging logistical issues.

Asian barrels were also competing with surplus from US Gulf Coast, of which an estimated 1.1 million mt is set to arrive in Europe over December, market sources said.

On cracks, the front-month January Singapore gasoil swaps against Brent swaps -- which measures the relative value of the product to crude oil -- slipped 10 cents/b to be assessed at $12.14/b on Monday.

In comparison, the Singapore gasoil swaps against Dubai swaps was also assessed lower at $13.64/b Monday, marking a 14 cents/b drop day on day.

The bearishness could also be seen further down the curve with the Q1/Q2 Singapore gasoil quarterly spread remaining in the negative territory of minus $1.03/b, down 3 cents/b day on day.
 
 
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