Singapore August 25 2024: The Singapore ultra low sulfur gasoil front month swap crack against front month Dubai swap was at its weakest in nearly three months Aug. 20 as regional stockpiles remained high despite lower export volumes from China.
Platts, part of S&P Global Commodity Insights, assessed the crack lower by 73 cents/b day on day at $13.95/b at the Asian close Aug. 20.
The crack — a measure of the product’s relative strength to the crude it is refined from — was last weaker at $13.88/b on May 30. It averaged $16.09/b over Aug. 1-20, compared with $16.75/b in July, Commodity Insights data showed. On a year-on-year basis, the swap crack halved from $31.14/b in August 2023.
“There are still a lot of cargoes in the market. We will need to see how much China issues for the third batch of export quotas to see whether the weak economic outlook [there] would make them allocate more export volumes,” a regional gasoil trader said.
China’s exports of clean oil products fell 9.1% from June to a three-month low of 3.09 million mt (847,000 b/d) in July, General Administration of Customs data showed Aug. 18, below market sources’ estimates in mid-July of gasoline, gasoil and jet fuel exports hitting 3.19 million mt.
On a year-on-year basis, outflows in July dropped 14.4%, the data showed, due to a decline in production.
Gasoil was the main factor behind the reduced exports, with outflows falling to a 13-month low of 540,000 mt (148,000 b/d), according to the data.
This suggested that about 7.23 million mt of clean product export quotas were available for August onward, likely covering two months of exports, with trade sources estimating outflows of gasoil, jet fuel and gasoline in August at 3.19 million mt.
Market sources expect the third batch of quotas to likely be allocated in September.
On the demand side, volatility in East-West arbitrage economics continued to trap surplus barrels in the East of Suez.
“The ICE spread has been flattish, so there is not much opportunity to do any East-West arbitrage,” a regional middle distillates trader said.
The front-month September gasoil exchange of futures for swaps spread was assessed at minus $19.83/mt at the Asian close Aug. 20, narrowing from minus $21.62/mt at the Asian close Aug. 19, Commodity Insights data showed. The spread was last narrower June 5 at minus $18.93/mt.
The EFS spread measures the gap between front-month Singapore 10 ppm sulfur gasoil swaps and the corresponding ICE low sulfur gasoil futures contract, acting as a barometer for arbitrage flows from the East of Suez to Europe.
A deeper negative EFS spread signals more competitive cargo pricing in the West than in the East and indicates viable East-West arbitrage economics.
Against this backdrop, Singapore’s onshore commercial stocks of middle distillates edged 0.25% higher over Aug. 8-14 to a fresh three-year high of 12.02 million barrels amid weak regional demand, Enterprise Singapore data showed.
Gasoil and jet fuel/kerosene stocks were last higher at 13.78 million barrels over June 24-30, 2021, historical Enterprise Singapore data showed.
“I expect demand to remain weak and regional supply to remain long until September when we see some winter heating demand but this also depends on how cold winter will be and it’s anyone’s guess,” a second regional middle distillates trader said.
