Current Trends in Asia’s Middle Distillates Market: A Focus on April Offers from China

Asia’s middle distillates market is seeing reduced liquidity, with traders anticipating April offers from China. Export estimates for diesel remain steady, while jet fuel volumes are substantial. Refining margins have fallen, and liquidity is constrained, prompting traders to watch for potential discussions on jet fuel arbitrage opportunities. U.S. inventories in crude are anticipated to rise, contrasting with declines in gasoline and distillate stocks.

The market for Asia’s middle distillates experienced a slowdown in activity following a brief period of heightened trading. The east-west price spread remained narrow, although ICE gasoil futures continued to exhibit an upward trend. Traders are anticipating the emergence of offers from Chinese refiners as April’s sales activities are expected to commence soon.

China’s export estimates for diesel loading in April are projected to be similar to those of March, at approximately 400,000 metric tons, while total jet fuel volumes are estimated at around 2.2 million tons. Refining margins have declined for the second consecutive session to roughly $13.30 per barrel amid a surge in the crude market, influencing window activity.

The liquidity in the market was limited, characterized by a notable absence of bids for 10ppm sulphur gas oil. Cash differentials also fell by 3 cents, aligning with a tightening backwardation in the April-May paper timespreads. The arbitrage spread for jet fuel between Asia and the U.S. West Coast has significantly widened, leading traders to anticipate upcoming discussions due to its profitability.

Locally, there were no completed deals for both gas oil and jet fuel within Singapore. Inventories in the U.S. are expected to have risen for crude oil, while distillate and gasoline inventories likely decreased, as indicated by a preliminary Reuters poll.

Additional news highlights include a single tank filled with jet fuel that was damaged due to an incident involving a military-contracted tanker off the coast of England. Moreover, Venezuela’s state-operated PDVSA is preparing multiple operational strategies amid an impending expiration of Chevron’s operational license in the country.

In summary, the middle distillates market in Asia is currently characterized by thin liquidity and a cautious outlook for April’s sales from Chinese refiners. While export estimates suggest stability, refining margins are under pressure due to fluctuating crude prices. Upcoming discussions about the jet fuel arbitrage could signal a shift in market dynamics. Traders remain vigilant as they navigate a landscape marked by diminishing bids and shifts in inventory expectations.

Original Source: www.tradingview.com