Asia weekly products: Gasoline-diesel crack spread collapses, jet rallies

London, (Quantum Commodity Intelligence) - Refining margins in Asia for gasoline have risen more than 10% in the past week, to close the gap versus diesel, according to Quantum data, as a fall in Singapore stocks of light ends outweighed a huge build in the US.

Cracks for RON 92 FOB Singapore for spot loading were pegged at $5.73/b on Friday, up $0.58/b, or 11.3%, on the week to end just $0.13/b below diesel 10ppm FOB Singapore as light-end stocks in the city-state fell 1 million barrels to 19% below this year's average level.

In comparison, that spread was a chunky $0.83/b last week.

Diesel 10ppm cracks, conversely, fell $0.13/b over the same period to $5.86/b, according to Quantum data, as middle distillate stocks broadly flatlined.

The picture of rising gasoline demand is the same for July, with gasoline paper cracks versus cash Brent moving 10% higher to $6.55/b, with 10ppm rising just 2% to $6.65/b.

Covid-19

The last time gasoline cracks on a spot basis were above that of diesel was on May 28 – before Malaysia announced a two-week lockdown to combat rising infections of Covid-19.

Since then infections in the region have eased, with Indian infections dipping below 100,000 a day.

As such, the narrowing of the spread indicates recovering demand for gasoline, which is more sensitive to travel restrictions than diesel.

The rise in gasoline cracks also comes as gasoline refining margins in Europe have fallen and cracks in the US have stayed stable, indicating it is regional demand driving the rise.

The east-west spread – US minus European gasoline - has largely flatlined at around $27.70-28/mt over the week, despite a huge US stock-build of 7 million barrels in the US chalked up the week before.

Jet

That picture of a cautious recovery was also played out in jet kero cracks this week, which surged 18% on the week to $3.26/b – the third-highest level in the past three weeks.

Global jet demand is on the rise as US passenger numbers over a seven-day average approach 1.8 million per day, 10% up on the month and 4% up on the week.

The overall broader picture for jet kero demand is poor though, with demand expected to remain more than 10% below pre-pandemic levels by the end of 2022, according to new IEA estimates published Friday.

Fuel oil

The picture still looks dismal for fuel oil cracks though, with 3.5% sulfur 380cst cracks softening 10% on the week to -$10.13/b FOB Singapore versus just over -$9/b a week earlier.

While part of that is due to higher crude prices, the ratio for the product's crack versus Brent still sank from -10% a week ago to -12%.

Good news may be on the horizon for fuel oil, though, as soaring temperatures in the Middle East of 5C above average will create additional demand for power generation fuel.

However, stocks in Singapore still appear weighty, surging to a five-week high last week to 15% above this year's average levels.

Marine fuel 0.5% cracks also fell by more than $1/b to $2.39/b, down from $3.50/b last Friday, according to Quantum data and calculations, which use a 6.9 barrels/mt factor.

The spread between the two grades, as such, was largely unchanged at $120/mt.

Front-month swap spreads widened from $118/mt to $119/mt due to lower spot demand for higher sulfur grades.