Asia weekly products: Gasoline margins surge on US pull, jet cracks slide
Quantum Commodity Intelligence – A huge draw in gasoline stocks in the US triggered by falling refinery runs easing imports and rising exports helped gasoline cracks in Asia to rally on the week, according to Quantum data.
RON 92 cracks basis Singapore versus cash Brent surged $1.37/b over the course of the week and were marked at $6.45/b by 1630 Singapore time – a one month high.
Rising US demand meant stocks fell almost 2.9 million barrels, hauling up cracks there, widening the east-west spread and helping underpin firmer cracks in Asia, which were also underpinned by a 5% draw in stocks in Singapore.
Increasing mobility in India was adding to good sentiment, a dynamic that helped the front month-prompt structure flip to a $0.18/b backwardation from a $0.05/b contango a week earlier.
Yet while prompt cracks are relatively high, they are only marginally above the $6.15/b average for prompt seen in May, as higher crude prices amid a US-Iran stand-off hits margins.
The rise left gasoline cracks ending the week above 10ppm diesel cracks for the first time in two weeks and the widest spread since early May - before travel restrictions in southeast Asia curbed demand.
10ppm cracks fell around $0.80/b on the week to $4.83/b FOB Singapore, hit by lower US cracks after a flurry of exports west hit arbitrage economics. With Indian run rates picking up, anticipated exports from India also added pressure.
The fall leaves the key diesel benchmark crack for the region at $4.83/b – the lowest in nearly seven weeks as it appears likely run rates in Russia and the US is pressuring margins.
Singapore also stocks didn't help, with distillate inventories rising to a five-week high of 13 million barrels, although they remain 5% below the average of 13.7 million barrels.
Jet cracks were also miserable for refiners, falling to a two-month low of $2.18/b basis FOB Singapore as refining has front-run demand.
Airline analysts said demand was growing slowly, increasing 2% last week compared to the week before with 72.4 million seats a week being filled – around one-third of pre-pandemic levels.
While that has had an impact on spot demand, further out the cracks fared better, with the Q4 crack hitting just a two week low of $6.87/b.
And in fuel oil, where stocks fell to a four week low in Singapore – cracks fared badly, with higher sulfur cracks falling $0.30/b to -$9.86/b even though competition from China was said to be easing.
Marine fuel oil 0.5% cracks were $1.70/b, down $0.40/b on the week amid a 5% rise in stocks in Fujairah.