Asian diesel prices surge $20/b on China export fears, arb shuts
Quantum Commodity Intelligence – The price of cargoes of diesel loading in the next four weeks out of the Asian hub of Singapore have breached the $181/b mark, according to data from Quantum, up more than $20/b on reports that Chinese oil companies have been told to suspend diesel exports in April.
By contrast, Brent and Dubai crude benchmarks were up by less than $5/b at the Asia market close, leading to the largest one-day rise in gasoil cracks seen on record.
Cargoes for loading in the next 20-30 days were being bid at $8/b over underlying swaps, up $1.50/b on the day, but with swaps increasing sharply, diesel cargoes are now being traded at values close to $1,350/mt.
Diesel swaps for March were pegged at over $178/b on Wednesday by 1630 Singapore time, up $21/b on the day, while April was pegged at just under $165/b - more than a $13/b spread between the two months and a record high as traders rush to source supply.
In the Platts trading window, where most of the liquidity for spot cargoes outside of tenders or bilateral deals are hosted, only bids were seen.
The price rise was starker in Europe, which will increasingly rely on exports from Asia and the US to avoid Russian supply, with low sulfur gasoil futures rising more than 7% overnight to $1,600/mt ($214.75/b).
The exchange futures for swaps – which is April 10ppm diesel swaps in Singapore minus April low sulfur gasoil futures and is a barometer of arbitrage opportunities from east to west – hit a record high of -$154/mt by 1630 Singapore time.
But with cargoes loading soon in Singapore trading at $120/mt above April swaps, the price difference between loading now in Singapore and delivering into Europe in April is just $34/mt, well below the cost of shipment, according to sources.
Wednesday's price spike comes after S&P Global reported that China's government had asked oil companies to suspend exports of gasoil and gasoline in Asia.
The country exported an average of 1.4 million mt of diesel per month last year, although supply from China had been falling since the summer on lower export quotas as the country seeks to cut emissions of greenhouse gases.
European prices are already at record highs after Europe and the UK announced plans to reduce their dependency on Russian oil and banks and insurance companies refused to offer financial services to commodity exports from Russia, the region's biggest supplier of diesel.
