Asian distillate margins surge to highest since pandemic outbreak

London (Quantum Commodity Intelligence) - Distillate cracks in Singapore have risen to their highest level since the outbreak of the pandemic on Wednesday as supply fears for diesel from India dovetailed with expectations of rising air passenger demand.

According to Quantum data, June cracks for 10ppm diesel basis FOB Singapore versus cash Brent rose above $6/b for the first time since March 2020 amid estimates from the IEA that current OPEC+ supply scenarios would not meet demand stemming from a global economic recovery from Covid.

Jet kero month ahead cracks on the same basis also surged, rising above $4.20/b versus August cash Brent compared with just $0.55/b at the end of March.

The rise in distillate cracks comes despite a build in stocks in Fujairah last week of 200,000 barrels to a two-month high, as well as a stock build in Singapore the week earlier.

But with China expected to be the only country in Asia with rising passenger demand, the source is higher prices in Asia with the east-west spread staying stable at around $10/mt as European cracks rise accordingly.

US Department of Transport figures show that the rolling five-day average for air passengers reached above 1.63 million per day for the first time since March 2013 – a 14-month high – while many European nations are also now opening borders for the northern hemisphere summer.