Asian jet cracks hit three-week low, east-west spread widens

Quantum Commodity Intelligence – Asian refining margins in Singapore for jet fuel have hit their lowest level for three weeks versus Brent crude oil, according to Quantum data, as not even summer demand in Europe can prop up what looks like an increasingly weak regional demand picture.

Spot cracks for jet kero basis FOB Singapore fell to $2.69/b versus front line cash Brent by 1630 Singapore time Thursday, the lowest level since July 9, while August paper cracks sat at $3.69/b, the lowest levels since July 2.

Jet cracks had been staging a recovery throughout July, rising steadily throughout the month to hit a two-month high just a week ago, but regional demand remains weak and predictions that European demand in July will remain steady against predictions of growth have also put a ceiling on cracks there.

European August paper cracks for jet basis CIF NWE have largely flatlined over the past week, meaning the key east-west spread between Singapore and Europe is growing wider.

The difference between FOB Singapore and CIF NWE at the Singapore close of 1630 has risen from -$15/mt to -$19/mt over the past two weeks.

East/West

That picture also played out down the curve, with broker data showing east-west spreads rising $2/mt over the past two weeks for the next 12 monthly swaps.

And that comes as stocks of middle distillates are at an 18-month low in Singapore at 20% below the average so far this year, despite Asia scheduled airline capacity falling by 1 million seats last week, according to analysts OAG, while the rest of the world broadly flatlined.

Meanwhile, Indonesia, which earlier this month overtook India as Asia's epicentre for the spread of Covid-19, has started to unwind restrictions but other economic powerhouses in the region, such as Australia, have been imposing fresh restrictions that are likely to deter international travel.

But it is IATA's view for July that will be a concern for jet fuel demand, with the global airline association saying in a statement Thursday that July is unlikely to see much growth from June levels.