Jet cracks slip as southeast Asian infections creep higher, arb widens

Quantum Commodity Intelligence – Asia refining margins hit a fresh 10-week low during early trade on Monday as crude rose and southeast Asian countries tightened curbs to combat a fresh wave of infections.

The spot crack versus cash Brent fell $0.75/b on the day to $1.43/b basis FOB Singapore at 16.30 Singapore time.

It's the lowest level since mid-April and comes as a speedy recovery for air travel looked less likely after Thailand reimposed controls on gatherings, Malaysia extended its month-long lockdown, Bangladesh imposed a fresh lockdown from Monday and Indonesia recorded a new high of 21,000 infections a day.

In Australia, new restrictions were imposed in Sydney and Darwin, the countries second and seventeenth largest cities.

The softer cracks in Asia had an impact on Europe, with the east-west spread for July widening $2/mt to -$13/mt, making the arb more profitable and pulling down European cracks.

Cracks in Europe fell $0.20/b to $4.55/b for July.

Asian refining margins for jet fuel have been in a bear trend for six week amid rising infections in Asia, losing approximately $3/b.

While Japanese and Indian infections are markedly down, southeast Asian nations are seeing rises, throwing doubt on how soon jet demand and air travel will return.

The July-August contango also widened on Monday, indicating nearby weakness.

The contango moved from -$0.20/b to -$0.35/b.

Bids and offers for cargoes loading in Singapore remain far apart, and Quantum assessed the cash differential at -$0.40/b to the swaps.

Two weeks ago, US bank Goldman Sachs said it expected August global jet fuel demand to hit 5 million barrels per day, up from 3.9m bpd in May.

August cracks then were $1/b higher than Monday's level of $3.80/b.