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FOB Singapore 500 ppm gasoil flips to backwardation on maintenance, open arb

http://www.chemnet.com   Mar 04,2015 Platts
The FOB Singapore 500 ppm sulfur gasoil swaps structure on the front-month flipped into backwardation from a contango Monday, March 2, on outflows to Europe and the Middle East and expected lower supplies during scheduled refinery maintenance in Asia over March and April, market sources said Monday.

The balance March/April Singapore gasoil swap spread was assessed at the close of market Monday at a backwardation of 8 cents/barrel, from a contango of 9 cents/b Friday.

The market was last in a brief backwardation on January 12. The balance March swap was assessed at $76.15/b while the April swap was assessed at $76.07/b.

"The global distillates market is strong, and now Asia [is] catching up," said a Singapore-based trader.


The arbitrage to send Asian and Middle Eastern barrels to Europe opened up last month, clearing up supplies of ultra-low sulfur diesel in the region.

"A lot of oil has left this region," said a second Singapore-based trader, who put the estimated outflow to Europe last month at 800,000-900,000 mt.

On the physical market, the FOB Singapore 500 ppm sulfur gasoil cash differential rose to a 1 cent/b premium over the Mean of Platts gasoil strip Monday, from an 8 cents/b discount last Friday.

The FOB 500 ppm cargo market was assessed at $76.14/b Monday.

"There is [seen to be a] lack of 500 ppm supplies in the Far East in March" due to refinery maintenance, said a third Singapore-based trader.

In addition, exports from India were heard to be lower on strong domestic demand, the trader said.

Much of the strength is supply-driven as demand within Asia remained lackluster, traders said.

Indonesia has not been seeking spot barrels in the past few months due to weak domestic demand and high inventories.

Demand from Australia for ULSD was steady, sources said.

In the Middle East, Bahrain's Bapco was heard to have sold 40,000 mt of 500 ppm sulfur gasoil for March 9-12 loading from Sitra at a premium of $1.80-$1.90/b to the Mean of Platts Arab Gulf Gasoil assessment on a FOB basis.

Earlier last month, AG cash differentials were heard in the low $1s/b to MOPAG gasoil assessment.

Lower exports from India for March contributed to the jump in AG cash differentials, a trader said.

Private refiner Reliance Industries has scheduled maintenance at its 660,000 b/d Jamnagar refining complex this month.

The maintenance is scheduled to start around mid-March and to cover about half the capacity of the Jamnagar I refinery and some secondary units, industry sources said.

Under the program, Reliance plans to shut a 330,000 b/d crude distillation unit, the Coker 1 unit and a fluid catalytic cracker for about 30 days, while the company intends to idle the diesel hydrotreater, or DHT 2, and a light naphtha hydrotreater for about 20 days, sources said.

There was no comment from Reliance.
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