SINGAPORE, Sept 7 (Reuters) - Asia's gas oil market strengthened on Wednesday, with the September/October timespread rising to near 4-month highs on the prospect of higher diesel demand from China in the face of expected winter shortages.
The product's September/October timespread was valued at a backwardation of 12 cents a barrel by 0830 GMT, up 3 cents, its fifth straight session of gains.
"We could see a repeat of last year when prices jumped after factories turned to diesel generators to get around limits on power consumption," said a Singapore-based distillates trader.
Some Chinese provinces will face a power crunch in the winter even though electricity demand growth will be curbed by an energy-efficiency drive, an official with the China Electricity Council (CEC) said.
Prices were also supported by lower Japanese stockpiles of middle distillates in the week ended Sept. 3, official data showed on Wednesday. Gas oil inventories fell over 2 percent to 2.15 million kilolitres, while exports were down 23 percent to around 176,000 kilolitres for the week.
Taiwan's Formosa Petrochemical Corp will restart the last of three crude distillation units (CDUs) at its refinery by Thursday after the plant was completely shut in end-July following a fire, a company spokesman said on Tuesday.
"The market has pretty much priced in the return of Formosa's exports," said another trader.
Each CDU has a throughput of 180,000 barrels per day (bpd) at the 540,000 bpd refinery. For a factbox on Formosa, please click
The cash differential for the gas oil's 0.5 percent sulphur grade strengthened for a fifth session, rising 2 cents to a discount of 14 cents a barrel by 0830 GMT. Hin Leong continued to be an active buyer in the physical market, picking a 180,000-barrel cargo at a discount of 10 cents a barrel during the pricing window.
The strength in the gas oil market further narrowed its spread to jet fuel prices, with the September regrade losing 20 cents to 70 cents, its lowest level in almost two months.
At least 300,000 barrels of September gas oil swap were done at $126.10-$126.20 during the pricing window, up from 150,000 barrels a day earlier. Another 50,000 barrels of the November/December contract changed hands at 2 cents a barrel.
A further 50,000 barrels of the September jet fuel swap transacted at $126.70 a barrel.
* SWAPS OUTRIGHTS: Gas oil's September swap rose $2.40 to $126.15 a barrel, while the October swap was $2.37 higher at $126.03 a barrel.
- Jet fuel swaps for September gained $2.20 to $126.85, while the September regrade, or the difference between jet and diesel prices, fell 20 cents to 70 cents.
* CRACKS: Gas oil's crack for October fell 29 cents to $17.50 a barrel over Dubai crude.
- Jet fuel cracks lost 46 cents to $18.75 a barrel.
* CASH DIFFERENTIALS: The discount for gas oil with 0.5 percent sulphur narrowed 2 cents to 14 cents, while the premium for the 0.25 percent sulphur grade dipped 2 cents to 83 cents. The 0.05 percent sulphur grade was steady at $1.55.
- Jet fuel's cash discount was flat at 45 cents.
* PHYSICAL OUTRIGHTS: Benchmark diesel with a maximum sulphur content of 0.5 percent was $2.40 higher at $125.95 a barrel, while jet fuel rose $2.25 to $126.60.
* CASH DEALS: Two gas oil deals, no jet fuel deal.
- Hin Leong bought 180,000 barrels of 0.5 percent sulphur gas oil from BP for Sep 22-26 lifting at a discount of 10 cents a barrel to Singapore spot quotes.
- Shell bought 150,000 barrels of 10ppm sulphur grade from ConocoPhillips for Sep 22-26 lifting at a premium of $3.00 a barrel to Singapore spot quotes. PRODUCT RIC BID ASK MEAN PREV CHG % CHG Jet/Kero JET-SIN 126.40 126.8 126.6 124.3 +2.25 +1.81
0 0 5 Gas Oil 0.5% GO-SIN 125.75 126.1 125.9 123.5 +2.40 +1.94
5 5 5 Gas Oil GO25-SIN 126.75 127.1 126.9 124.5 +2.40 +1.93 0.25% 5 5 5 Gas Oil GO005-SIN 127.65 128.0 127.8 125.2 +2.60 +2.08 0.05% 5 5 5 Jet/Kero JET-SIN-DIF -0.55 -0.35 -0.45 -0.45 0.00 0.00 Diff GO 0.05 Diff GO005-SIN-DI 1.45 1.65 1.55 1.55 0.00 0.00
F GO 0.25 Diff GO25-SIN-DIF 0.73 0.93 0.83 0.85 -0.02 -2.35 GO 0.5 Diff GO-SIN-DIF -0.24 -0.04 -0.14 -0.16 +0.02 n.a. GO Swap M1 GOSGSWMc1 126.1 123.7 +2.40 +1.93
5 5 GO Swap M2 GOSGSWMc2 126.0 123.6 +2.37 +1.92
(Reporting by Francis Kan; Editing by Miral Fahmy)