Oil report

Asia Distillates-Gasoil cracks post biggest weekly drop in over 3 years

    SINGAPORE, Jan 10 (Reuters) - Asian refining margins for 10 ppm gasoil fell on Friday,
posting their biggest weekly decline in more than three years, weighed down by muted
buying interest as the market awaits an expected demand boost following a switch to
cleaner fuels in the shipping sector.
    The International Maritime Organization (IMO) has banned ships from using fuels with a
sulphur content above 0.5%, effective Jan. 1, and a section of ship-owners are expected to
switch to marine gasoil (MGO) to adhere with the new rules.
    But some ship-owners and operators, especially those with larger ships, strongly
prefer very low sulphur fuel oil (VLSFO) over MGO due to technical issues related to
running on distillate fuel as opposed to heavy fuels.
    Traders, however, are optimistic that gasoil demand would pick up steadily over next
few months as the availability of existing VLSFO supplies shrink.
    Refining margins, also known as cracks, for gasoil with 10 ppm sulphur content
 plunged to $13.98 per barrel over Dubai crude during Asian trade on Friday,
down from $14.95 per barrel a day earlier.
    Cracks for the benchmark gasoil grade in Singapore have dropped about 13.4% this week
in their steepest weekly decline since August 2016, Refinitiv Eikon data showed.
    Cash premiums for 10 ppm gasoil GO10-SIN-DIF, which have dropped 59% over the last
two weeks, were at 37 cents per barrel over Singapore quotes on Friday, 1 cent higher
compared with Thursday.
    Meanwhile, cash differentials for jet fuel JET-SIN-DIF were at a discount of 15
cents per barrel to Singapore quotes, compared with a 11-cent discount in the previous
    Refining margins for jet fuel fell to $12.79 per barrel over Dubai crude
on Friday, their lowest in more than eight months. They were at $13.55 a barrel on
    - Global air passenger traffic for November showed demand rose 3.3% compared with the
same month a year earlier, but stayed below the long-term trend, the International Air
Transport Association (IATA) said on Thursday.
    - "November's moderate result reflects the continuing influence of slower economic
activity, geopolitical tensions and other disruptions, including strikes in Europe,"
Alexandre de Juniac, chief executive officer of IATA said in a statement.
    "On the plus side, positive developments in the U.S.-China trade talks, in tandem with
signs of improving business confidence, could support an uptick in travel demand," he
    - Passenger traffic for Asia-Pacific airlines increased 3.9% in November compared with
the year-earlier period, slightly lower than the 4.2% annual growth recorded in October,
IATA said. The Asia-Pacific region makes up more than a third of the global aviation
    - Among domestic passenger markets, Indian airlines experienced a return to
double-digit growth for the first time since January 2019, as traffic rose 11.3% compared
to November 2018, IATA said.
    - Domestic traffic in Japan rose 3.7% in November year-on-year, while airlines in
China posted a rise of 5.3% in domestic traffic for the same period.
    - The price of very low-sulfur fuel oil (VLSFO) has risen in recent months, a sign of
increasing worry there is not enough of the fuel to comply with new global shipping laws
that took effect this year, market participants said.
    - Fuel oil's better calorific properties and better properties on engines as compared
with MGO are making shippers reluctant to make the switch even though VLSFO prices are now
marginally higher than gasoil, trade sources said.
    - Gasoil stocks independently held in the Amsterdam-Rotterdam-Antwerp (ARA) refining
and storage hub STK-GO-ARA rose 3.5% to 2.6 million tonnes in the week to Jan. 9, data
from Dutch consultancy Insights Global showed.
    - Gasoil stocks rose by around 3.5% to 2.57 million tonnes, despite improved demand
from inland Rhine locations compared with the previous week, Insights Global's Lars van
Wageningen said.
    - ARA jet fuel inventories STK-JET-ARA fell 3.6% to 563,000 tonnes, the data showed.
    - Compared with a year earlier, jet fuel stocks were 1.3% higher, while gasoil
inventories were up 25.7%.
    - Eight jet fuel trades, one gasoil deal.
    - For more information, click
    - China has approved a long-awaited tax waiver on exports of cleaner ship fuel, paving
the way for refiners to boost output, though Beijing may initially limit shipments to
focus on growing its coastal marine fuel market, state refiner officials said.

    - India's oil demand growth is set to overtake China by mid-2020s, priming the country
for more refinery investment but making it more vulnerable to supply disruption in the
Middle East, the International Energy Agency (IEA) said on Friday.
    - Oil prices dropped on Friday extending days of losses as the threat of war in the
Middle East receded and investors switched attention to economic growth prospects and the
rise in U.S. crude oil and product inventories.
    - Even as the United States and Iran appear to signal a keenness to avoid further
conflict, oil and gas shipowners are bracing to pay a price for the war of words that
culminated in rocket strikes in Iraq over the last week - higher insurance bills.

 CASH ($/T)             ASIA CLOSE       Change   % Change   Prev Close   RIC
 Spot Gas Oil 0.5%                76.65    -1.09      -1.40        77.74  GO-SIN
 GO 0.5 Diff                      -2.04     0.01      -0.49        -2.05  GO-SIN-DIF
 Spot Gas Oil 0.25%               77.30    -1.09      -1.39        78.39  GO25-SIN
 GO 0.25 Diff                     -1.39     0.01      -0.71        -1.40  GO25-SIN-DIF
 Spot Gas Oil 0.05%               78.59    -1.09      -1.37        79.68  GO005-SIN
 GO 0.05 Diff                     -0.10     0.01      -9.09        -0.11  GO005-SIN-DIF
 Spot Gas Oil 0.001%              79.06    -1.09      -1.36        80.15  GO10-SIN
 GO 0.001 Diff                     0.37     0.01       2.78         0.36  GO10-SIN-DIF
 Spot Jet/Kero                    77.11    -1.01      -1.29        78.12  JET-SIN
 Jet/Kero Diff                    -0.15    -0.04      36.36        -0.11  JET-SIN-DIF
 For a list of derivatives prices, including margins, please double                       
 click the RICs below.                                                    
 Brent M1                                                                                 
 Gasoil M1                                                                                
 Gasoil M1/M2                                                                             
 Gasoil M2                                                                                
 Regrade M1                                                                               
 Regrade M2                                                                               
 Jet M1                                                                                   
 Jet M1/M2                                                                                
 Jet M2                                                                                   
 Gasoil 500ppm-Dubai                                                                      
 Cracks M1                                                                
 Gasoil 500ppm-Dubai                                                                      
 Cracks M2                                                                
 Jet Cracks M1                                                                            
 Jet Cracks M2                                                                            
 East-West M1                                                                             
 East-West M2                                                                             
 LGO M1                                                                                   
 LGO M1/M2                                                                                
 LGO M2                                                                                   
 Crack LGO-Brent M1                                                                       
 Crack LGO-Brent M2                                                                       
 (Reporting by Koustav Samanta; Editing by Amy Caren Daniel)