March 23, 2020 / 10:16 AM / 16 days ago

Asia Distillates-Jet cracks turn negative, cash discounts widest in 14 months

    SINGAPORE, March 23 (Reuters) - Asia's cash differentials for jet fuel plunged on Monday to
their weakest in more than a year, while refining margins for the aviation fuel turned negative
for the first time in more than a decade as global airlines continued to ground fleets due to
the coronavirus pandemic.
    Cash discounts for jet fuel JET-SIN-DIF were at $1.64 per barrel to Singapore quotes on
Monday, the widest since January last year. They were at a discount of $1.10 per barrel on
Friday.
    The front-month time spread for jet fuel in Singapore, which has remained in
contango since the beginning of February, widened to trade at a discount of $2.59 a barrel on
Monday, Refinitiv Eikon data showed.
    Refining margins, also known as cracks, for jet fuel fell to minus 7 cents per
barrel over Dubai crude during Asian trading hours on Monday, a level not seen in the last 11
years, according to Refinitiv Eikon data that goes back as far as March 2009. 
    The jet fuel cracks were at $2.97 per barrel on Friday.
    Airlines cancelled more flights on Monday as Australia and New Zealand warned against
non-essential domestic travel, the United Arab Emirates (UAE) halted flights for two weeks and
Singapore and Taiwan banned foreign transit passengers in the coronavirus battle.
    Ratings agency Moody's estimated that the global capacity would fall by 25% to 35% this
year, assuming the spread of the virus slows by the end of June.
    Meanwhile, refining margins for gasoil with 10 ppm sulphur content slipped to
$9.60 per barrel over Dubai crude on Monday, down from $9.87 per barrel on Friday.
    Cash differentials for 10 ppm gasoil GO10-SIN-DIF widened their discounts to 24 cents per
barrel to Singapore quotes on Monday, compared with a discount of 15 cents on Friday.
    
    OVERHEDGED JET FUEL HEADACHE FOR AIRLINES
    - The collapse in global passenger flights has left airlines with fresh challenges: how to
manage overhedged jet fuel positions as oil prices crashed to just a third of some contracts
agreed in anticipation of rising prices and solid air travel demand.
    - A shattered global airline industry is now seeking tens of billions of dollars from state
bail-outs to absorb the shock from the coronavirus pandemic, as many have grounded almost entire
fleets and placed thousands of workers on unpaid leave to stay afloat.
    - With a sharp plunge in oil prices and the rapid spread of the flu-like virus globally
raising uncertainty when and how strongly air travel demand will recover, airlines are now left
counting the cost of their heavy fuel hedging.
    
    SINGAPORE AIRLINES GROUNDS MOST OF ITS FLEET
    - Singapore Airlines will cut capacity by 96%, ground almost all of its fleet and
look to raise funds, the carrier said on Monday, in response to coronavirus travel restrictions
it called the "greatest challenge" it had ever faced.
    - The move comes as global travel hub Singapore closed borders to travellers and transiting
passengers in a bid to stem spread of the virus.
    
    SINGAPORE CASH DEALS
    - One jet fuel trade, no gasoil deals
    - For more information, click
    
    OTHER NEWS
    - Traders and analysts are struggling to revise down their forecasts for oil demand fast
enough, as government lockdowns to contain the coronavirus outbreak have rapidly cut fuel
consumption.
    At the start of the year, forecasters had expected demand to edge up or stay flat. But, in
the space of a few months or even weeks, the most bearish outlooks seem hopelessly out of date.

    - U.S. ultra-low sulphur diesel was the latest product refined from crude oil to take a hit
in its cash market last week, after refiners boosted production in a bid to flee poorer margins
for other products more affected by coronavirus fallout.

    ASSESSMENTS
 MID-DISTILLATES                                                                      
 CASH ($/T)           ASIA CLOSE       Change   % Change   Prev Close  RIC
 Spot Gas Oil 0.5%              35.33    -4.44     -11.16       39.77  GO-SIN
 GO 0.5 Diff                    -2.04    -0.08       4.08       -1.96  GO-SIN-DIF
 Spot Gas Oil 0.25%             35.57    -4.44     -11.10       40.01  GO25-SIN
 GO 0.25 Diff                   -1.80    -0.08       4.65       -1.72  GO25-SIN-DIF
 Spot Gas Oil 0.05%             36.26    -4.44     -10.91       40.70  GO005-SIN
 GO 0.05 Diff                   -1.11    -0.08       7.77       -1.03  GO005-SIN-DIF
 Spot Gas Oil 0.001%            37.13    -4.44     -10.68       41.57  GO10-SIN
 GO 0.001 Diff                  -0.24    -0.09      60.00       -0.15  GO10-SIN-DIF
 Spot Jet/Kero                  26.02    -7.56     -22.51       33.58  JET-SIN
 Jet/Kero Diff                  -1.64    -0.54      49.09       -1.10  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 Sherry Jacob-Phillips)
  
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