Asia Distillates: Jet fuel cracks crawl up from record low, market still subdued

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SINGAPORE (April 6): Asian refining margins for jet fuel crawled higher on Monday, after posting their lowest level on record last week as countries around the world ramped up lockdown measures to curb the coronavirus, while a majority of flights in the region remained grounded.

Refining margins, also known as cracks, for jet fuel were at US$1.15 a barrel below Dubai crude during Asian trading hours, compared with a record low of minus US$3.35 a barrel on Friday.

Cash discounts for jet fuel widened to US$3.07 per barrel to Singapore quotes on Friday, a level not seen since August 2008. They were at a discount of US$3 on Friday.

The market for jet fuel is among the hardest hit due to the virus-led travel restrictions, and traders remain worried aviation demand would be the slowest to recover as passengers continue to avoid travelling in coming months.

Data firm OAG said that several years of industry growth had been lost and that it could take until 2022 or 2023, before the volume of air passengers returns to the levels that had been expected for 2020.

The coronavirus crisis has blindsided airlines and planemakers, prompting bailouts and drastic revisions, while Europe's leading planemaker Airbus is studying a sharp cut in output of its top-selling A320 plane series amid the industry-wide slowdown.

Meanwhile, cash discounts for 10 ppm gasoil widened to US$1.36 per barrel to Singapore quotes on Monday, the biggest discounts since Singapore's benchmark was shifted to 10ppm gasoil in January 2018 from 500ppm earlier. They were at a discount of US$1.12 a barrel on Friday.

Refining profit margins for gasoil with 10 ppm sulphur content rose to US$6.85 a barrel over Dubai crude on Monday, partly helped by weaker raw material crude prices.

The gasoil margins had hit US$6.15 a barrel on Friday, which was the lowest on record, according to Refinitiv Eikon data that goes back to January 2014.
Asia-Pacific needs to support airline industry — IATA

- Major Asia-Pacific countries could see air passenger demand reduced by between 34% to 44% this year, the International Air Transport Association (IATA) said on Friday.
-  Cambodia (-34%), Vietnam (-34%) and the Philippines (-36%) will be on the lower end of the range, while Thailand (-40%), Pakistan (-40%), Republic of Korea (-40%) and Sri Lanka (-44%) will see the largest impact, the IATA said in a statement.

- "Based on a scenario in which severe travel restrictions last for three months, the Asia-Pacific region as a whole will see passenger demand reduced by 37% this year, with a revenue loss of US$88 billion," said Conrad Clifford, IATA's regional vice president, Asia-Pacific.

- Australia, New Zealand and Singapore have announced a substantial package of measures to support their aviation industry, but other countries including India, Indonesia, Japan, Malaysia, the Philippines, Republic of Korea, Sri Lanka and Thailand, have yet to take decisive and effective action, according to IATA. 
Asian product shipping rates highest since 2008

- Freight rates for smaller long-range (LR) vessels to move naphtha and other clean oil products from the Middle East to Japan have hit near 12-year highs, Refinitiv data showed, driven by a demand surge for floating storage to combat oversupply.

- The shipping index benchmark for LR vessels that can carry 55,000 tonnes, also known as TC5, rose to Worldscale (W) 205 as of April 2, the highest since late 2008, Refinitiv Eikon data showed. Worldscale is an industry tool used to calculate freight charges.
- Sri Lanka's Ceylon Petroleum Corp (Ceypetco) is seeking a single cargo of 280,000 barrels of 500ppm gasoil, as a floating storage for discharge via SPM Muthurajawela, Colombo, during a one month period starting from May 22 on a DAP basis.

 - Ceypetco is also seeking another single cargo of 280,000 barrels of 500ppm gasoil as a floating storage for discharge via SPM Muthurajawela, Colombo during a one month period starting
from June 12 on a DAP basis.
- Both tenders close on April 21 and will remain valid for three days.
 Singapore cash deals
    - One jet fuel trade, one gasoil deal
 Other news

 - Takeover target Caltex Australia Ltd said on Monday that it would bring forward and extend the planned shutdown of Lytton oil refinery to ward off an expected hit to refining, due to the pressures on demand amid the coronavirus pandemic.

 - Oil prices fell on Monday, after Saudi Arabia and Russia delayed a meeting to discuss output cuts that could help alleviate global oversupply, as the coronavirus pandemic pummels demand.