The prompt Singapore January/February middle distillate intermonth swap extended recent declines and posted fresh year-to-date lows on Wednesday amid bearish market fundamentals and weaker crude oil futures.
For gasoil, the Singapore front month January outright swap slipped to a year-to-date low of $62.90/b at the Asian close Wednesday, marking a $4.39/b fall from Friday, December 24. The swap was last assessed lower on August 23, 2017 at $62.46/b, S&P Global Platts data showed.
In the Asian gasoil market, bearish sentiment continued to prevail amid persistently poor demand and healthy supplies.
"Gasoil is still very weak," an industry source said late Wednesday. "There's lots of gasoil around the region, floating about," he said.
S&P Global Platts reported earlier that shipping sources have estimated that there were around 30 vessels carrying gasoil floating around Taiwan. Total volume onboard the ships was estimated to be around 3 million mt. Other details could not be confirmed.
In addition, poor arbitrage economics of sending Asian gasoil to the West meant that surplus barrels were trapped in the region, dampening the already bearish sentiment. With the East-West arbitrage shut, the gasoil market continued to see consistent outflows from regional refineries, further exacerbating the current excessive supply situation.
On jet, the Singapore front month January jet fuel/kerosene outright swap slid $4.32/b from Friday to be assessed at $64.43/b Wednesday. The last time the front-month swap was assessed lower was on August 31, 2017 at $64.31/b, S&P Global Platts data showed.
The Asian jet fuel market remained overwhelmed with supplies, especially for prompt January loading, as industry sources reiterated anemic regional demand has failed to soak up surplus from the region.
In addition, with heating requirements from the northern hemisphere for the peak winter period yet to materialize, there was little support for the jet fuel/kerosene market, they added.
On the arbitrage front, still-high freight rates and weak buying interest from the US -- a common home for South Korean barrels -- have eroded economics; pushing North Asian cargoes to Singapore and further exacerbating the supply overhang.
Reflecting this, onshore commercial stockpiles of middle distillates in the main trading hub of Singapore rose for the third consecutive week for the December 13-19 period, climbing 1.8% from the previous week, according to the latest data from government agency Enterprise Singapore.
The prevailing weak fundamentals has left the FOB Singapore cash differentials in negative territory since November 16.
Month to date, the front month January gasoil and jet fuel/kerosene swaps have plunged $12.47/b and $12.79/b, respectively, since the beginning of December.
Meanwhile, the prompt Q1/Q2 Singapore gasoil quarterly spread fell 15 cents/b from Friday's Asian close to be assessed at minus $1.14/b, while the jet fuel/kerosene quarterly spread slid 12 cents/b to be assessed at minus 63 cents/b Wednesday. During the Asian trading hours on Wednesday, the February ICE Brent futures contract briefly traded below $50/b for the first time since July 2017. Nevertheless, the contract eventually rose $4/b to end at $54.47/b at the US close.
That said, market sentiment remained depressed amid geopolitical tensions and oversupply concerns.
"US crude futures have hit the lowest levels ... as jitters have frown about the impact of the escalating US-China trade dispute on global growth and crude demand," Trifecta Consultants' director Sukrit Vijayakar said on Wednesday.
"Markets ... have come under pressure as the US government shutdown that began on Saturday intensified growth concerns. The US senate has been unable to break an impasse over Trump's demand for more funds for a wall on the border with Mexico," Vijayakar added.
"Oil bulls are breathing a collective sigh of relief this [Thursday] morning as the robust tone in global equity markets helped provide the perfect springboard for a massive rally in both WTI and Brent to ensue," OANDA's head of trading Stephen Innes said.
"A clear signal that the oil market tumult was rooted in the equity market volatility where investor sentiment has been weighted down by the unfortunate events in Washington, higher US Interest rates, China economic slowdown and the omnipresent US-China trade dispute," Innes added.
