Due to less supply from Japan, the crack spread of medium distillates rose to 30-month high in Asia on Mar 16, and the swaps markets became backwardated, C1 found.
The crack spread between gasoil with 0.5% of sulfur content and Dubai crude widened to US$23.8/bbl on Mar 16, and the crack spread of jet went up to US$25.46/bbl, both hitting new high in 30 months, C1's data shows. These spreads were up US$2.91/bbl and US$3.11/bbl from before the earthquake that hit Japan earlier this month.
The April/May timespread of gasoil and jet swaps settled at US$0.05/bbl and US$0.25/bbl on the day, versus minus US$0.05/bbl one week before for both gasoil and jet.
As market players bought long positions for April amid expectation of higher prices, April/May timespread of gasoil widened further to US$0.3/bbl at noon on Mar 17.
Japan has been a net exporter of gasoil, but its exports, particularly those of low-sulfur gasoil, have dropped notably because of lower refinery operation rates and increased demand from power generation and reconstruction, said an international trader.
In addition, refineries in other Asian countries see intensive maintenance this season, which has also resulted in lower supply and pushed up the prices of medium distillates.
The market has basically reached a consensus that supply is tight in Southeast Asia and demand is likely to stay strong for some time, and backwardation will continue, said a Singapore-based trader.
