Asia’s middle distillates markets weakened further against a backdrop of ample March supply from northeast Asian suppliers, cautious expectations on the east-west arbitrage trade activity and overall steady futures prices.

The feasibility of traders sending cargoes from east to west emerged as a key focus point for the market, given the dip in freight costs and steeper spot discounts for March cargoes since last week.

Talks of some March-loading cargoes from northeast Asia to northwest Europe are emerging despite the shaky arbitrage price spreads, one trade source said.

Freight costs for shipping a long-range vessel that can carry 90,000 metric tons of gasoil/diesel have fallen back to around a two-month low of $4 million, SSY pricing data showed.

Adjustments of China-origin exports further up to around 1.3 million metric tons for March loading contributed to sufficient supply.

Refining margins GO10SGCKMc1 for the fuel dipped to a near two-month low of around $21 a barrel as a result.

Spot market premiums GO10-SIN-DIF likewise fell for the fifth straight trading session, with the backwardation of the March-April spreads narrowing further and sellers remaining aplenty in the open trading market.

Jet fuel refining margins JETSGCKMc1, however, weakened at a slightly slower pace given thinner spot market activity.

The lack of economical arbitrage windows between Asia and the West for most parts of this week still weighed slightly on market fundamentals. This comes amid sufficient regional supplies from northeast Asia.

Regrade JETREG10SGMc1, however, narrowed to a new one-month high of a $1.60 a barrel discount as some participants were more bearish on gasoil fundamentals in comparison.

“..the closure of almost all Asian origin jet arbitrage routes to Europe has contributed to a widening Singapore regrade,” said Sparta Commodities’ James Noel-Beswick.

Source: Hellenic Shipping News