RTRS:Asia Distillates-Gas oil's cracks strengthen to 1-week high
SINGAPORE, Aug 12 (Reuters) - The Asian gas oil market strengthened on Friday, with the
cracks and timespreads gaining ground on the prospect of Chinese diesel imports and uncertainty
over when Taiwan's Formosa would re-start exports from its shut refinery in Mailiao.
Trading activity was focussed on the second-month contracts, which turn prompt next Tuesday,
with at least 400,000 barrels of the September fixed price swap and 350,000 barrels of the
September/October timespread transacted by 0830 GMT.
The August/September contango fell 9 cents to 16 cents a barrel, while September/October
gained 4 cents to minus 1 cent, Reuters data showed.
Further along the curve, the November/December to February/March contracts flipped into a
slight backwardation.
The product's September premium to Dubai crude rose to a one-week high near $19 a barrel by
0830 GMT, Reuters data showed.
China has removed import duties on middle distillates to entice refiners to buy cargoes from
abroad to meet domestic demand, but there has been no sign of significant imports so far.
However, with prices falling in tandem with sharply lower crude benchmarks in recent weeks,
refiners may find it financially feasible to import now, traders said.
"There's talk that China might start importing now that flat price is much lower," said a
Singapore-based distillates trader.
The prospect of a prolonged delay to Formosa restarting its distillates exports also
underpinned sentiment, with traders saying that it might not happen before September at the
earliest.
Although Formosa has said it is ready to start up on Aug. 20 pending government approval, it
was not immediately clear when Asia's fifth largest refinery will be able to fully restore its
diesel exports, estimated at 800,000 tonnes a month.
Formosa's shutdown helped boost Asian prices and close the gas oil's arbitrage window to
Europe, although its restart could pry it open again. But if Chinese diesel imports surge, the
window may stay shut, traders said.
* SWAPS OUTRIGHTS: Gas oil's August swap rose 28 cents to $121.08 a barrel, while the
September swap gained 19 cents to $121.24 a barrel.
- Jet fuel swaps for August were up 68 cents to $122.93 a barrel, with the August regrade
(the difference between jet and diesel prices) climbing 40 cents to $1.85.
* CRACKS: Gas oil's crack for September rose 17 cents to $18.91 a barrel over Dubai crude.
- Jet fuel cracks added 30 cents to $20.99.
* CASH DIFFERENTIALS: The discount for gas oil with 0.5 percent sulphur narrowed 3 cents to
55 cents, while the premiums for the 0.25 percent and 0.05 percent sulphur grades were steady at
50 cents and $2.00, respectively.
- Jet fuel's cash discount was flat at 52 cents.
* PHYSICAL OUTRIGHTS: Benchmark diesel with a maximum sulphur content of 0.5 percent rose 25
cents to $120.60 a barrel, while jet fuel gained 40 cents to $122.70.
* CASH DEALS: Two gas oil deals, two jet fuel deals.
- Hin Leong bought 100 barrels of jet fuel from Vitol for Aug 27-31 lifting at a discount of
45 cents to Singapore spot quotes.
- Vitol sold 100,000 barrels of jet fuel to Cargill for Sep 1-5 loading at minus 40 cents a
barrel.
- Hin Leong sold 250,000 barrels of 0.5 percent sulphur gas oil to ConocoPhillips at 40
cents below August prices for Sep. 7-11 loading.
- The Singapore trader bought a similarly sized parcel from Shell at minus 60 cents a barrel
for Sep. 1-5 lifting.
