RTRS:Asia Distillates-Gas oil's Aug/Sep extends losses on rising stocks
SINGAPORE, Aug 11 (Reuters) - Asian gas oil's front-month timespread weakened for a second
session on Thursday, weighed down by persistently high supplies in the region.
The August/September contango fell 5 cents to 25 cents a barrel, falling further from a
three-week high of minus 10 cents reached on Monday, Reuters data showed.
Further signs of mounting stocks of middle distillates emerged on Thursday, with data
showing Singapore onshore inventories rising to a three-week high above 14 million barrels in
the week ended Aug. 10.
"With 14 million barrels in tanks, the market is reflecting the reality on the ground. And
that's not counting what Glencore is storing on the VLCC," said one Singapore-based distillates
trader.
London-listed trader Glencore is storing gas oil on a supertanker it chartered last month
after having accumulated at least 3.75 million barrels of the refined product in July.
The Swiss trader has turned seller this month after its buying binge in July, having so far
offloaded 800,000 barrels of 0.5 percent sulphur gas oil in the physical spot market. Glencore
has also been offering cargoes in the pricing window at progressively lower prices in recent
sessions, reaching a discount of 70 cents a barrel on Thursday, in what traders say could be a
pricing play.
Glencore's lower offers have helped widen the 0.5 percent sulphur grade to minus 58 cents,
from minus 40 cents on Monday.
The start-up of Formosa Petrochemical Corp's 540,000 barrels-per-day refinery in
Taiwan could further dampen sentiment, traders said. The refinery is ready to come back online
in stages on Aug. 20, subject to government approval, after it was completely shut following a
fire at a secondary unit at the end of July, its spokesman said on Thursday.
However, the market is expected to strengthen beyond this month, with the timespreads
further along gas oil's 12-month forward curve narrowing towards parity. The September/October
and October/November contangos were both valued at 5 cents, up 4-5 cents a barrel.
"The market is seasonally stronger in Q4 and with flat prices low now, regional buyers could
use this opportunity to stock up for the year-end," said the trader.
The jet fuel market, which has also been depressed by rising supplies and lacklustre demand,
is also expected to pick up towards the year-end as North Asian demand for heating fuel picks
up.
The November and December regrade, or jet's premium to gas oil, was valued at $2.30 and
$2.50, respectively, both up 35 cents a barrel.
In the swaps market, trading activity was focused on the timespreads, with at least 250,000
barrels of gas oil's August/September contract transacted at minus 20 cents and 50,000 barrels
of September/October at minus 6 cents.
Another 50,000 barrels of the August fixed-price swap were done at $120.80 and 100,000
barrels of September at $120.90
* SWAPS OUTRIGHTS: Gas oil's August swap rose $1.95 to $120.80 a barrel, while the September
swap gained $2.00 to $121.05 a barrel.
- Jet swaps for August were up $1.95 to $122.25 a barrel, with the August regrade (the
difference between jet and diesel prices) was steady at $1.45.
* CRACKS: Gas oil's crack for September slipped 2 cents to $18.74 a barrel over Dubai crude.
- Jet fuel cracks also edged down 2 cents to $20.69.
* CASH DIFFERENTIALS: The discount for gas oil with 0.5 percent sulphur widened 3 cents to
58 cents, while the premium for the 0.25 percent sulphur grade was steady at 50 cents.
- The 0.05 percent sulphur grade premium was also lower by 5 cents at $2.00 a barrel.
- Jet fuel's cash discount was flat at 52 cents.
* PHYSICAL OUTRIGHTS: Benchmark diesel with a maximum sulphur content of 0.5 percent rose
$1.95 to $120.35 a barrel, while jet fuel gained $2.20 to $122.30.
* CASH DEALS: One gas oil deal.
- Glencore sold a 150,000 barrel cargo of 0.5 percent sulphur diesel to BP for Sept. 6-10
loading at 30 cents a barrel below Singapore spot prices.
