Singapore gasoil cash differential plunges to 38-month low on weak demand, ample supply
Singapore (Platts)--27Dec2012/1159 am EST/1659 GMT
The cash differential for FOB Singapore 0.5% sulfur gasoil fell to more
than a three-year low Wednesday, amid ample supply in the region and weak
buying appetite for the grade ahead of a change in sulfur specifications for
the Singapore benchmark gasoil, traders said Thursday.
The differential for the grade was assessed at a discount of
$1.06/barrel to Mean of Platts Singapore Gasoil assessments at Asian close
Wednesday, down 22 cents/b from Monday. The differential was last any lower
on October 9, 2009, when it finished at a discount of $1.30/b.
The cash differential for gasoil represents the price buyers are willing
to pay for the automotive and power generation feedstock, below or above
benchmark prices published around the day a cargo loads. Falling physical
differentials indicate a weak appetite from buyers and are typically
accompanied by softness in the structure of the forward curve.
There were mixed views for the weaker buying appetite seen.
Some traders said buyers were shunning the 0.5% sulfur grade as it will
cease to be the benchmark grade in Singapore after January 2. Platts
announced in 2011 that the sulfur specification of its benchmark FOB
Singapore/Arab Gulf Gasoil assessment would be reduced from the current 5,000
ppm to 500 ppm from January 2, 2013.
But others said the weakness was perceptible across the grades and not
just for the 0.5% sulfur grade. "If you look at recent spot deals around the
region, they have been concluded at much lower levels compared with the 2013
term differentials. But this is not just for the high sulfur gasoil grade but
also for the other gasoil grades," a Singapore-based trader said.
CHINA AND INDIA SEE HIGHER GASOIL EXPORTS
Ample supply, especially from China and India, had further weakened the
Total gasoil exports from the two Asian giants were seen to surge
33-47%, or 2 million-2.5 million mt, year on year in the fourth quarter of
2012, up from 1.5 million-1.7 million mt in Q4 2011, amid a gloomy global
economic outlook and increased refining capacity.
Chinese refiner West Pacific Petrochemical Corp., or Wepec, has already
sold its third spot parcel of 40,000 mt of 0.2% sulfur gasoil for loading in
January, Platts reported earlier. Wepec typically exports gasoline, naphtha,
jet fuel and kerosene cargoes, but over November-December started exporting
gasoil as well due to lower domestic demand.
Gasoil exports from China are expected to hover around 300,000 mt/month
till the first quarter of 2013, a trade source with knowledge of the
country's gasoil market said. "January gasoil exports will likely be at
similar levels as seen in the fourth quarter of 2012," the source added.
Indian gasoil exports were also climbing, with Essar oil becoming a
regular exporter since September 2012. The private refiner has been exporting
as much as 200,000-250,000 mt of 500 ppm sulfur gasoil each month since
September following a refining capacity expansion.
Reflecting surging supply, middle distillate stocks in Singapore rose by
296,000 barrels week on week to 10.155 million barrels for the week ended
December 19, official data from International Enterprise Singapore showed
last Thursday. The data for this week due to be out later Thursday, is
expected to show a similar increase in stocks, traders have said. "There has
been limited outlets for gasoil at the moment," another source said.
"Supplies are growing but demand is bad."
--Jonathan Nonis, firstname.lastname@example.org
--Edited by Haripriya Banerjee, email@example.com