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Asia Distillates-Gasoil cash differential falls but ends week higher on improving demand in the region

June 21/2021

MOSCOW (MRC) -- Cash discounts for cargoes of Asia's 10 ppm gasoil slipped on Friday on weaker physical deal values in the Singapore trading window, but ended the week higher on signs of improving demand in Asia, reported Reuters.

The 10 ppm cash differential was at a four-session low of minus 4 cents a barrel below Singapore quotes on Friday, down from minus 2 cents in the previous session. The differential climbed to a more than two-week high premium of 5 cents a barrel on Wednesday. Sentiment, however, was capped by concerns of rising regional supplies as refiners in north Asia resume operations following seasonal refinery turnarounds.

China's diesel exports plunged 38% in May from a month before to their lowest level this year, as reduced fuel output during the refinery maintenance season forced refiners to prioritise domestic consumers. China shipped out 1.68 million tonnes of diesel last month, data from the General Administration of Customs showed on Friday. That compares with 2.72 million tonnes in April, but was still higher than 1.45 million tonnes in May last year. May gasoline exports were at 1.55 million tonnes, edging up 5% from April and more than double the low base in May 2020 when the COVID-19 pandemic curbed travel demand overseas. Jet kerosene exports were up 1.8% year-on-year at 570,000 tonnes. Chinese refiners have been carrying out overhauls since late March, affecting more than 1 million barrels per day of crude processing capacity in April and May.

Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub dropped 7.4% to 2.1 million tonnes in the week ended June 10, data from Dutch consultancy Insights Global showed. ARA jet fuel inventories dipped 2.1% this week to 1.1 million tonnes.

In Singapore, middle distillate inventories jumped 15% to a four-week high of 12.96 million barrels in the week to June 16, according to Enterprise Singapore data. The 1.69 million barrel increase in distillate inventories was the largest weekly build up in 14 months.

Brent crude's premium to Dubai quotes DUB-EFS-1M rose on Friday to the highest in 21 months on the back of stronger demand this summer, effectively keeping Atlantic Basin grades out of Asia's reach, according to traders and Refinitiv data.

As MRC informed previously, Asia's cash differentials for jet fuel flipped into premiums for the first time this year in early May, partly supported by firmer deals in the physical market, while prompt-month spread for the aviation fuel stood at its narrowest contango in more than two months.

We remind that slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.

We also remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
Author:Margaret Volkova
Tags:Asia, Europe, crude and gaz condensate, propylene, ethylene, petrochemistry, USA.
Category:General News
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