The Asian middle distillates market experienced heightened activity this week, particularly focusing on July spot refiner sales amid unplanned outages in Japan. Spot premiums for diesel reached their highest levels in three weeks, drawing attention from market participants.
At least three major refiners in northeast Asia initiated discussions for July diesel sales, although most transactions remained at discounted rates compared to free on board (FOB) Singapore quotes. The sales included several large cargoes: three 300,000-barrel and two 750,000-barrel cargoes of 10ppm sulphur gasoil, along with two 500ppm sulphur gasoil cargoes of 300,000 barrels each, sold through tenders or private agreements.
While buying interest varied across regions, there was cautious sentiment due to concerns regarding slowing demand during the ongoing monsoon season. Jet fuel activity was relatively subdued, although a slight uptick in east-west arbitrage flows provided some support to the market, balancing out the effects of the closed Asian arbitrage window to the U.S. west coast.
Refining margins saw little change week on week, ending just below $16 per barrel. In the trading window, spot deals mostly ranged from premiums of 40-60 cents per barrel, with cash differentials increasing by 58% week on week to reach a three-week high.
Meanwhile, regrade discounts held steady at around $1.20 per barrel. In inventory news, gasoil stocks in the Amsterdam-Rotterdam-Antwerp (ARA) hub increased nearly 1% to 2 million tonnes, according to data from Insights Global.
On the refinery front, Japanese oil refiner Idemitsu Kosan announced the temporary shutdown of its No.3 crude distillation unit for scheduled maintenance. In Canada, Irving Oil unveiled plans to invest $100 million to enhance a crucial crude oil processing unit at its Saint John facility, the country’s largest refinery.
Lastly, China’s export growth reportedly slowed in May, likely influenced by lingering trade tensions with the U.S.