Asia’s middle distillates markets have shown signs of recovery, responding to higher crude prices and some stabilization in the Middle East conflict. However, physical spot transactions have remained largely stagnant, leading to minimal trading activity. In July, northeast Asian refiners continued to engage in sales, but the pricing discussions showed little change, with diesel remaining at discounts of 40 to 90 cents per barrel and jet fuel around $1 lower.
In the coming days, an increase in offers from Chinese refiners, particularly for jet fuel, is anticipated. Despite recent encouraging trends in refining margins, overall supply and demand have remained relatively stable. Notably, China’s diesel exports are projected to decrease to approximately 700,000 metric tons, down from previous estimates of nearly 1 million tons, mainly due to shrinking profit margins abroad.
By the end of trading, refining margins managed to recover from previous losses, reaching just over a year-high of about $19.5 a barrel. Nevertheless, the disparity between buying and selling prices impeded spot transactions, with 10ppm sulphur gasoil cash differentials following the paper market closely, closing at premiums around $1.13 a barrel. Conversely, the regrade shifted back to discounts at approximately $1.80 a barrel.
In terms of inventory, middle distillate stocks at the Fujairah Oil Industry Zone hit two-month peaks of 2.044 million barrels by the week ending June 23, according to S&P Global Commodity Insights. Meanwhile, U.S. crude and distillate stockpiles declined last week, while gasoline inventories rose, as reported by the American Petroleum Institute. Additionally, updates on refinery operations revealed that Russia’s offline primary oil refining capacity for June has been revised upward by 5% to 3.22 million metric tons.
Furthermore, U.S. President Donald Trump stated that China would still be able to purchase Iranian oil after a ceasefire between Israel and Iran, although this was clarified not to imply any easing of U.S. sanctions.