Asia’s middle distillates markets experienced a decline last Friday, primarily due to an influx of supply for July that dampened upward price movements. Despite this, some short-covering buying and prompt demand provided a measure of support to the market. Key northeast Asian oil majors were actively offering shipments of 10ppm sulphur gasoil for the end of July, with transaction prices reported between discounts of 50 to 90 cents per barrel.
Reports indicate that South Korean refiners have significantly increased their spot sale volume for July compared to June. Sources suggest that at least 21 spot cargoes, typically around 300,000 barrels each, have been sold. Nearly half of these transactions were likely conducted through private discussions.
Demand remained somewhat steady in Southeast Asia due to short-covering activity amidst refinery disruptions and a delayed seasonal monsoon lull. Meanwhile, discussions regarding jet fuel arbitrage between east-west routes to northwest Europe slowed as price spreads tightened mid-week. Conversely, the arbitrage spread between Asia and the U.S. west coast widened, prompting spot trading conversations due to concerns over unstable domestic supply attributed to refinery production challenges.
Refining margins settled at $19.3 per barrel, reflecting an 80-cent drop from the previous week. Activity in the trading window remained minimal, and cash differentials showed little change, indicating a firm paper market structure. In inventory news, gasoil stocks in the Amsterdam-Rotterdam-Antwerp region fell to their lowest levels since February 2024, mainly due to decreased imports and lackluster inland demand.
Additionally, the South Pars refinery’s damaged unit in Iran has resumed operations following recent tensions. Recent reports revealed a decrease in shipping costs for the Gulf following a ceasefire between Israel and Iran, although rates remain vulnerable to fluctuation based on geopolitical developments. Other significant developments include the U.S. delaying its crude oil deliveries to the Strategic Petroleum Reserve and ongoing strain in China’s factory activity, which has been affected by trade tensions with the U.S.