Asia’s middle distillates market experienced a subdued trading atmosphere as June came to a close. Many traders adopted a wait-and-see approach, looking for clearer signals regarding supply and demand trends in July. Anticipation built around the upcoming supply from refiners, with many expected to commence their August spot sales later in the week.
The arbitrage landscape revealed that the diesel east-west price spread continued to hover at discounts of less than $30 per metric ton. Meanwhile, freight costs for long-range vessels on the South Korea-to-UKC route remained stable at around $40 per ton. After a period of fluctuating prices, refining margins faced declines for the second consecutive session, finishing at $18.5 a barrel, which diminished some of the risk premiums that had developed over the previous fortnight.
On the trading front, engagement was minimal, and diesel cash differentials maintained premiums at $1.14 a barrel. Jet fuel discussions mirrored this trend of inactivity, as traders sought guidance from the West amidst stable regional demand and volatile arbitrage prices between the US and Europe. Consequently, the July regrade widened, reflecting a decline in jet fuel market performance, with discounts reaching $1.85 a barrel.
In refinery news, Israel’s Oil Refineries announced the partial resumption of operations at its Haifa facility following a missile strike two weeks prior. Other noteworthy updates included California’s energy regulator suggesting new rules to foster private investment in fuel imports and pause refiner profit limits to stabilize gasoline prices as the state faces refinery closures. Furthermore, OPEC+ is set to announce a significant production increase of 411,000 barrels per day for August to reclaim market share.
Meanwhile, declining oil prices were reported on Monday due to easing geopolitical tensions in the Middle East alongside the anticipated OPEC+ output hike. Additionally, a heat wave in western Europe impacted shipping routes, particularly affecting cargo transportation on the Rhine River.