The middle distillates markets in Asia continue to show a lack of trading activity, which can be attributed to the ongoing volatility in macroeconomic conditions and tariff negotiations. However, the sales activity for May cargoes from refiners has started to increase slightly, aligning with previous projections. Despite this uptick, several northeast Asian refiners are holding back their offers due to a significant decline in fixed prices earlier this week. Diesel spot sales for May are expected to remain at discounted rates for the foreseeable future, primarily driven by an ample supply that is influencing Asian market fundamentals.
Additionally, there are discussions surrounding the potential movement of some diesel barrels from the Middle East to the Asia-Pacific region, according to one trade source. The arbitrage opportunity for jet fuel between Asia and the U.S. West Coast remains viable, although there have been few shipping inquiries. In terms of refining margins, they have experienced a slight decline from the prior trading session but are still hovering near one-month highs, exceeding $14.50 per barrel. Furthermore, cash differentials have stabilized around 25 cents per barrel, reflecting the larger time spreads between April and May.
The regrade has narrowed to discounts of approximately 80 cents per barrel compared to the previous session. Regarding inventory levels, middle distillate stockpiles in the Fujairah Oil Industry Zone have decreased to a two-week low of 2.56 million barrels. In the U.S., crude oil and distillate inventories have also decreased, while gasoline inventories saw an increase last week. On the refinery front, Reliance Industries in India has reportedly shut down a crude unit and some secondary units for maintenance, which will last for 21 days at their 660,000 barrels-per-day refinery focused on the domestic market.
Finally, significant tariff increases are on the horizon, with China set to impose an 84% tariff on U.S. goods, a rise from the previously announced 34%. This escalation in trade tensions has led to a drop in oil prices to a four-year low, marking a troubling five-day losing streak for the market. Furthermore, Goldman Sachs has stated that ongoing tariff conflicts between the U.S. and China could negatively affect China’s GDP forecast for 2025.