Asia 10-ppm gasoil refining margins near 18-month low on clouded outlook (updated)

Formosa Petrochemical

28/08/2024 11:23

(Updates paragraph 1, adds details and quotes throughout)
    By Trixie Yap
       SINGAPORE, Aug 28 (Reuters) - Asia's 10ppm sulphur
gasoil refining margins  GO10SGCKMc1  have slumped to a near
18-month low amid mixed market outlooks as well as softer ICE
gasoil futures and prompt paper swaps, pricing data from LSEG
showed on Wednesday.
    Prompt-month September refining margins, or "cracks", for
the transport and industrial fuel fell to around $12.40 a barrel
at the market close, down from around $14 a day earlier, the
data showed. 
    That level was last seen in early May 2023, the data showed.
    Markets were mixed on the fourth quarter outlook, with paper
swap price levels declining despite expectations of improving
supply fundamentals. 
    This decline was mostly attributed to caution in the paper
trading markets on demand prospects for the fourth quarter of
this year, two Singapore-based trade sources said, adding recent
macroeconomic drivers have not been particularly bullish. 
    "(ICE gasoil) Speculators increased their net short by
26,875 lots over the week to 27,207 lots. This is the largest
net short that speculators have held in gasoil since May last
year," said ING analysts in a client note dated Aug. 26. 
    On the physical market front, most traders remained slightly
more bullish ahead of expected lower production levels, as some
refineries globally start their scheduled maintenance from
September, a third Singapore-based trading source said.  
    A handful of regional refineries in northeast Asia and
Singapore are shut in September-October, with Russian refinery
maintenance also likely to start in that time, which will
tighten supplies, a fourth trade source said, adding that "some
traders are also clueless why paper prices fell so quickly".
    Shell's Bukom refinery and Singapore Refining Co are
currently on scheduled overhauls, with Taiwan's Formosa
Petrochemical Corp to shut in mid-September, Reuters records
showed.  REF/OUT 
    "There could be some upside to market going into Q4 given
there will be some schedule maintenance taking place, and
refineries might be prompted to cut runs if margins continue to
fall further, which could then help prop up the market," said
LSEG analysts in an email reply. 
    Meanwhile, traders are awaiting Beijing's decision on a
third batch of export quotas for China's refiners, which could
tilt the market balance as well. 
    China's exports of diesel have mostly been declining
year-on-year in the past three months amid volatile export
margins and lowered crude runs. 

 (Reporting by Trixie Yap; Editing by David Holmes and Mark
Potter)
 ((trixie.yap@thomsonreuters.com))