The Asian jet fuel market may be booming greater this week as Japan is anticipated to begin its winter heating demand kerosene stockpiling in September, while South Korea’s national gas oil industry is preparing for more supply after its automotive tax relief was repealed last week.
This week, after South Korea repealed its tax relief, the Asian gas oil industry is anticipated to be unstable, leaving industry attendees expecting South Korea, the biggest provider of gas oil in East Asia, to send out even more cargo quickly, trade officials said.
South Korea, which produces about 1.8 million-2 million tons of gasoline a month, after Saudi Arabia is the world’s biggest provider of middle distillate.
“The demand [for gas oil cargo in South Korea] is already very low, the return of the automotive tax could make it worse,” said a Singapore-based trader, adding that “North Asia is becoming over-supplied and individuals are looking for barrel houses.” At Asian closing Friday, the FOB Singapore gas oil money difference was evaluated at plus 27 cents / b for Mean of Platts Singapore gas oil asses.
On August 27, in the midst of a slowdown in place supply for physical barrels, the money price had fallen to as small as plus 15 cents / b.
That said, the upcoming renovation in the Singapore gas oil market between September and October could be the turning point, sector officials said.
“I don’t see much demand in Asia currently, but in September-October, we might see lesser supply as a result of refinery turnarounds in the fourth-quarter, therefore I think potentially, trading activity will pick up in the second half of September,” a Singapore-based refining source said.
The front-month September / October time spread rose 18 cents / b weekly on the derivatives market to be evaluated at the Asian closing on Friday at plus 26 cents / b. Furthermore, from the settle on August 26 to $1.09/b last Friday, the Q4/Q1 time spread was up 39 cents / b.