Stocks of light distillates fell by 5.1% to 5.948 million barrels, retreating from a 20-week high seen last week.
The front-month time spread for Arab Gulf petrol RON 95 fell further into contango and was at minus 53 cents yesterday, indicative of seasonally lower petrol demand. Naphtha cracks have fallen sharply recently as Asian petrochemical producers expect to see the end of peak run rates with the upcoming Lunar New Year, adding further downward pressure on the light distillates complex.
Arbitrage routes out of Asia are heard to be closed with the Middle East and the US West Coast already being sufficiently stocked. One source commented, ‘the (Middle East) market is a bit long, but in the coming months … it will be balanced with all the tenders and the turnarounds’.
Stocks of middle distillates rose by 5.5% or 113,000 barrels to a nine-week high of 2.183 million barrels. The price impact on gasoil of cold weather in Europe and North America has moderated, with markets in those regions seen as flat at best. Four LR2-sized vessels each carrying around 90,000 mt of gasoil that loaded from East of Suez locations are currently en route to the US East Coast, but this arbitrage has now closed in line with a falling spread between the NYMEX heating oil and ICE low sulfur gasoil futures.
Stocks of heavy distillates and residues fell by 6% or 545,000 barrels to 8.529 million barrels. Bunker demand in Fujairah was reported as sluggish in recent days, with the rally of ICE Brent prices to $70/b raising prices and dampening buying interest. The front-month time spread for Arab Gulf 180 CST remained in contango at minus 75 cents/mt yesterday. Added to the suspension of fuel oil tenders by Pakistan State Oil and a narrowing differential between Singapore and Fujairah cargo prices, fuel oil stocks could well rebound in the coming weeks.