????Persistent bearishness in the Asian gasoil market amid a supply overhang and lackluster demand has pushed the front-month January/February Singapore gasoil timespread to a 12-month low, industry sources said Thursday.
????At the Asian close Wednesday, the front-month January/February gasoil timespread remained in contango at minus 70 cents/b, down 8 cents/b day on day. The last time the prompt Singapore gasoil timespread was assessed lower was November 30, 2017, at minus 95 cents/b, S&P Global Platts data showed.
????Market participants said the outlook for gasoil remained stubbornly bearish, with further downside anticipated as a flood of gasoil from China was expected to hit the market in December.
????"China is very heavily exporting in December because of the additional quota allocations," a Singapore-based trader said Thursday.
????S&P Global Platts reported in late November that China had surprised many in the market by releasing an oil product export quota allocation amounting to 2 million mt, of which gasoil comprised 1.3 million mt or 65% of the total.
????The swell in China's oil product exports was already being seen in the market before the announcement, with Platts reporting earlier the same week that the country's exports rebounded 11.7% to 4.5 million mt in November from an eight-month low in October in preliminary data from the General Administration of Customs. That rise was widely attributed to the previous round of oil product export quotas announced in the second half of October.
????For December, Chinese market sources have said they expect product exports to rise sharply, with all state-owned refiners polled by Platts saying they have plans to raise December exports.
????The weakness in the Asian gasoil market has also been reflected in rapidly falling cash differentials for the benchmark Asian 10 ppm sulfur gasoil grade.
????At the Asian close Wednesday, the FOB Singapore cash differential for the benchmark FOB Singapore ultra-low sulfur gasoil grade slipped 1 cent/b to minus 75 cents/b to the Mean of Platts Gasoil assessments, a year-to-date low.
????CRACK SPREAD LOSES STEAM
????Meanwhile, the physical gasoil crack spread to crude, a measure of the relative strength of a product against the crude it is produced from, has also been rapidly losing steam.
????At the 0830 GMT Asian close Wednesday, the FOB Singapore 10 ppm sulfur gasoil crack against front-month cash Dubai crude stood at $12.32/b, down 55 cents/b on the day and the lowest the physical gasoil crack against cash Dubai has been since June 29, when it was assessed at $12.19/b.
????In terms of paper cracks, front-month January Singapore gasoil swaps against Brent swaps slipped 39 cents/b on the day to be assessed at $11.90/b Wednesday, marking the third consecutive day of decline.
????Singapore gasoil swaps against Dubai swaps were assessed at $13.66/b Wednesday, down 66 cents/b on the day.
????The bearishness was also evident further down the curve, with the prompt Q1/Q2 interquarter spread falling 8 cents/b on the day to minus $1.09/b Wednesday. The prompt quarterly spread has been in negative territory since November 22, when it was assessed at minus 27 cents/b.