- Singapore 10/500 ppm gasoil spread hits 3-year low as ULSD supply tightness eases
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The price spread between ultra low sulfur diesel and 500 ppm sulfur gasoil cargoes loading from Singapore has narrowed to a more than three-year low as supply tightness for the benchmark 10 ppm grade eases, trade sources said July 28.
The Singapore 10/500 ppm gasoil spread narrowed 1 cent/b from the previous session to 8 cents/b at the Asian close July 27, S&P Global Platts data showed. The spread was last narrower on March 8, 2017, at 7 cents/b.
The shrinking of the spread marks a quick about-turn for the ULSD grade, which in early July was grappling with tight supply as regional refiners kept operating rates low due to poor margins, and was not due to demand emerging for 500 ppm sulfur gasoil grade, market sources said.
"I'm not seeing firm fundamentals for 500 ppm sulfur gasoil in the region, to be honest," a Singapore-based gasoil trader said. "I think the market is generally just slow at the moment, and 10 ppm is weaker than 500 ppm in terms of sentiment, which is making the spread narrower," the trader said.
Sentiment for 10 ppm sulfur gasoil was seen softening on expectations of more supply becoming available from Northeast Asia in August, market sources said.
"[Gasoil prices in] August are not going to be as strong as July," a trader with a European trading house said, echoing the views of other participants in the market. The anticipated rise in supply comes at a time of demand concerns for gasoil due to a resurgence in COVID-19 infection rates following a period in which many countries were thought to have tamed the outbreak.
Fundamentals in the 500 ppm sulfur gasoil sector were also seen shaky due to the annual fishing ban in the South China Sea and widespread flooding in south China due to heavy seasonal rains. The 500 ppm sulfur gasoil product can be blended into the light cycle oil pool and sold to China for use in the fishing, construction and agricultural sectors.
However, while sources said fundamentals for 500 ppm sulfur gasoil were not strong, they said the outlook for the grade was not as bearish as for ULSD.
The cash differential for FOB Singapore 10 ppm sulfur gasoil was assessed down 14 cents from the previous session at 29 cents/b to Mean of Platts Singapore gasoil assessments at the Asia close July 27, while the cash differential for 500 ppm sulfur gasoil was assessed down 13 cents/b over the same period at 21 cents/b to MOPS gasoil assessments.