The time spread for gasoil swaps in Singapore narrowed 15 cents/barrel day on day to a seven-week low of plus 3 cents/b for April/May Wednesday, because of low regional gasoil demand and concerns over increased exports from China and India, trade sources said Thursday.
The spread between the front-month and second-month swaps has been narrowing steadily from its last peak of plus 80 cents/b on March 1, Platts data showed. The last time the prompt time spread was any lower was on January 28 at plus 1 cents/b.
In a backwardated market, the future price is lower in the distant delivery months than in the nearer delivery months. The narrowing of a backwardated curve could indicate falling demand and rising surplus.
East Asian gasoil demand, which has been slow in the first quarter, could remain low into the next quarter, as the region's top demand centers such as Vietnam and Indonesia continue to limit their spot purchases.
Indonesian gasoil demand for one, has been weighed down by a combination of heavy flooding in the capital Jakarta in January, a slowdown in the mining industry and the move to natural gas.
Under Indonesia's 2013 state budget for fuel subsidy, gasoil consumption this year is forecast to fall 4% to 15.11 million kl (260,000 b/d) from 15.73 million kl in 2012, with the government still looking at ways to curb domestic consumption, Platts reported previously.
State-owned oil and gas entity Pertamina's April imports are expected to fall to 2 million-2.5 million barrels, all of which are met by term supplies. This is sharply lower than the 3 million-4 million barrels/month of term imports for Q1, through its trading arm Petral.
Meanwhile, Vietnam's largest oil products importer Vietnam National Petroleum Group -- better known as Petrolimex -- has bought only two 35,000-mt cargoes of 500 ppm sulfur gasoil from the spot market so far this year.
It is still in the process of completing its semi-term purchase of 39,000 mt (290,600 barrels) of 0.25% sulfur gasoil for April to July. In contrast, Petrolimex bought up to 461,000 mt of gasoil in the first six months of 2012 because of supply cuts from the country's sole refinery, Platts data showed.
But since late last year, Petrolimex has been meeting its monthly requirements from the 6.5 million mt/year refinery at Dung Quat.
GROWING GASOIL EXPORTS FROM CHINA, INDIA
Further bearish sentiment in the market was seen from a sharp increase in Chinese gasoil exports since last November, led by new refining units coming onstream.
Exports from the world's number two oil consumer in January surged 280% over the same month last year, to 380,000 mt. Since November, China's monthly gasoil exports have averaged around 347,000 mt a month.
Adding to this, more spot gasoil exports from India could emerge in the coming weeks, as private refiner Reliance Industries Ltd. resumes operations of the 290,000 b/d crude distillation unit 4 at its 580,000 b/d Jamnagar refinery from a four week long planned turnaround, which started in middle of February.
The planned turnaround also included the shutdown of a vacuum gasoil hydrotreater and a diesel hydrotreater.
Reliance owns and operates two large refineries at Jamnagar -- the other with a capacity of 660,000 b/d -- and can export between 800,000 and 1.2 million mt of gasoil a month, according to trade sources.
Its monthly exports can rise up to 1.3 million-1.5 million mt whenever domestic demand is weak.
