Asian diesel margins slip as prompt spreads deepen backwardation

what happened

Reuters reported that Asian diesel refining margins and prices moved lower as traders priced in greater regional supply availability and reduced concern over tight Western markets. Prompt timespreads, however, shifted into deeper backwardation. Offers for October-loading Chinese cargoes appeared from late last Friday, with at least three refiners in discussions. South Korean refiners offered additional November cargoes, and negotiations were ongoing.

The October east-west spread narrowed to a discount of roughly $170 a ton, while the November spread reached about $160. The GO10SGCKMc1 refining margin extended its decline to slightly above a two-month low near $60 a barrel. The GO10-SIN-DIF cash differential edged up to nearly $2.3 a barrel as October-November timespreads strengthened in backwardation, although the spot window was inactive. November jet fuel was discussed at slight premiums to free on board Singapore prices, while JETREG10SGMc1 narrowed to around $1.5 a barrel.

There were no Singapore cash deals for jet fuel or gasoil. Reuters also reported that US President Donald Trump announced an energy ceasefire between Russia and Ukraine that he said was “effective immediately”; Ukrainian leader Volodymyr Zelenskiy said he was still awaiting the details. Trump said Russia had agreed to supply diesel to global markets, while his administration temporarily lifted sanctions on Russian fuel. The cost of chartering a supertanker to move US crude to China fell after reaching a record in the previous session.

Asian closing prices showed 0.25% gasoil at $156.29 a barrel, down $2.36, with its differential at -$9.41. 0.05% gasoil was $160.82 and its differential was -$4.88. 0.001% gasoil was $167.99 and its differential was $2.29. Jet/kerosene was $170.56, with a $4.00 differential. Previous values were $158.66, -$9.69, $163.19, -$5.16, $170.36, $2.01, $172.52 and $4.02, respectively.

why it matters

Lower margins point to weaker refining economics, while deeper prompt backwardation signals continued firmness in nearby market structure. Potential Russian diesel flows and temporary US sanctions relief may influence expectations for middle-distillate supply.

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