Singapore middle distillates rallied since the dip seen in June, with gasoil surpassing jet levels. Gasoil 10ppm averaged $142.34/bbl (+12.6% MoM, +56.4% YoY) and jet $138.94/bbl (+11.3% MoM, +58.2% YoY), though both remain below the March and April peaks.
Unlike June where the changes in price levels can largely be matched against crude price movements, July's growth in flat prices for middle distillates surged beyond crude's increase. M1 cracks to Dubai near-doubled while Dubai rally matched only a fraction of the gains, pointing to genuine distillate tightness rather than a crude related move higher. The first significant surge in price levels was observed on 14th July, coinciding with the collapse of the interim US-Iran deal and the reinstatement of US naval blockades. The move was initially jet-led before gasoil took over in the second half, inverting the regrade and shifting refiner yield incentives toward gasoil. The gasoil complex was further constrained with Russia's diesel export restrictions.
MARKET ACTIVITY
Swaps
- July saw 185 Gasoil swap trades done within the month at 1.24 million metric tons, up from June's 151 trades and 1.01 million mt. Dare took 57 of the 185 sales (30.8%), half of the percentage they accomplished in June, and 45 of the buys (24.3%), trading both sides continuously from 1 to 30 July rather than repeating June's clean split of first half buying and second-half selling. The sell-side share Dare vacated went to Vitol Asia, which sold 44 lots (23.8% of sales) against 19 buys and ended at -1,250 KB, the largest net short in the book. That is a complete reversal from June, when Vitol was the most active accumulator at 22.5% of traded volume and finished with the largest net long at +1,400 KB.
- Jet swaps grew to 45 trades from June's 37 but gave up June's balance of available bids and offers, posting 197 bids against 237 offers (roughly 1:1.2) after June's 1:1 bid offer ratio.
Physical
- The physical gasoil window saw 143 offers and 55 bids, converting into 14 trades, against June's 66 offers, 60 bids and 4 trades. The book moved from near-balance in bid offer ratios for June to 1:2.6 offer-skewed while executions more than tripled, portraying a likely seller-side market clearance in cargoes. Sell-side liquidity concentrated in Vitol Asia (60 of the 143 offers), Unipec (35), BP (19), Glencore (15) and Ampol (12); Gunvor, which placed 44 of June's 66 offers, does not appear on the offer side at all. Bids came from Trafigura (20), Gunvor (14) and Total (13).
- The physical jet window presented 51 offers to 2 bids, compared to June's 3.2:1 and May's 6:1. Bids all but disappeared, with offers placed mainly by BP (20), Ampol (9) and Unipec (7). One trade printed on 1 July where Vitol sold 175 KB to BP at +2.50 for H2 July, and nothing cleared after it.
PRICE ACTION
- For the month of July, Singapore middle distillates reversed the June decline, with gasoil averaging $142.34/bbl vs June's $126.37/bbl and jet averaging $138.94/bbl vs June's $124.80/bbl. Gasoil started the month of July at $115.97/bbl and on the last working day of the month landed at $160.73/bbl. Jet followed closely, opening at $116.70/bbl and closed $153.07/bbl. Both grades peaked on 23 July (gasoil $168.13/bbl, jet $160.91/bbl) with the month's low seen on 3 July.
Jet Fuel Singapore FOB Cargoes
Gasoil 10ppm Singapore FOB Cargoes
CROSS-MARKET DYNAMICS
- M1 cracks to Dubai near-doubled in July for middle distillates. Gasoil cracks grew from $45.31/bbl to $76.22/bbl and jet from $44.96/bbl to $72.72/bbl. With the growth in middle distillates surpassing the implied Dubai M1 which rose only $11.39/bbl compared to jet M1's $39.15/bbl gain and gasoil's $42.30/bbl gain, 71% of the move reflects product-specific tightness rather than crude. Gasoil crack closed $3.50/bbl above jet's, shifting the marginal refiner yield incentive toward gasoil. This is line with the narrative that cracks favor diesel production, given the slowdown in travel post World Cup and summer season.
- The M1 regrade shifted from an initial value of -$0.35/bbl to end the month at -$3.50/bbl, averaging -$1.52/bbl against June's -$0.20/bbl. Gasoil was seen at a premium in 21 of 23 sessions against 13 of 21 in June. The widest print was -$4.00/bbl on 30 July, the widest of the period, and the monthly range was -$9.00/bbl against June's -$2.99/bbl. July saw a collapse in the supply of diesel, as Russia announces its export bans on account of several refining attacks, joining existing export bans on gasoline and jet fuel.
CROSS-REGIONAL DYNAMICS
- A widening gasoil East-West spread was observed, rising from -$58.34/mt to -$126.54/mt as ICE LSGO Singapore assessments rose 42.5% over Singapore gasoil M1's 37.4%. Europe diesel supplies remain limited due to Russian export bans (mostly Turkey) and further throttled by the offline Jizan and Houthi attacks. The continent will have to rely on US Gulf Coast or Indian cargoes to make up for the shortfall in diesel arrivals.
- Jet East-West arbitrage window widened by $83.78/mt to -$166.64/mt, amid tight supplies in Europe, while the jet trans-Pacific arb between Singapore and Los Angeles narrowed $93.07/mt to -$60.21/mt. These price spreads may narrow further as post-summer travel season encroaches, reducing the demand for jet cargoes.
CURVE STRUCTURE
- Forward curves for both products steepened in favor of a backwardated structure, with prompt gains far outpacing the back: gasoil M1 gained $42.30/bbl compared to M12's $11.19/bbl, and jet M1 $39.15/bbl against M12's $8.92/bbl. The M1-M12 backwardation spread widened 2.7x for gasoil and 3.1x for jet.
- The grades diverged at the front end of the curve. Jet M1-M2 peaked at $8.58/bbl on 14 July then settled at $5.15/bbl, while gasoil M1-M2 kept widening to a month-end high of $9.60/bbl.
PRICE VOLATILITY
- July Coefficient of Variation rose to 12.18% (jet) and 13.23% (gasoil) from June's 11.73% / 12.15%, a second consecutive pickup and the highest of the last six months behind March — escalation within an elevated regime rather than a fresh break.
- Gasoil CV exceeded jet CV for the fifth time in six months, consistent with gasoil carrying the marginal tightness in this complex.
Jet Fuel Singapore FOB Cargoes
Gasoil 10ppm Singapore FOB Cargoes
SOMETHING TO WATCH
- Regrade levels as the end of peak summer demand by end-August removes demand independent of supply. Relief in jet prices may be observed while end of year winter heating demand may shift regrade levels even lower.
- Cracks will indicate on the availability of refining and crude, especially with crude supplies hanging in the balance given geopolitical stability in the Middle East.
Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.
