Northeast Asia diesel and jet fuel exports rebound as margins soar
South Korean and Taiwanese refiners have raised May cargo sales, but shipments remain below pre-Iran-war levels as Asian fuel supply stays tight.
- Northeast Asian refiners are increasing diesel and jet fuel exports for May, driven by record-high refining margins that have soared to around $60 a barrel.
- Refiners in South Korea and Taiwan have sold significantly more fuel cargoes for May than for April, with diesel sales more than doubling and jet fuel sales also rising.
- Despite the rebound, the total export volumes for May remain well below the levels seen before the recent conflict in Iran disrupted supply chains.
- The increased supply from these exports is helping to cool record spot premiums for diesel and jet fuel in the Asia-Pacific region, though they remain far above pre-conflict levels.
Spot exports of diesel and jet fuel from Northeast Asia are expected to recover in May, with refiners moving to benefit from record margins and improving crude oil availability, trade sources said.
Reuters data showed refiners in South Korea and Taiwan have sold more diesel and jet fuel cargoes for May loading than they did for April.
However, the volumes remain below levels seen before the Iran war.
Asian refining margins climbed to all-time highs of around US$60 a barrel earlier this month, encouraging refiners to release more fuel into the spot market.
The additional supply has helped pull back record spot premiums for diesel and jet fuel in the Asia Pacific.
Those premiums had surged after the conflict disrupted most of the region’s oil supply moving through the Strait of Hormuz, putting pressure on countries across the region.
South Korea’s SK Energy, GS Caltex, S-Oil and Hyundai Oilbank sold a combined total of more than 10 diesel cargoes for loading next month, more than double their April volume, Reuters data showed.
Taiwan’s Formosa Petrochemical Corp also returned to the market for May, selling one 10 ppm sulphur diesel cargo and one 500 ppm sulphur diesel cargo, compared with no such sales for April.
Each cargo is around 300,000 barrels.
Even so, May diesel sales remain well below the pre-conflict level of 25 cargoes or more.
For jet fuel, the same group of refiners has sold at least five 300,000-barrel cargoes for May, up from about three cargoes in April, two trade sources said.
Rising supply cools prices
Spot premiums and refining margins have eased as fuel exports recover, but they are still far above levels recorded before the war began on February 28.
That suggests supply remains limited as refineries in Asia and the Middle East continue to deal with lower output.
Diesel cargoes loading from Northeast Asia changed hands last week at premiums below US$5 a barrel to Singapore quotes on a free-on-board Korea basis, down from US$10 a barrel or more two weeks earlier, Reuters tender records showed.
Asian refiners’ margins for producing diesel, a key transport and industrial fuel, stood at nearly US$62 a barrel on Monday.
That was down from a record US$86 a barrel on March 30, but still about three times the level seen at the end of February, LSEG data showed.
Jet fuel cracks were around US$69 a barrel, also more than triple their end-February level, though lower than the March 30 peak of US$94 a barrel.
Cash premiums for aviation and heating fuel have dropped to about US$18 a barrel from highs above US$40 a barrel, but they remain more than double the level seen at the end of February.
Reuters
