Asian Oil Market Overview: Diesel Cracks Continue to Decline, Divergence Intensifies Between Strong and Weak Fuel Oil

(1) On Monday, Asia's diesel market maintained active over-the-counter trading, with ongoing refinery spot sales for September. However, liquidity in window trading was subdued, and both margins and inter-month price spreads fell significantly from the previous trading day, slipping for the third consecutive day to around $69 per barrel, a two-week low. (2) Spot price spreads softened slightly, following the narrowing of backwardation in paper contracts. Northeast Asia's GS Caltex refinery is currently selling September spot cargoes via tender. (3) In the jet fuel segment, GS Caltex is also tendering two batches of September-loading spot cargoes. The price spread between jet fuel and diesel has narrowed slightly, with market trading intentions still around a discount of $4.6 per barrel. No trades were concluded in Singapore's spot window for either diesel or jet fuel. (4) For naphtha, procurement has slowed due to partial shutdowns of petrochemical cracking units in Japan and South Korea. The naphtha–Brent crack spread remains steady at about $138 per ton, with the price structure showing backwardation; prices for cargoes loading in the first half of October are estimated at $837.75 per ton. (5) Gasoline crack spreads remained rangebound at around $20 per barrel. The market expects September supply to increase, offsetting strong demand from Indonesia and Australia. The direction remains unclear as supply and demand continue to compete. (6) Fuel oil showed a distinct divergence: ultra-low sulfur fuel oil spot premiums have approached a one-month low as the market anticipates tight prompt supply to ease after this month; meanwhile, high sulfur fuel oil prices remain firm, with exports from the Middle East still far below pre-war average levels. (7) Regarding crack spreads, both varieties closed higher on Monday than Friday. Ultra-low sulfur fuel oil crack spreads rebounded to a premium near $19 per barrel, while the 380 cst high sulfur fuel oil crack spread saw a slight discount of 55 cents per barrel.