Singapore, 30 July (Argus) — Singapore's onshore inventories of middle distillates rose to their second highest level this year, underlining a lingering supply overhang amid a lack of arbitrage prospects to Europe or the US.

The onshore inventories of gasoil and jet-kerosine rose by 311,000 bl to 15.37mn bl in the week to 28 July, close to the highest level this year of 15.62mn bl recorded three weeks ago.

The oversupply outweighed regional demand, amid high distillate exports from refining centres like South Korea. Los Angeles jet fuel differentials are at around August Nymex +9¢/USG, which are unviable to cover freight costs from northeast Asia and undermined any arbitrage opportunities to the US west coast. But a return of fresh spot jet fuel demand from China has offered some reprieve to the market.

But disruptions in Taiwan could ease some of the regional oversupply in gasoil markets. Several August-loading diesel cargoes from Taiwanese private-sector refiner Formosa Petrochemical have been postponed, while several gasoline cargoes have been cancelled with the agreement of buyers. Formosa restarted yesterday two of its three crude distillation units at its 540,000 b/d refinery in Mailiao after a fire on 25 July had forced the entire complex to shut down.

But India's import demand for diesel appears to have fizzled out. Newly-upgraded units at Indian refineries are set to return, curbing its need for imports. No August-arrival imports are seen from Indian state-owned refiner IOC. Indian refiners bought considerable volumes of diesel during June-July, largely to cover shortfalls in production with the country's new tighter fuel specifications.

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