Governments across Asia-Pacific are imposing lockdowns to curb flare-ups of Covid-19, hitting regional transport fuel demand and pressuring refining margins.
Australia's New South Wales (NSW) government has introduced stay-at-home orders in the country's biggest city, Sydney, from 26 June until 9 July because of a rise in coronavirus cases. Less stringent restrictions have also been imposed in other parts of NSW, while a lockdown has been introduced in the city of Darwin in the Northern Territory.
Australian case numbers remain low by global standards, with just 42 new infections confirmed yesterday. But the curbs are likely to hurt oil product demand in the country, which is becoming increasingly reliant on imports because of the closure of domestic refineries. The worsening outbreak has already derailed a planned air travel bubble between Australia and New Zealand, hitting jet fuel demand. Wellington has temporarily suspended the quarantine-free travel plans in reaction to the rise in case numbers, while Singapore last week also announced tighter restrictions on travellers arriving from NSW.
Australian jet fuel consumption rose to a 13-month high of 73,000 b/d in April, up from 66,000 b/d in March and 32,000 b/d in April 2020, but remains well below pre-pandemic levels, according to Australian Petroleum Statistics figures. Asian jet fuel refining margins — or the premium of Singapore jet fuel swaps to Dubai crude values — fell below $5/bl today for the first time since late April, hitting $4.82/bl.
Southeast Asia curbs
In southeast Asia, the Malaysian government has extended a movement control order (MCO) that had been due to end today. Malaysia imposed the restrictions on 31 May and had already extended them once before, on 14 June. The curbs will remain in place until daily cases fall below 4,000 and other conditions are met, including 10pc of the population receiving two doses of a Covid-19 vaccine, the government said. Malaysia recorded almost 5,600 new cases yesterday, according to Johns Hopkins University (JHU) data.
The restrictions have already hit Malaysia's gasoline imports by forcing the deferment of some cargoes for second-half June and July loading, according to traders. The MCO has weighed on gasoline demand, cutting driving activity to 65pc of a January 2020 baseline so far this month, down from 87pc in January-May, according to mobility data from US technology firm Apple.
New Covid-19 infections have reached a record high in Indonesia, where the government has so far refrained from imposing widespread lockdowns. There were over 21,000 new cases yesterday, JHU data show, adding to pressure on the government to place restrictions on movement. Indonesia is Asia-Pacific's largest gasoline buyer, importing around 260,000-330,000 b/d.
The coronavirus outbreak is also surging in Bangladesh, prompting authorities there to order a strict national lockdown later this week. New cases have tripled so far this month to around 5,300 yesterday and are approaching the previous peak of over 7,000 a day reached in April. The lockdown could hit demand for products including fuel oil, which Bangladesh uses for power generation, traders said. Bangladesh relies on imports of transport fuel, which it typically buys on a contract basis from suppliers including Singapore, China and India.
Regional transport fuel margins fell today after the curbs were announced. Asian gasoline margins — the premium of the Argus 92R gasoline price to Ice Brent — fell by 11pc to $5.63/bl from $6.33/bl on 25 June, although this is still higher compared to $4.60/bl on 1 June. The market has been supported by an expected fall in Chinese gasoline exports and rising fuel demand in India, which is recovering from the worst of its Covid-19 outbreak.
Gasoil margins — or the premium of Singapore 10ppm sulphur gasoil assessments against Dubai crude values — fell to $7.62/bl today, the lowest since $7.58/bl on 31 May. The regional Covid-19 outbreaks are disrupting demand and countering the impact of a likely fall in Chinese exports, traders said.
