Gasoline trouncing diesel in Asia amid uneven demand recovery

Asian gasoline has surged to a record premium to diesel as the use of private vehicles rise while public transport and industrial activity remain sluggish, highlighting the uneven demand recovery from Covid-19.

After a brief slump in early September, motor fuel prices have rebounded amid signs cars and motorbikes are being favored to avoid infection. Diesel -- commonly used by buses and trains -- has fallen amid weak demand and a global glut of middle distillates that’s being caused by many refiners having only limited scope to adjust the mix of oil products they’re making.

In the Asian oil hub of Singapore, 92-RON gasoline’s front-month swap was at a $3.26 per barrel premium to diesel on Monday, the most in figures going back to 2017, Bloomberg Fair Value data show. Motor fuel, which is normally cheaper than diesel, was at a discount of $25 to the industrial fuel in March.

The rising gasoline consumption has forced India’s second-biggest refiner -- Bharat Petroleum Corp. -- into the unusual position of seeking cargoes on the spot market. A surge in diesel exports from major Asian economies, meanwhile, is adding to the glut, while heavy rainfall in China has suppressed demand for the industrial fuel.

“As refinery runs remain constrained by the supply overhang of middle distillates, Asia will remain net short of gasoline through year-end," said Sandy Kwa, oil market analyst at industry consultant FGE.

China’s state-owned refineries were operating at around 76% of capacity in September, almost 5% less than a year earlier, according to industry consultant SCI99. Indian processors were running at 76% in August, down from 83% in July, government data show.

The relative fortunes of gasoline and diesel are also being reflected in fluctuations of stockpiles in Singapore. Inventories of light distillates, including motor fuel, plunged the most in 25 years in the week through Sept. 23, government data show. Stockpiles of middle distillates -- diesel and jet fuel -- are close to their highest in nine years, meanwhile.

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