Wed Aug 17, 2011 10:32am GMT 
 

SINGAPORE, Aug 17 (Reuters) - Asia's gas oil market strengthened on Wednesday, with the
product's forward curve moving towards backwardation on signs of firmer demand in the region.
    The September/October and October/November contracts rose to a slight contango, while the
November/December and December/January contracts flipped into backwardation. 
    The prospect of stronger Vietnamese demand as the country's Dun Quat refinery remains shut
for maintenance has buoyed sentiment, even as high supplies of middle distillates in the region
keep a lid on gains, traders said.
    Vietnam's PV Oil is seeking 47,000 tonnes of 0.25% sulphur gas oil for end August to early
September delivery via a tender, traders said.
    The market continues to look for clues on when Formosa's 540,00 barrels-per-day refinery in
Mailiao, Taiwan will restart. The closure of the complex over two weeks ago following a fire has
helped boost the market, and Formosa has said it is ready to come back online on Aug. 20.
    However, a restart will depend on a government review this week, although traders said it
may be towards the end of August.
    Even then, the restart is likely to take place in stages and it was not immediately clear
when Asia's fifth-largest refinery will be able to fully restore its diesel exports, estimated
at 800,000 tonnes a month.
    The resumption of exports from Formosa will likely depress prices, although it could re-open
the east-to-west arbitrage window that shut following its closure, traders said.
    Gas oil's front-month September crack was hardly changed, slipping 1 cent to $18.33 a barrel
by 0830 GMT.
    China's Brightoil Petroleum, a recent entrant into the middle distillates trading arena, was
seen buying a gas oil cargo in the physical spot market for a second straight day. Singapore
trader Hin Leong, which has been a seller since the start of the month, turned buyer after it
picked up a parcel.
    The deals were done at higher price levels and helped strengthen the cash differential for
gas oil's 0.5 percent sulphur grade for a fourth session to a near one-month high.
    Trading volumes in the swaps market continued to be thin, with 100,000 barrels of the
September front-month swap transacted at $123.40, down from 200,000 barrels a day earlier.
Another 100,000 barrels each of the September/October timespread and September regrade were
done.
                    
    * SWAPS OUTRIGHTS: Gas oil's September swap rose $1.23 to $123.28 a barrel, while the
October swap gained $1.20 to $123.31 a barrel.           
   - Jet fuel swaps for September climbed $1.43 to $125.43 a barrel, while the September
regrade, or the difference between jet and diesel prices, added 20 cents to $2.15.           
              
    * CRACKS: Gas oil's crack for September inched down 1 cent to $18.33 a barrel over Dubai
crude. 
    - Jet fuel cracks gained 19 cents to $20.48 a barrel.           
              
    * CASH DIFFERENTIALS: The discount for gas oil with 0.5 percent sulphur narrowed 7 cents to
25 cents, while the premiums for the 0.25 percent sulphur grade were up 5 cents to 60 cents. The
premium for the 0.05 percent sulphur grade rose 2 cents to $2.10 a barrel.
    - Jet fuel's cash discount was flat at 43 cents.        
                  
    * PHYSICAL OUTRIGHTS: Benchmark diesel with a maximum sulphur content of 0.5 percent rose
$1.30 to $123.00 a barrel, while jet fuel gained $1.50 to $124.95.
                  
    * CASH DEALS: Two gas oil deals.
    - Brightoil bought 150,000 barrels of 0.5 percent sulphur gas oil from SPC for Sept. 10-14
loading at a discount of 20 cents to Singapore spot prices.
    - Barclays sold 150,000 barrels of 0.5 percent sulphur gas oil to Glencore for Sept. 1-5
loading at a 30-cent discount.