May 22, 2013
Physical premiums for CIF Northwest European cargoes and FOB Rotterdam barges fell Tuesday under supply-side pressure from those importing barrels from the Persian Gulf, and as airlines also looked to offload surplus barrels into the barge market.
CIF Northwest European cargoes were assessed at a premium to ICE 0.1% gasoil futures of $63.50/mt (down $2.25/mt), and an outright price of $938.50/mt (down $9.75/mt).
FOB Rotterdam barges were assessed at a premium of $64/mt (down $3.25/mt) and $939/mt (down $10.75/mt). Comparative tightness for prompt barrels kept barges over cargoes, sources said.
On the cargoes, trading sources said intraday that delayed loadings in the Persian Gulf and India had pushed back some end-May arrivals into June.
Vitol returned to offer in the Platts Market On Close assessment process for the first time since selling two 30,000 mt parcels to Shell last Wednesday.
It backed up an offer basis Rotterdam over June 5-13 with the tanker Ruby Express. The Long Range 2 vessel, capable of carrying around 90,000 mt of jet, loaded in Jubail, Saudi Arabia, last week, and was Tuesday evening traveling into the Gulf of Aden, Platts vessel tracking tool cTrack showed.
BP, who up until this week had been offering consistently, swooped on the offer from Vitol when it reached a price of plus $2/mt to the Mean of Platts CIF cargoes, or a premium of $63.48/mt. That appeared competitive versus a bid apiece from Shell and Morgan Stanley into Ghent and Oiltanking Antwerp.
One source said with the bulk of resupply coming on LR2s, the bids into ports which could not take those larger tankers would require a sizable additional premium to make them attractive to sellers.
BP will receive the cargo at the earliest opportunity from Vitol, after nominating June 5-9. There were rumored to be issues at BP's 400,000 b/d Nerefco refinery in Rotterdam, according to market sources. BP traders declined to comment on the reports.
The major was also the main buyer on the barges, picking up 2,000 mt from Vitol and sold 4,000 mt by Dutch airline KLM. Both parcels are due to load from within the Flushing-Amsterdam-Rotterdam-Antwerp-Ghent region before the end of the month.
Bearish Singapore gets boost
The Singapore physical jet/kerosene crack against front-month cash Dubai crude climbed 26 cents/b Tuesday to the highest level in two months at $16.04/b, underpinned by strength in the gasoil market.
The last time the jet crack was at $16.04/b was on March 20.
Jet fuel fundamentals remained weighted towards the bearish side, with demand at a lull amid an oversupplied market, though jet fuel volumes are expected to be curbed going forward as refiners minimize jet fuel production and maximize gasoil output due to the negative regrade.
Cash differentials for cargoes loading from Singapore gave back some of Monday's gains, falling 3 cents/b to minus 13 cents/b Tuesday.
Abu Dhabi's state-owned ADNOC has opened term negotiations with its buyers on the July 2013-June 2014 cycle, with an offer at a $2.25/b premium to the Mean of Platts Arab Gulf jet/kerosene assessments, 20 cents/b above its current term contract ending June 2013, market sources said Tuesday. No buyer has concluded a deal at this level yet.
While it is still unclear whether Europe will impose taxes on Middle Eastern jet imports from January 2014, a market source said the premium fixed for the contract will remain for the entire year if taxes are not imposed.
Should taxes be imposed, the premium on cargoes loading over January to June 2014 will be subject to a review later this year. ADNOC declined to comment on its term talks.
In the spot market, Pakistan International Airlines is seeking two years of supply of jet A-1 fuel for delivery to 27 airports around the world. The airline is seeking a total 199.44 million gallons, or about 4.75 million barrels, of jet fuel with an operational tolerance of plus/minus 15% for delivery over July 2013 to June 2015.
A quarter of the volumes is for delivery to Jeddah airport in Saudi Arabia, with the remainder to airports in Europe, Asia, the US and the Middle East.
The tender closes June 17, with offers to remain valid until June 30.
During the Platts Market on Close assessment process, bids were absent with three offers seen from Vitol, Shell and BP for cargoes loading over June 5-20.
Meanwhile, China's aviation traffic continued to grow, with a 10.3% year-on-year rise seen in April to 5.45 billion mt-km, according to data released by the Civil Aviation Administration of China late Monday. Of the total, domestic air traffic recorded a 10.3% year-on-year increase to 3.72 billion mt-km, while international traffic jumped 10.4% to 1.73 billion mt-km.
The robust performance in aviation has spurred growth in jet fuel demand in China. China's total domestic production of jet fuel/kerosene in April rose 14.4% year on year to 1.95 million mt, with output over January-April gaining 13.8% to 7.77 million mt, data from the National Bureau of Statistics showed.