June 18, 2013
Differentials for Los Angeles and Chicago jet fuel differential climbed Monday as the regions struggled with refinery problems.
Platts assessed Los Angeles jet up 1.75 cents at NYMEX July ULSD futures minus 5.50 cents/gal, its highest level since minus 3.50 cents/gal on April 26.
Traders cited refinery buying as Chevron readies for a month of crude unit maintenance at its 275,000 b/d El Segundo refinery next to Los Angeles International Airport.
West Coast jet inventories in early June were at their highest since January thanks in part to imports since mid-May. But sources said resupply from Asia appears at a lull, with only one possible ship--the Port Union--on its way. Meanwhile, Taiwan's state-owned refiner CPC said it would have no July exports of jet due to refinery issues, possibly diverting into Asia any imports that might have come to Los Angeles.
"It seems very dull on the jet front," a shipping source said of the Asia to West Coast route.
The Chicago market gained 5 cents to plus 25 cents/gal based on bidding heard at plus 24 cents/gal, while the Gulf Coast dropped 95 points to minus 12.50 cents/gal. The spread between the two region widened to 37.50 cents/gal, the most since June 6 when it was 41.50 cents/gal. June 5 saw a record 51.50-cent/gal premium of Chicago over the Gulf.
The Chicago premium to the Gulf has been 23 cents or higher since April 29 near the start of lengthy turnarounds at BP's 405,000 b/d refinery in Whiting, Indiana, and ExxonMobil's 248,000 b/d refinery in Joliet, Illinois. Joliet has restarted and BP was expected to do so in coming weeks.
European supply sufficient
In the CIF Northwest European jet complex Monday, cargoes were assessed at $966.50/mt, down $2.75/mt, and at a premium to front-month gasoil of $72/mt, down 50 cents/mt.
In Platts Market On Close assessment process, Vitol placed three cargo offers, two basis Rotterdam and one into Le Havre, opposite bids from BP into Le Havre, Rotterdam and Ghent.
The most competitive indications were on prompt dates. Vitol's offer basis Rotterdam, over June 27-July 1, was lowered to a price of Platts CIF Cargoes plus $2/mt, or a premium of $71.68/mt.
That looked competitive versus a BP bid into Le Havre, over June 27-July 2, to July gasoil plus $72/mt. BP's bid basis Rotterdam reached July $70/mt, a little below the aforementioned Vitol offer on similar terms. No trades occurred.
Supply appeared sufficient for current demand, with stocks also healthy.
"I would not expect huge digit increases in the summer. There is just not the economic growth to sustain the growth [in passenger numbers] we used to get," said one airline source.
Market sources in Europe and Singapore also discussed the arbitrage from the Persian Gulf and Indian edging towards opening.
"I still see the [jet] arb in the very front closed by about $2/mt. Not far from working," said one banking source. "It is probably workable for some players."
Vitol has put on subjects the Holy Victoria, a Long Range 1 tanker, to load 60,000 mt of jet at the end of the month. The charter party would allow the trading house to load from New Mangalore, West Coast of India, and Fujairah, and deliver to Northwest Europe at a lump sum of $1.925 million.
Vitol was understood to have been awarded a recent tender by Mangalore Refinery and Petrochemicals Ltd. to load 40,000 mt of jet from New Mangalore over June 26-28. It also has 40,000 mt to load over July 4-6.
Freight costs for the type of tanker commonly used to ship jet fuel from the Persian Gulf to NWE have fallen to the lowest level in more than 14 months. Platts assessed a lump sum of $2.145 million for the Clean Arab Gulf-UKC 75,000 mt LR2 route, unchanged on the day and the lowest since April 4, 2012.
The corresponding route to the Mediterranean was assessed at a lump sum of $2.045 million, the lowest since July 2012. Freight costs for the smaller 65,000 mt assessment were $1.875 million to NWE and $1.775 million to the Mediterranean.
Demand from China tepid
Outright prices of FOB Singapore jet/kerosene continued to gain Monday, hitting the highest level in more than two months at $120.13/barrel, buoyed by the global crude complex.
The crack against front-month cash Dubai crude slid 8 cents/b from to $16.72/b Monday. Demand for jet/kerosene remained tepid with slow demand from China, and Bangladesh picking up 24% less jet and superior kerosene for the July-December 2013 period, compared with the January-June period, due to weaker domestic demand.
In the paper market, the June/July intermonth spread narrowed 1 cent/b to be valued at plus 9 cents/b, while the July/August spread was assessed at 10 cents/b.
Taiwan's state-owned refiner CPC is expected to have little or no jet fuel to export for July loading after an unplanned shutdown of the No. 2 residue desulfurization unit at its Kaohsiung refinery, a source familiar with the matter said Monday.
The average operating rate at CPC's three refineries in Kaohsiung, Talin and Taoyuan -- which have a combined capacity of 720,000 b/d -- has fallen to slightly under 60%, compared with slightly more than 60% before the May 27 RDS unit shutdown, the source said.
Each month, CPC typically exports one MR-sized cargo of jet fuel of 300,000 barrels into the spot market.
"Exports of all products are reduced," the source said. "There are still exports of gasoil and fuel oil in July, but there is little or no jet fuel export for the month."
Gasoil exports for July are expected to be one to two cargoes lower than June, the source said. It remains unclear how much fuel oil exports will drop in July.
CPC's lower exports are expected to have little impact on Asia's jet fuel market, as the volumes are small and the market is seeing tepid demand from Asian end-users.
In the Middle East, more details emerged on Kuwait Petroleum's jet fuel sales for July. The Kuwaiti producer was heard to have sold two cargoes of jet fuel totalling 155,000 mt in its latest tender.
BP bought a 90,000-mt cargo at Mean of Platts Arab Gulf jet/kerosene assessment plus $2.50/b, and Shell took a 65,000-mt cargo also around the same level, a market source said. KPC could not be reached for confirmation.