December 6, 2013
The cash premium for Northwest Europe jet fuel cargoes rallied $3.50/mt to $75.50/mt Thursday, the highest level since March 15.
Demand into the north France port of Le Havre from BP and Trafigura was left unfilled on a lack of available supply.
Despite the recent price rally, trading sources said the arbitrage from the Far East, Persian Gulf and US Gulf Coast remained closed.
"The pace of increase in Europe is slower [than Asia], so the arb has been worse this week," said one jet trader. "The freight is picking up, the east/west [spread] and [Singapore] regrade are moving up. If you have got demand for the second-half of December or January, you are going to have to pay up."
On the jet forward curve, firm buying interest also moved the balance-month swap to a near nine-month high. The CIF NWE balance-month December swap was assessed at a premium of $71.25/mt, up $1.75/mt.
Phillips 66 bid to $71/mt without finding a seller in the Platts Market On Close assessment process.
Steepening backwardation in the overall jet complex reflected tighter cargo supply. The December/January swaps spread widened 50 cents to plus $1.25/mt.
The barge market was relatively better supplied, and continued to price at a discount to cargoes. FOB Rotterdam barges were assessed at $71.25/mt, up $3.50/mt.
Jet kerosene stocks in the Amsterdam-Rotterdam-Antwerp region climbed almost 28% to 3 million barrels over the past week, according to BNP Paribas data. The build put inventories 29.6% above year-ago levels for the week ending December 5.
The barge market has proved to be a cheaper option for hand-to-mouth buyers. Shell bought 6,000 mt in the MOC, adding to the 27,500 mt bought earlier in the week.
In downstream news, global air passenger traffic in October rose 6.6% year on year, outpacing September growth at the start of an expected strong fourth quarter, the International Air Transport Association said. Capacity expanded 6.5%, with the load factor little changed at 78.9%.
The Middle East saw the most traffic growth in international markets, up 14%, continuing a trend seen for much of 2013.
European international traffic rose 5.4% in October, capacity expanded 4.6%, and the load factor was up 0.6 percentage points to 81%.
USGC barge discount to USAC widens
The Gulf Coast jet fuel differential slid 1.15 cents Thursday, falling 11.75 cents behind New York jet barges for the widest discount since January.
Platts assessed Gulf Coast jet at NYMEX January ULSD futures contract minus 11 cents/gal, while New York barges slipped only 25 points to plus 0.75 cent/gal. New York's 11.75-cent premium over the Gulf Coast tied Tuesday's premium for the largest since 13.25 cents/gal on January 25.
The premium has been above the 4.50-cent tariff cost of the Houston-to-New York Colonial Pipeline for 26 trading days, since October 28. Atlantic Coast production remains low while Gulf Coast traders have been trimming year-end stocks to avoid ad valorem and other taxes.
Refiners have been leading the selling. In the Platts Market on Close assessment process Thursday, Valero sold 50,000 Gulf Coast barrels in one deal each to Noble and Astra. Shell, Phillips 66, BP were other refiners selling this week.
Refiners also were heard trying to export more barrels than in previous Decembers, despite government estimates of a decline in jet exports.
One trader said companies may be waiting for official word from the European Union that it will end a 4.7% duty on jet fuel into Europe as of January, a tax from which many competing jet fuel-producing countries were exempted.
Japan demand heating up
The jet fuel/kerosene market in Asia continued to gain traction Thursday, underpinned by stronger buying interest for heating oil during the Northern Hemisphere winter season.
In addition, sources noted that regional supply has gradually tightened in recent weeks due to tapering volumes from North Asia amid stockpiling efforts to cater to domestic requirements.
Japan, in recent weeks, has flipped from being a regional supplier to becoming a key buyer as the country relies on kerosene to heat homes during the cold season.
Japanese refiners exported 607,350 barrels of jet fuel for the week over November 24-30, down 45.8% week on week, and 610,684 barrels of kerosene, which has similar specifications to jet fuel, after not exporting any the previous week.
Sources anticipated that exports from Japan will continue to dwindle until February, which marks the end of the winter season.
Elsewhere, Saudi Aramco Total Refining and Petrochemical Company or SATORP, has issued its first tender offering 20,000-40,000 mt of kerosene for loading over December 22-28 from Jubail. The tender closes on December 5.
According to trade sources, the refiner has been offering one or two 30,000-40,000 mt parcels every month, but only via private negotiations, since starting up its new 400,000 b/d Jubail refinery in September.
In other news, Indonesian state-owned oil and gas company Pertamina is expected to import about 525,000 barrels of jet fuel in December, down from 735,000 barrels in November. Sources said the cutback in purchases was likely due to sufficient inventories on ample domestic output and slower consumption during the low travel period.