July 30, 2015
Russian exports of jet fuel continue to funnel into the Scandinavian market at higher levels than previously, recent data from Eurostat showed, adding pressure to a Northwest European market already weighed down by ample supply.
In May, the latest month with available data, a combined 124,154 mt of Russian jet fuel made its way into Finland, Sweden and Denmark, with the Swedish port of Gavle and the Danish port of Copenhagen regularly featuring as primary import locations. This marked the highest combined monthly imports of Russian jet by the three countries in at least five years, according to the Eurostat data.
Eurostat's categorization of jet fuel does not preclude TS-1 specification material, the Russian standard for aviation fuel which does not meet the A-1 specification widely used across Europe due to its lower flash point. With a typical freeze point of around minus 60 degrees centigrade, however, TS-1 one is sometimes imported by Scandinavian countries -- particularly during the winter period -- for blending with diesel due to its favorable cold-weather properties.
Finland imported 43,326 mt of Russian-origin jet fuel in May, with Sweden and Denmark absorbing 41,732 mt and 39,097 mt, respectively, the data showed. Previously, these countries sourced more of their jet requirements through northbound cargoes from the ARA region, but increased Russian exports have backed out some of those barrels, adding length to the Northwest European market.
With Novatek expanding the splitting capacity at its Ust-Luga terminal during the first quarter of the year, production of jet A-1 at the facility -- mostly earmarked for waterborne export -- has nearly doubled from 39,333 mt/month in 2014 to 70,000-75,000 mt/month this year, the company said. The company's preliminary Q1 product sales showed 203,000 mt of jet fuel sales. A tax maneuver implemented at the start of the year by Russia has also created an incentive for increased product exports into Europe.
Data from shipping sources and Platts vessel-tracking software cFlow appeared to show the trend continuing in July, with the 50,975 dwt Prisco Elena making two runs to Gavle and one to Copenhagen since the start of the month, heard to be laden with jet A-1 from Ust-Luga on each voyage.
Located on Sweden's east coast, Gavle is a strategic import location for jet fuel, with a fully automated rail loading facility sending daily shipments of aviation fuel from the port to Stockholm's Arlanda International airport, Inter Terminals said on its website. Certain facilities at the port can handle vessels with a maximum draft of 12.2 meters and an overall length of as much as 245 meters, making it accessible for some medium-range product tankers.
US markets largely weaken
The Gulf Coast jet fuel market came off Thursday on weak underlying fundamentals and persistent backwardation, market sources said.
"Feels like things are coming off, fundamentals can only be ignored for so long," one trader said. USGC jet fuel differentials have been higher the past two weeks on buying interest despite strong refinery output and multi-year high stocks. "I could not understand the rally since last week, had no real foundation in my estimation."
The physical Gulf Coast market was quiet in the morning as the jet fuel swaps market started to fall after becoming more liquid.
Platts assessed the Gulf Coast 43rd cycle pipeline differential 1.25 cents lower to the NYMEX September ULSD futures contract minus 13.75 cents/gal, or an outright $1.4767/gal.
During the Platts Market on Close assessment process, 225,000 Gulf Coast jet fuel barrels traded for the prompt 43rd cycle on the Colonial Pipeline. Noble was the largest buyer for the second day in a row with 125,000 barrels. Shell was the largest seller, providing 200,000 barrels.
On the West Coast, Los Angeles jet fuel fell for the third straight day as CARBOB gasoline continued to come off Thursday and jet stocks in the region continued to grow.
Platts assessed Los Angeles jet fuel another 1.50 cents lower at NYMEX September ULSD futures minus 4 cents/gal, or $1.5742/gal outright. The differential has fallen 8.25 cents in three days and reached its lowest value in two weeks.
The jet fuel market typically follows volatility in the CARBOB gasoline and CARB diesel markets in Los Angeles, which are prone to larger price swings.
California jet stocks grew by 30,000 barrels last week to reach 2.98 million barrels, according to California Energy Commission data. Inventory was also 216,000 barrels larger year-on-year.
For imports, the Theodosia, a Panamax, was heard carrying jet fuel from South Korea to the US West Coast, sources said. The ship is expected to arrive into Los Angeles August 15, according to Platts cFlow ship-tracking software.
A second ship, Alexandros II, was heard fixed to carry jet fuel for Valero to the West Coast from South Korea, set to load later this week.
Both the Lilac Victoria and the Bai Lu Zuo arrived into Los Angeles in the past week carrying jet fuel for Valero, Platts cFlow showed.
The New York Harbor market also fell Thursday, weighed down by a falling Gulf Coast market.
Platts assessed New York Harbor barges at NYMEX September ULSD minus 7.25 cents/gal, or $1.5417/gal outright.