October 29, 2014
US jet differentials mostly rose Wednesday as new data showed a 2.28-million barrel drop in stocks across the nation.
Platts assessed Los Angeles jet up 75 points to NYMEX December ULSD futures minus 3 cents/gal, its highest level since September 18. Gulf Coast jet rose 50 points to minus 8.50 cents/gal and New York barges climbed 1 cent to minus 1.75 cents/gal.
Chicago and Group 3 out of Oklahoma were unchanged at plus 13 cents/gal and minus 4 cents/gal, respectively.
Strong buying pressure came as Energy Information Administration data released Wednesday showed total jet fuel stocks dropped to 37.65 million barrels, only 2.2% lower than the corresponding week last year but the lowest level since end-of-summer stockbuilding began in early September.
Nearly all regions showed draws -- 347,000 barrels to 10.13 million barrels in the East Coast; 537,000 barrels to 6.82 million barrels in the Midwest; 583,000 barrels to 11.12 million barrels in the Gulf Coast; and 903,000 barrels to 8.77 million barrels on the West Coast.
"That's a big draw in L.A. stocks," a jet trader said. "I'm guessing the differential will get stronger."
US production rose 90,000 b/d to 1.51 million b/d, which was 4.9% more than the corresponding week last year. Gulf Coast output rose 121,000 b/d to 767,000 b/d, while West Coast output jumped 37,000 b/d to 458,000 b/d despite maintenance underway at several San Francisco-area refineries.
Product supplied, also known as implied demand, rose a sharp 251,000 b/d to 1.69 million b/d. Implied demand data is considered volatile from week to week, but the trader said cooler weather in the western US, especially Las Vegas and Phoenix, has boosted air travel and thus jet fuel supply.
"It's nicer to visit," he said. "Airports are seeing more traffic."
US imports declined to 31,000 b/d from 102,000 b/d, all on the East Coast and about the size of one cargo. Exports were estimated to have climbed to 177,000 b/d, the highest level on record for the EIA, dating back to June 2010.
The EIA exports are only estimates, but a second jet trader said the cargo market has been solid to Latin America and Canada and was picking up strongly to Africa as refiners are looking to sell barrels for export.
"I'm loading some in the Gulf Coast this week for export," he said. "It's all about availability, and price, of course."
CAO looking to buy
The Asian jet fuel/kerosene market regained momentum Wednesday as buying interest emerged in China.
China Aviation Oil issued a tender seeking 240,000-300,000 barrel parcels of jet fuel loading from Asia over November and December and a further 845,300 barrels, comprising two lots of 39,000-41,000 mt and one of 25,000 mt, for delivery over November and December to Tianjin and Huangpu, China, which closes October 30 and remains valid until October 31.
CAO last sought 25,000 mt of jet fuel for delivery into Huangpu over November 10-20. Award details were not known and several sources said the tender was cancelled, possibly due to a lack of selling interest, although this could not be confirmed with the company.
Sources said the key China market's jet fuel/kerosene requirements were expected to remain strong going forward due to the robustness of its aviation sector.
The country's apparent demand for jet fuel/kerosene in September rose 20% year on year to 540,000 b/d, latest National Bureau of Statistics data showed.
While demand has increased, market observers noted imports to China have dwindled this year due to ballooning domestic supply as refineries tilt production to favor jet fuel/kerosene over co-product gasoil as margins were greater.
Chinese refineries' jet fuel/kerosene yield rose to 6.26% in September from 5.82% a year ago, the NBS data showed.
In other news, Hong Kong's Civil Aviation Department Monday approved airlines imposing a maximum fuel surcharge of HK$172 ($22.17) on passengers on short-haul flights and HK$757 on long-haul flights in November, down 6% from October, Xinhua reported Monday.
The surcharge imposed by airlines to offset volatility in aviation fuel prices is reviewed monthly.
NWE sees buying interest
Outright European jet prices strengthened mid-week, tracking rising Brent and gasoil futures, while strength in the physical market prevailed, with strong buying interest for cargoes into UKC, Le Havre and Rotterdam holding Wednesday.
But cargo premiums edged lower, down 75 cents to plus $80/mt. FOB Rotterdam barge premiums were assessed $3.50 higher at plus $81.75/mt.
Traders were heard selling out of tank in ARA and discharging cargoes via STS to meet local shorts, despite a better prompt availability of long-range vessels heard for arrival early November.
"The market backwardation is rolling down, it's got to sell what is in tank," one trader said of the prompt structure in Northwest Europe.
The backwardated market structure that held through October appeared to have transferred to the November-December forward curve with November swaps closing up $0.25/mt to $76/mt at a $3.50/mt premium to December swaps.
Interest for barges saw the FOB Rotterdam barge-CIF NWE cargo spread move from a discount to a premium on strong buying appetite, against thinner supply.