December 5, 2013
US jet fuel differentials moved slightly lower Wednesday after US Energy Information Administration data showed US jet fuel stocks last week bounced off their lowest level since 2004, as production ramped up for the holiday season.
Platts assessed Los Angeles jet down 25 points at NYMEX January ULSD futures contract minus 2.25 cents/gal, Gulf Coast jet down 10 points to minus 9.85 cents/gal and New York jet barges down 25 points to plus 1 cent/gal. Platts assessed the underlying futures down 1.25 cents to $3.0511/gal at 3:15 pm EST Wednesday.
Total US stocks in the week ended November 29 rose 339,000 barrels on the week to 36.32 million barrels, though remain 3.8 million barrels, or 9.5%, below the corresponding week a year ago, according to EIA data.
The previous week's inventories of 35.98 million were the lowest since May 2004.
Total US production increased 62,000 b/d to 1.56 million b/d, its highest mark since the second week of September as the summer travel season wound down. Airline traffic is predicted to be strong during the 2013 holidays.
US jet fuel imports slumped to 18,000 b/d from 123,000 b/d, all into the East Coast. That's the lowest figure since late July.
Exports remained unchanged at 126,000 b/d, but weekly data often lags for exports and market sources said the market remains strong.
EIA estimates showed that jet fuel supplied -- also known as implied demand -- dropped 275,000 b/d to 1.41 million b/d. This data has bounced from a low of 1.21 million b/d to a high of 1.67 million b/d in the last two months.
Japan building stocks
The jet fuel/kerosene market in Asia is starting to "come alive", one market source said Wednesday, bolstered by stronger demand for the middle distillate which is used as a heating oil during winter in the Northern Hemisphere.
Japan, a key importer in the region, was said to be building up inventories through purchases from South Korea to supplement its local output to cater to domestic winter demand.
Sources said the South Korean cargoes were bought at a premium of around $3.70-3.80/barrel to the Mean of Platts Singapore jet/kerosene assessments, FOB, in the spot market.
"Japan will continue to buy [kerosene], especially for December and January ... but it will be difficult to predict how much and how long [the buying] will last," said a Singapore-based trader, noting the severity of this year's winter.
According to a three-month forecast released Monday by the Japan Meteorological Agency, all regions of Japan are likely to experience average or below-average temperatures over December-February.
Kerosene stocks in the country rose 4.5% week on week to 20.04 million barrels as of November 30, the Petroleum Association of Japan said Wednesday. The increase came as kerosene output surged 44.2% week on week to 4.46 million barrels over November 24-30, the PAJ data showed.
The firmer sentiment also led to higher premiums for Formosa Petrochemical's recent tender to sell 240,000 barrels of jet fuel for loading over January 27-31 from Mailiao.
The tender was awarded to BP at a premium of 80-85 cents/b to MOPS jet/kerosene assessments, FOB. In its previous tender, Formosa sold 300,000 barrels of jet fuel for loading over November 14-19 at a premium of around 50 cents/b to MOPS jet/kerosene assessments, FOB.
As a result of the strengthening jet/kerosene market, market sources said Wednesday that the physical regrade -- the spread between jet fuel and gasoil -- which has been lingering in negative territory since November 19, is expected to narrow in the weeks to come.
Separately, sources said that Japanese refiners -- JX Nippon Oil and Energy and TonenGeneral Sekiyu -- have started term talks to supply jet/kerosene for 2014. Details are not clear, but sources said each refiner is looking to sell two to three 30,000-40,000 mt MR-sized cargoes every month.
France demand supportive
Unfilled demand into northern France continued to support European jet values midweek, and nudged the CIF NWE cargo cash premium to a 14-week high.
The premium of Jet Cargoes CIF NWE to gasoil was assessed at $72/mt, up $0.50/mt on the day to its highest since August 28 when the market stood at $72.75/mt.
BP and Trafigura were visible buyers into Le Havre, but did not find interested sellers. Sources said aside from these pockets there was limited cargo activity.
"It seems people are happy to run off stocks and bring in [arbitrage barrels] or from their own system," said one market source.
On the jet forward curve, buying interest saw the balance month swap move to a 25-day high, and pushed the prompt December-January spread into backwardation.
Meanwhile, arbitrage opportunities remained difficult from the Middle East and local stocks were low.
Platts assessed balance-month December at $69.50/mt, up 50 cents on an outstanding Morgan Stanley bid at $69.25. The balance month had previously traded a total of 40,000 mt at $69.25 and $69.50 levels, with Total and Vitol sellers and BP, Hetco and Morgan Stanley buyers.
January was assessed down 25 cents at $68.75/mt, under a live Total offer at $69.
Fixtures heard included the Mount Rainier on subjects to Repsol at Worldscale 160 to load 30,000 mt of jet December 12 on a Skikda-Med charter party, shipbroker data showed. It was previously reported the Spanish oil company had a UPT tanker on subjects for Dec 9 loading.
Also in the Mediterranean, Eni had the Georgia on subjects at w155 to load 30,000 mt of jet December 12 on an Aliaga-Med charter party.
For intra-regional flows, BP has lined up the Maistros at $1.1 million to load 60,000 mt December 15 for a Rabigh-UK Continent route.
Kuwait Petroleum Corp. has the FPMC P Glory on a contract of affreightment to load 65,000 mt December 25 for a Kuwait-UKC charter party.
Shell and Total each lined up ships for 65,000 mt loadings on a Persian Gulf-UKC route. Shell was heard to have the Mari Ugland for December 17 loading at $1.625 million, while Total has STI Heritage for December 19 loading at $1.65 million.
In downstream news, global air freight demand grew 4% year on year in October, the International Air Transport Association said. Europe posted growth of 4.4%, behind the Middle East with 12.3%. African demand fell 2.7%.