April 17, 2014
Gulf Coast jet fuel differentials rose 1.05 cents Thursday and fell 1 cent for New York barges, narrowing the spread between the two to levels last seen in August.
Platts assessed Gulf Coast jet fuel at NYMEX May ULSD futures minus 5.45 cents/gal, highest since March 13 when it was minus 5.25 cents/gal.
Sources saw higher-than-normal demand to ship up Colonial Pipeline lately, and a climb in export interest out of the Gulf Coast despite a closed arbitrage to Europe.
Platts assessed New York barges at minus 4.75 cents/gal. Sources disagreed on whether cargo imports remained a possibility for New York Harbor, with one person saying an export may have been fixed. But sources said more supply was put into Colonial's Houston-to-New York pipeline as traders bought jet fuel instead of higher-priced ULSD to fulfill linespace commitments.
The 70-point premium for New York barges to Gulf Coast pipeline is the narrowest since August 23 when it was 62 points, according to Platts data. The arbitrage had been above the 4.51-cent tariff from March 10 to April 4 on pipeline issues, but narrowed since then as traders rebuilt Atlantic Coast stocks to 9.54 million barrels, the highest level since November 1.
The Chicago jet fuel differential, meanwhile, dropped 4 cents Thursday and 30 cents on the holiday-shortened week as resupply emerged on the latest shipping cycle on Explorer Pipeline originating from the Gulf Coast.
European cargoes stronger
European jet cash premiums rose for the fourth day in a row Thursday as traders pointed to seasonally higher demand and the risk of war in Ukraine.
CIF Northwest Europe cargoes were assessed at April ICE 0.1% gasoil futures plus $56.50/mt, up $1/mt on the day. The outright price was down $3/mt day on day to $977/mt.
"The contango structure had an impact on demand and there are few smaller vessels...I think the rebound is more to do with short covering around the Ukraine situation," said one trader.
By contrast, Rotterdam barges fell by $1/mt to April ICE 0.1% gasoil futures plus $54.25/mt. Traders said European refining margins had risen in recent days, providing an incentive to produce more products.
"Prices will slump if European refiners push too much...the US arbitrage is open on diesel so without a big demand pull, it's hard to see too much upside," said the first trader.
Ukraine was still engulfed in a major political crisis Thursday as separatists in the east of the country attempted to break away from central authorities. Russia annexed the region of Crimea in southern Ukraine in March.
Asian diffs come off
The uptrend seen in the Asian jet fuel market early in the week was short-lived, as buying interest for the middle distillate fizzled out due to poor end-user requirements and a shut East-West arbitrage, sources said Thursday.
The cash differential for cargoes loading from Singapore eased Wednesday to a premium of 17 cents/barrel to the Mean of Platts Singapore jet fuel/kerosene assessments, after it jumped 17 cents/barrel over two days to a premium of 22 cents/b on Tuesday.
Sources reiterated that lower output from several regional refineries due to the second-quarter turnaround season has failed to lift sentiment in the jet fuel/kerosene market.
Japanese refiners exported 1.11 million barrels of jet fuel over April 6-12, down 13.8% from 1.29 million barrels the previous week, data released Wednesday by the Petroleum Association of Japan showed.
Observers said that regional jet fuel/kerosene supply was still abundant, stemming from a spillover of surplus barrels due to weaker-than-expected heating demand during the peak Northern Hemisphere winter over December to February.