July 29, 2015
Fresh demand from China for more than 1 million barrels of jet fuel for September has failed to rally benchmark Singapore differentials.
The region is still seen as flooded with ample availability of the middle distillate, trade sources said Wednesday.
Despite the overall bearishness, the Singapore discount to the Mean of Platts Singapore strip was assessed at minus 67 cents/b Wednesday, up from minus $1.41 as recently as July 21.
China Aviation Oil is seeking more than 1 million barrels of jet A-1, in four parcels, for loading and delivery over several dates in September. The tender closes on July 30, with a validity till July 31.
Lower crude-driven jet fuel prices in recent weeks have spurred interest from several buyers. But overall demand was still described by the majority of market participants to be lackluster, further dented by closed East-West arbitrage due to high freight rates.
South Korea exported 4.48 million barrels to the US in June, nearly triple the 1.5 million barrels a year earlier. Total product shipments to the US have more than doubled every month on a yearly basis since last December.
"South Korean refiners have sent more oil products to the US to take advantage of supply shortages and higher margins there," an official said.
Outflows in July on the other hand, is expected to pale in comparison due to high stockpiles and weaker sentiment in the US, observers said.
South Korea's oil shipments to China jumped 21.1% year-on-year to 5.76 million barrels in June from 4.76 million barrels in the same month last year. On a year-on-year comparison however, exports of jet fuel from South Korea to China dropped 65.6% on the year to 478,000 barrels in June.
Sources attributed the fall to an increase in China's refining capacity in recent years.
In fact, China has transformed from a major importer to an exporter, and has even deepened its footprint in the export arena with its second LR2 vessel of jet fuel to Europe on-board the SKS Donggang due to arrive at Le Havre on August 15.
BP bidding in Rotterdam
CIF Northwest European jet cargoes rose $2 to ICE gasoil plus $19.50/mt Wednesday, with BP bidding for cargoes into Rotterdam as well as the UK ports of Hamble and Isle of Grain during the Market on Close process.
The steep contango on the forward curve -- which has resulted in high jet stock levels in the region -- had been indicative of thin spot buying interest at the prompt, as market participants with system barrels look to sell product forward.
But this was alleviated somewhat Wednesday with the August CIF NWE cargo differential swap $1.25/mt stronger to $20.75/mt, and the September swap up $0.75/mt to $22/mt.
Even so, the market is largely regarded as fundamentally long, with little immediate tightness visible at the prompt as abundant volumes were heard to be inbound from the Middle East. Further, European refineries were still churning product at elevated levels from healthy -- though fading -- cracking margins.
Cracking margins in Italy for Saharan Blend -- which has a substantial jet fuel yield -- closed at $5.80/b Tuesday, in line with the 30-day moving average. Margins though are down from over $6/b in mid-July.
Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
In shipping, Vitol was heard to have the Seasprite for loading 80,000 mt of jet fuel from the Persian Gulf August 8 for delivery into Europe.
The 115,708 dwt vessel Four Sky was tracked bound for Fiumicino with an estimated arrival of July 31 after departing Ruwais July 14.
Israel's consumption of jet fuel was 78,000 mt in June 2015, the same amount as last June, data from the country's Energy and Water Ministry showed Wednesday.
West Coast supply rebuilding
The Los Angeles jet fuel market fell again Wednesday as CARBOB gasoline continued to weaken and Energy Information Administration data showed a build in West Coast jet fuel stocks.
Platts assessed Los Angeles jet fuel another 3.25 cents lower at NYMEX September ULSD futures minus 2.50 cents/gal, or $1.5795/gal outright. The differential has fallen nearly 7 cents in two days.
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.
West Coast inventories added 607,000 barrels of jet fuel week on week to reach 9.27 million barrels, the highest level since the early summer draw on stocks from widespread refinery maintenance.
Imports into the West Coast continued to surpass historic levels despite poor arbitrage economics, EIA data showed. Over the past four weeks, jet fuel imports averaged 94,000 b/d compared to 45,000 b/d and 40,000 b/d in 2014 and 2013 respectively. Imports during June also doubled the previous year's levels.
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.