November 26, 2014
The US Gulf Coast jet fuel differential fell 55 points Wednesday, November 26, and has shed 4.70 cents over two days, as new data confirmed the difficulty moving product up to the poorly supplied Northeast.
Platts assessed USGC jet at NYMEX January ULSD futures minus 13.50 cents/gal, while New York barges slipped 1.25 cents to NYMEX December ULSD futures plus 7 cents/gal.
The USGC outright price reached a fresh low at $2.2121/gal; it was last lower on October 27, 2010, when it was $2.2120/gal.
New York barges were at $2.4825/gal, a 27.04-cent premium that is about five times the cost of shipping on the fully allocated Colonial Pipeline, which runs from Houston to New York Harbor.
The premium has been four to five times the roughly 5-cent/gal cost of shipping for the last seven trading days.
One trader pointed to Energy Information Administration data released early Wednesday to illustrate the difficulty in moving barrels north: Gulf Coast stocks gained 1.05 million barrels to 12.84 million barrels, their highest since the first week of June, while East Coast stocks lost 700,000 barrels to 7.97 million barrels, a low since early August.
Passenger demand is high in the highly trafficked Atlantic Coast corridor as US airlines deal with the busiest travel time of the year. European market participants have said several jet fuel cargoes have diverted from their original destination of Europe to the East Coast instead.
But Colonial is still the main supply artery and it has been fully allocated for three years, with jet fuel competing with heating oil and ULSD for space on the 1.16 million b/d pipeline.
The open distillate arbitrages have lent support to the secondary line space market, with distillates Line 2 space talked at a premium of at least 8 cents. If shippers have access to especially profitable products, they will often pay a premium to have another shipper transport their product for them.
US production rose across the board last week, but was highest in the Gulf Coast, up 32,000 b/d to 835,000 b/d. East Coast production gained 12,000 b/d to 102,000 b/d; the Midwest rose 25,000 b/d to 205,000 b/d; and the West Coast was up 25,000 b/d to 439,000 b/d.
Chicago and Group 3 each fell 5 cents or more in light, holiday-shortened trading, each assessed at January plus 22.50 cents/gal.
A second trader said no bids or offers have been heard in a week in either market, and HollyFrontier was no longer bidding for barrels in Group 3, where the differential had risen to plus 52 cents/gal on November 12.
"It's just as quiet as it was prior to Holly jumping in for distressed spot barrels," he said.
"Jet is weak and nobody is bidding it," a third source said of the Midwest. "Directionally, it has to come off."
Asian bears point to Japan
The Singapore jet/kero price differential edged lower Wednesday, and traders said the market could turn more bearish in the months ahead if winter demand ebbs.
Singapore jet/kero was assessed at a 59 cents/barrel premium to Mean of Platts, down 2 cents/b on the day, and down from a 94 cents/b premium November 18.
A North Asian trader said that only prompt month cargoes were recently in short supply.
"But that will ease soon," he said, with winter re-stocking by Japanese companies nearly done. Japan uses jet kerosene as a heating fuel during winter.
"So far, I can't see very good demand from Japan this year," said a Singapore-based trader.
"Looks like they have enough jet/kerosene stored in South Korea and domestically," he said.
"Seasonal demand isn't good ... even worse than last year," said the North Asian trader.
Japan jet/kero was assessed at a $2.15/b premium to MOPS Wednesday, down from $2.23/b Monday.
Japan is well-supplied. Combined jet/kero stocks at 25.45 million barrels the week ending November 15 were roughly on par with inventories last year.
The Petroleum Association of Japan will release its weekly oil statistics for November 16-22 on Thursday, instead of Wednesday, because of a public holiday.
In tenders, China Aviation Oil is seeking up to 1.42 million barrels of jet A-1 fuel for loading over January from Japan, South Korea, Taiwan or Malaysia, Singapore, Thailand.
The cargoes will be priced against MOPS, FOB basis, and will be delivered to Tianjin and Huangpu ports in mainland China. The tender closes November 27 with next-day validity.
The company last sought 39,000-41,000 mt of jet A-1 fuel for December 28-30 delivery into Tianjin, China, in a tender that closed November 19. It was unclear if the tender was awarded.