May 21, 2015
The jet fuel/kerosene market in Asia remained focused on arbitrage opportunities from North Asia to the US West Coast, said traders Thursday.
Higher prices in the USWC amid tight supply due to refinery issues and closures, was pulling barrels from South Korea and Japan there, said sources.
But there was no other upsides in the FOB Singapore jet fuel/kerosene market with fundamentals remaining dismal. Lack of fresh buying interest coupled with mounting inventory pressure in the main trading hub of Singapore dragged cash differentials deeper into the negative territory.
The FOB Singapore jet fuel/kerosene differential held near a three-week low of minus 63 cents/barrel against Mean of Platts Singapore jet fuel/kerosene assessments Thursday.
In spot trades, the UAE's Abu Dhabi National Oil Co. was heard to have sold 95,000 mt of jet fuel for loading from Ruwais over June 11-13 at a premium of around $1.80/b to Mean of Platts Arab Gulf jet fuel/kerosene assessments, FOB.
Mena Energy was said to be the buyer.
ADNOC was last heard to have sold 95,000 mt of jet fuel for loading from Ruwais over May 29-31 to Shell at a premium of around $1.80/b to MOPAG jet fuel/kerosene assessments on an FOB basis.
Elsewhere, Indian Oil Corporation is seeking a combination cargo, comprising jet fuel and kerosene for delivery over June 15-17. The first cargo -- 5,000 mt jet A-1 and 500 mt superior kerosene oil -- is slated for delivery to Vasco.
Meanwhile, the second parcel for 5,000 mt jet A-1 and 5,000 mt superior kerosene oil is to be delivered to Chennai. IOC last sought 5,000 mt of jet fuel for delivery to Goa or Vasco over May 3-5.
It was also looking to buy 12,000 mt of superior kerosene oil for delivery to Mundra over April 28-30 in a separate tender. Award details for both tenders were not known.
Imports calm LA differentials
Los Angeles jet fuel fell 6 cents Thursday, remaining wide as trading for May delivered barrels comes to a close, sources said.
Platts assessed the Los Angeles jet fuel differential at NYMEX June ULSD plus 39.75 cents/gal, an outright $2.3846/gal.
This came after last Friday's plus 65 cents/gal, the highest the differential has been since Platts began assessing Los Angeles jet fuel in 1987. Direct comparisons are difficult considering the NYMEX futures contract switch from heating oil to ULSD in 2013.
The jet market was wide Thursday as the market prepared to roll to June delivered barrels on Monday. June delivered barrels were seen heavily backwardated as imports from Asia get closer to Los Angeles and refineries such as BP's jet-oriented Cherry Point, Washington refinery are expected to return from maintenance in the coming weeks.
June delivered barrels were heard trading at NYMEX July ULSD plus 25 cents/gal, according to one source.
Two ships, Valero's Zircon and Morgan Stanley's Neptun D, were seen on the water heading toward Los Angeles carrying jet fuel and estimated to arrive May 26 and June 3 respectively, according to Platts cFlow ship-tracking software.
A third ship, Qi Lin Zuo, was heard fixed to load jet fuel in South Korea for Valero. The Panamax is expected to load May 27 and head for the US West Coast.
The arbitrage was calculated at $134.21/mt, considering $46/mt freight costs from South Korea to the West Coast, South Korean FOB jet fuel at $600.99/mt and Los Angeles jet fuel at $781.20/mt. While not as massive as the $207/mt spread last Friday, the arbitrage opportunity still remained wide open.
Imports spiked last week following more than two weeks of an open arbitrage from South Korea. Imported barrels rose 97,000 b/d to reach 155,000 b/d, the most imports in one week since November 2007, US Energy Information Administration data showed.
The Gulf Coast jet fuel differential jumped 1.25 cents to be assessed at NYMEX June ULSD minus 11.25 cents/gal, or $1.8746/gal on the outright.
The New York Harbor jet fuel market was slightly stronger again Thursday. Platts assessed New York Harbor barges up 25 points to NYMEX June ULSD minus 7 cents/gal, or $1.9171/gal outright.
Le Havre buying fails to support
Prompt length continued to weigh on the European jet cargo market Thursday, despite keener buying interest resurfacing in Le Havre.
Physical overhang has been accumulating for some time on supportive structure, heavy arbitrage re supply, and high domestic output, caused by high refinery utilization rates.
Ullage limitations were being felt even in larger ports, sources said. Despite pronounced length in Europe, there were no immediate opportunities to re-export out of the region, sources said.
Europe still continued to offer best netback levels for swing arbitrage barrels.
While underlying demand has been described as relatively healthy, incremental buying has been thin due to the widespread surplus.
"We are into the semi-peak seasonal period without sign of any incremental demand, and there are still a lot of liftings out of the PG. For June arrival into Europe I am seeing between 800,000-900,000 mt, and that is just what I see from the PG," a trader said. "[It] excludes system barrels and more coming possibly from the east."
"There is not much ullage but floating [storage] does not work really," he added.
"If you look at the paper and the print down around $12/mt, Q4 differential swaps are around $38/mt," he said. "If you were able to get to a stage where contango reached $9/mt per month it would break-even for floating. If you added about a $5/mt contango over the front gasoil spreads between now and the end of the year we are not there yet. But it is not ridiculous to think it could go if jet [differentials] comes off again."
In the barge market, spot activity remained muted, with short covering minimal, sources said.