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Backwardation in prompt NWE jet cargo swaps reaches three-year high

London (Platts)--12Feb2018/1050 am EST/1550 GMT


The backwardation between the balance-month and front-month jet fuel cargo swaps in Northwest Europe rose to its highest level in three years Friday, amid closed arbitrages into Europe.

Related podcast: Asian kerosene strength brings fresh highs to European jet fuel prices

The spread between the balance-month and front-month swaps jumped $2.50/mt Friday to reach $6.50/mt, the highest level since February 2015.

This follows a spike in jet differentials, which also reached fresh three-year highs Friday at $59.25/mt, after first spiking to a three-year high of $56.25/mt at the beginning of February.

Traders have been struggling to find cargoes, as a pull from other regions has reduced availability.

Persian Gulf refinery maintenance, strength in Asian kerosene markets and a pull of cargoes to the US have seen any available cargoes either moving to the US or staying in East of Suez markets.

Low temperatures in Asia have seen the front-month gasoil EFS swap -- a measure of the strength of Asian distillates vs European distillates -- reach into positive territory Friday, leaving opportunities for arbitrage from Asia to Europe firmly shut.

Traders saw European jet fuel demand as increasing, but not any more than expected for the season, with prices rising to attract cargoes.

"If your arbs aren't working, the market has to move, so we should see the market adjust to bring in the arbitrage," a trader said.

--Christopher Ewen, christopher.ewen@spglobal.com
--Edited by James Leech, james.leech@spglobal.com

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