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NWE jet fuel barges sustain strength vs cargoes as ICE backwardation persists

London (Platts)--21Sep2017/908 am EDT/1308 GMT


Jet fuel barges in Northwest Europe refused to budge under their cargo counterparts Wednesday as the backwardation in the market saw traders buying smaller lots rather than taking in surplus product in a market where storing is less economically rewarding.

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The Platts FOB Rotterdam barge assessment priced at a parity to CIF NWE cargoes Wednesday evening, at $23/mt, and has been at a premium to cargoes for 10 out of the past 15 sessions.

The backwardated structure on the ICE low sulfur gasoil futures contract continued to impact the Northwest European jet fuel market Wednesday.

Despite supply arriving on larger vessels, the structural lack of incentive to store means barges are in higher demand than their cargo counterparts, sources said.

"There is plenty of product available, but it's on LR2s and LR1s" one trader explained.

By Wednesday, the backwardation between the front-month and second-month ICE LSGO futures contract was at $7/mt, increasing from $6.25/mt the previous day. By mid-morning Thursday, the spread was seen trading at a $7.50/mt backwardation.

"Barges are 2-3kt, they cover demand, while we are in backwardation but have plenty of stocks, CIF can't be strong and barges are likely to price over as they allow everything to continue without holding high stocks to roll down the curve," another trader said of the current situation.

--Caroline Knight, caroline.knight@spglobal.com
--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com

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