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Asian jet fuel timespread flips to contango as post-Harvey demand fades

Singapore (Platts)--3Oct2017/542 am EDT/942 GMT


The Asian jet fuel/kerosene prompt-month timespread flipped to contango Monday for the first time in five weeks as demand faded to move cargoes to the US West Coast in the wake of Hurricane Harvey.

The balance October/September paper timespread was assessed at minus 6 cents/b Monday, down 30 cents/b from last Friday.

The timespread was last in contango at minus 5 cents/b on August 25, before flipping to backwardation as Hurricane Harvey shut refineries in the US West Coast and surging to plus 11 cents/b on August 29, the highest level since March 31, 2016.

Jet fuel demand from the US West Coast has been fading as operations begin returning to normal in the wake of hurricanes Harvey and Irma, market sources said.

Outages due to the hurricanes in late August-early September opened an arbitrage opportunity for Asian suppliers to move barrels to the US West Coast.

Cash differentials for jet fuel remained at a premium over August 30- September 29 after earlier having been negative for most of the year.

The FOB Singapore jet fuel/kerosene cash differential surged to a 16-month high at plus 20 cents/b August 30, before steadily declining to stand at minus 9 cents/b Monday.

However, kerosene buyers in North Asia may soon start returning to the market to secure supplies for winter heating needs over December-February, market sources said.

"December kerosene [prices] should go up," a market analyst said.

"I guess only heating might revive [demand]," a jet fuel trader said.

Other market sources said Asian refiners would be unlikely to cut back production given that cracking margins were still healthy.

The FOB Singapore jet fuel/kerosene crack against Dubai crude swap averaged $14.26/b in September, rising steadily from $12.95/b in August and $12.07/b in July, Platts data showed.

--Sue Koh, sue.koh@spglobal.com
--Edited by Wendy Wells, wendy.wells@spglobal.com

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