August 27, 2014
US Gulf Coast jet fuel differentials edged higher Wednesday as data showed another sharp drawdown in US stocks.
Platts assessed Gulf Coast jet fuel 70 points higher at NYMEX October ULSD futures plus 2 cents/gal.
New York barges remained flat at September plus 19 cents/gal, a 16.56-cent/gal premium to the Gulf Coast differential, which is more than three times the cost of shipping barrels up Colonial Pipeline from Houston to New York Harbor.
Both benchmarks have risen sharply since the start of August, when the USGC was at minus 4.50 cents/gal and the USAC was flat to the NYMEX.
The latter region has seen the sharpest year-on-year decline in inventory.
Energy Information Administration data released Wednesday showed total US stocks fell 842,000 barrels to 34.72 million barrels the week that ended August 22, 7.9% lower than at the same time a year ago and behind only the weeks ending August 1 and August 8 as the lowest since May 31, 1996.
Several longtime traders said jet fuel markets feel as tight as that spring stretch in 1996 as well as during the Persian Gulf War earlier in that decade.
"Jet has always been squirrely, now as much as ever," one of the traders said.
The largest stock drop occurred in the Gulf Coast, where inventories fell 744,000 barrels to 11.18 million barrels, a 5.8% decline from year-ago levels.
East Coast stocks slipped 410,000 barrels to 8.83 million barrels, 18.3% lower than last year. Midwest stocks fell 55,000 barrels to 6.33 million barrels. West Coast stocks rose 293,000 barrels to 7.8 million barrels.
US production rose 3,000 b/d to 1.674 million b/d, near a two-year high.
Demand rebounded 250,000 b/d to 1.69 million b/d, 11% higher than last year heading into the Labor Day holiday travel season.
Imports rose 5,000 b/d to 34,000 b/d, the equivalent of one normal cargo load, which entered on the East Coast.
Imports from Asia to the West Coast and from Venezuela to the Atlantic Coast were fixed or shipped, according to Platts cFlow vessel-tracking software and sources. But so were exports, including the Seto Express that just loaded out of New York headed for the east coast of Canada.
European length pummels diffs
Amid limited spot demand for jet fuel in Europe, improved availability on the day triggered a sharp decline in cargo premiums Wednesday.
The CIF NWE cargo physical premium to ICE gasoil fell $4.25/mt to $68.50/mt, the lowest since June 17. Swaps differentials also fell sharply, having risen slightly at the beginning of the week.
The September swap fell $2.75/mt to $66.50/mt, while the October swap was down $1.75/mt to $65.75/mt.
BP was seen offering in the cargo market with barrels from the UAE and Oman on the SKS Dokka, a Long Range 2 tanker due to arrive next month. BP spent the summer bidding on almost a daily basis.
Trade sources said the upcoming refinery maintenance season could explain a shift in strategy. Shell said it has scheduled maintenance at its 400,000 b/d Pernis refinery in the Netherlands starting next week and which would result in flaring.
It would not comment on the nature of the works, but trading sources said the hydrocracker, FCC and alkylation units will be affected in a 30-day turnaround.
Pernis is one of the biggest producers of jet fuel in ARA.
There was little change to the barge price on the day -- shrugging off the fall in cargoes -- which appeared to reflect the shift in domestic supply fundamentals.
Pricey freight eats into ME-Europe arb
Spot activity in the Asian jet fuel/kerosene market was largely subdued Wednesday, in part reflecting a slowdown arbitrage moves to the West of Suez markets on weaker buying interest from Europe amid higher freight rates.
Italy's ERG had been set this week to move a jet cargo from Jubail, Saudi Arabia, working the arbitrage to the Mediterranean for the first time.
Sources said last week that ERG had the Histria Tiger on subjects for a Jubail-UK Continent voyage, loading 40,000 mt on Thursday, at $1.7 million, lumpsum. However, Platts cFlow ship-tracking software puts the Histria Tiger unladen, in port at Umm Qasr, Iraq.
The Arab Gulf-Med route, basis 40,000 mt, was assessed Wednesday at $1.54 million, lumpsum. This translates to around $38.50/mt. Platts data shows FOB Arab Gulf jet cargoes delivered to the Med, basis 40,000 mt, would come at a more than $20/mt premium to FOB Med cargo assessments, making the arbitrage unworkable.
In the wider Asian market, supply was heard to have gradually tightened on the back of recent production cutbacks at several refineries due to narrowing margins.
Philippines' Petron Corp. was heard to have bought 80,000 barrels of jet fuel for delivery into Limay, Bataan over September 13-15 at a premium of $2.50/barrel to the monthly average of Mean of Platts Singapore jet fuel/kerosene assessments on a CFR basis, with the seller said to be a Chinese trading company.