December 17, 2014
The Group 3 jet fuel differential dropped 3.50 cents Wednesday, closing the arbitrage from the Gulf Coast for the first time since November 5.
Platts assessed Group 3 out of Oklahoma at NYMEX January ULSD futures minus 16.25 cents/gal, down 3.75 cents this week and far off the record differential of plus 52 cents/gal on November 12.
With a backdrop of low inventories, Group 3 popped on bidding by HollyFrontier in early November to offset maintenance at its two regional refineries.
The refineries returned online but the thinly traded market gradually came off as stocks remained tight.
Midwest stocks increased by 82,000 barrels week-over-week to 6.27 million barrels for the week ended December 12, according to Energy Information Administration data released Wednesday.
That remains 12% below year-ago levels, but one source said traders were placing less weight on stocks for several reasons, including production of 235,000 b/d that are 4.4% above year-ago output.
"It could be that as well as just end-of-year selling," he said. "People are trying to thin inventories and realize some gains before the end of year."
He noted product also has been shipping from the Gulf Coast to fill any needs, but that arbitrage finally closed as Group 3 was offered down this week.
The Gulf Coast jet fell 60 points to minus 20.05 cents/gal, but had rallied 9.30 cents the first two days of this week.
The premium for Group 3 over Gulf Coast slipped to 3.80 cents, with shippers generally needing 5.50 cents to overcome the cost of shipping and some other factors.
The premium was last below that November 5, at 4.75 cents, and had been as high as 63.50 cents on November 12 and 13.
US jet stocks rise
US jet fuel stocks in the week ended Friday rose by 96,000 barrels to 36.33 million barrels ahead of the holiday travel season, the Energy Information Administration said Wednesday.
US stocks are now at its highest level since the end of October, but are 4.27 million barrels below the five-year average of 40.61 million barrels for the same reporting week, EIA said.
West Coast stocks saw the biggest gain, rising 211,000 barrels to 8.81 million barrels. Stocks are now 1.01 million barrels below where they were in the corresponding week of 2013.
Those gains were offset by inventory losses in Gulf Coast, were stocks fell by 217,000 barrels to 11.61 million barrels.
Inventories are now 2.22 million barrels below the five-year average of 13.84 million barrels.
Atlantic Coast stocks fell 10,000 barrels to 8.59 million barrels.
Singapore shrugs off stock draw
Singapore jet/kerosene remained remained bearish Wednesday even after kerosene stocks in Japan showed a decline.
The FOB Singapore jet fuel/kerosene cash differential was assessed at a 43 cents/barrel discount to Mean of Platts Singapore.
The cash differential for jet fuel has been declining since December 2, when it was at a 51 cents/b premium.
Some sources said kerosene stocks in Japan were sufficient to meet heating demand in light of the cold snap that has gripped the country.
Kerosene is used as heating oil in Japan, and its demand peaks over December-February.
Local refiners typically increase kerosene production ahead of winter. Japan's kerosene stocks fell 8.1% week on week to 18.73 million barrels as of December 13, the Petroleum Association of Japan said Wednesday.
The stocks were down 9.1% year on year.
Kerosene output in the week of December 7-13 rose 3.9% to 2.65 million barrels, PAJ said.
Stocks of jet fuel, which has similar specifications to kerosene, fell 2.2% week on week to 6.16 million barrels as of December 13. Still, the jet fuel inventory was up 20.8% from a year ago.
Adding to the bearish supply fundamentals, China's State-owned China Petroleum and Chemical Corp., or Sinopec, has planned to export a total of 230,000 mt of jet fuel from its Gaoqiao refinery, Zhenhai refinery and Maoming refinery this month.
In tenders, Tanzania's Petroleum Importation Coordinator purchased 15,065 mt of jet fuel and 1,150 mt of kerosene for delivery to Dar es Salaam over February 17-19 from Addax Energy.
The tender was awarded at a premium of $52.10/mt to the Mean of Platts Arab Gulf jet fuel/kerosene assessments, CFR, for both products.