March 6, 2014
Chicago jet fuel on the second shipping cycle shot up 9.50 cents/gal over Tuesday's cycle one assessment to the highest level since July.
Platts assessed Chicago jet fuel at NYMEX April ULSD futures plus 18.25 cents/gal, the highest since plus 23 cents/gal on July 22. Market sources said the dramatic shift was due to a major refiner taking a buy position in the region.
"They clearly need barrels pretty badly this month," one trader said. "When any refiner in that area becomes a buyer, it tends to push that market up sharply since it's so illiquid."
Refiner and blender production of jet fuel in the region fell 16.67% in the week ended February 28, according to Energy Information Administration data released Wednesday. Jet fuel production was down 40,000 b/d, averaging 200,000 b/d, according to the data.
Stocks remain tight at 7.27 million barrels, or nearly 8% below the EIA five-year average.
Meanwhile, US Atlantic Coast jet fuel weakened 1.25 cents to plus 1 cent/gal despite reduced stocks reported in the region. East Coast stocks shed 1.09 million barrels, declining to 8.2 million barrels, according to the data.
Platts assessed the NYMEX April ULSD futures contract at $2.9914/gal at 3:15 pm EST.
European cargoes at 20-mo low
The European jet cargo premium fell to its lowest level in 20 months Wednesday, weighed down by mild temperatures across Europe and good supplies of the fuel globally, according to traders.
It was assessed $1.75/mt lower on the day at March ICE 0.1% gasoil futures plus $55/mt. This was the lowest premium assessed since July 2012, according to Platts data.
Traders said kerosene demand in Europe was down by between 20% and 30% on year, in line with a similar fall for gasoil, due to milder temperatures. On the supply side, production from Persian Gulf refiners was said to be plentiful, leaving plenty of volumes on offer.
"Demand for aviation fuel is on plan...it's going up seasonally but that's already factored in. But kerosene demand is poor and there are a lot of cargoes coming in," said one trader. "I personally think it will remain weak until the summer."
"Term contracts are fulfilled but that's it...there's not been a spot market for kerosene this winter," another trader said. "Yes there are barrels pointing this way, but a lot of these markets aren't as bearish as they look...There is lower production from UK refiners and some logistical issues...It's not that easy to secure supplies in ports with smaller drafts."
In the Platts Market on Close assessment process, BP offered jet fuel on the vessel Gulf Coral, but its offer was left outstanding at the close.
Global air passenger numbers up 8.0% in January: IATA
Global air passenger demand in January increased by 8.0% year on year, exceeding capacity expansion by 1.3 percentage points to push passenger load factors to 78.1%, the International Air Transport Association said Wednesday.
With strong growth reflected across all regions, Middle East airlines, which represent 10.1% of the total global passenger share, had the strongest start to the year with demand up 18.1% as the region continued to benefit from greater business activity and international trading opportunities.
On domestic markets, several markets reported double-digit growth in total revenue passenger kilometers, with China leading the crowd (20.1%), followed by Russia (10.9%) and Japan (10.7%).
Rising domestic traffic in China over the period underpinned a continuing trend in local demand that has seen domestic capacity rise 16.9% compared with a year earlier, pushing load factors up 2.1 percentage points to 79.4%.
IATA director general and CEO Tony Tyler said: "2014 is off to a strong start, with travel demand accelerating over the healthy results achieved in 2013, in line with stronger growth in advanced economies and emerging market regions," "The second century of commercial aviation has begun on a positive note, with air traffic demand rising in line with generally positive economic indicators.
While this is in line with an improved overall outlook for 2014, aviation remains highly vulnerable to external shocks. Rising geopolitical tensions around the world have the potential to cast shadows on this optimistic outlook," Tyler said.
Singapore fundamentals bearish
The Singapore jet fuel/kerosene market remained bearish Wednesday, due to surplus supply and weak prompt demand, industry sources said.
Singapore jet/kero was assessed at an 11 cents/barrel premium to Mean of Platts Singapore assessments, down a penny on the day, and down from 44 cents/b February 21.
The soft demand was attributed to reduced seasonal requirements, with the winter over in North Asia, where kerosene is traditionally used for heating purposes.
A North Asia-based source said that with the winter season at an end, more jet fuel supplies from Japan and South Korea are being exported into the rest of Asia, while markets such as mainland China were not buying as much due to an increase in domestic production.
In addition, the East-West arbitrage window remained closed, he said. He added that several new refineries had come online in China, churning out more product for export, thus compounding the supply situation.
A Singapore-based trader noted though that an increase in the production of 10 ppm sulfur gasoil could help absorb some North Asian jet fuel/kerosene supply, as the latter can be used to blend the ultra-low sulfur diesel to higher-sulfur diesel.
Still, kerosene inventories have been tightening in Japan.
Petroleum Association of Japan data released Wednesday showed in increase in jet stocks, but a decline in kero stocks for the week ending March 1.
Jet inventories climbed 204,000 barrels to 5.37 million barrels, while kerosene inventories fell 1.196 million barrels to 9.134 million barrels.
Japanese kerosene stocks have been tightening since mid-December, when they stood at 20.6 million barrels.
Japan jet/kero was assessed at a $1.07/b premium to MOPS Wednesday, unchanged on the day, and up from a 92 cents/b premium February 26.