July 30, 2014
Chicago jet fuel differentials strengthened Wednesday as the Energy Information Administration released data showing reduced production and stocks.
Midwest jet fuel production fell 20,000 b/d in the week ended July 25 to average 227,000 b/d. Jet fuel stocks in the region also fell, ending the week at 6.63 million barrels, 302,000 barrels lower.
Platts assessed Chicago jet fuel up 1.50 cents/gal at NYMEX September ULSD futures plus 4.50 cents/gal.
Atlantic Coast jet fuel held steady despite a 1.25 million-barrel decline in stocks to 8.88 million barrels. Production saw a 21,000 b/d increase to 117,000 b/d, a level not seen since 118,000 b/d on May 20, 2011.
A broker said production needed the boost to catch up on low inventories, and other sources said stocks in the region had been drawn by export opportunities in Canada, with waterborne barrels making their way to Dartmouth and Montreal.
Distillate space on Colonial Pipeline continued to trade in the negatives, with offers at minus 25 points/gal for Line 2's 44th shipping cycle. This means a line space seller must pay a buyer to take the space.
Barrels arriving from outlets East of Suez and higher domestic production continued to exert downward pressure on European jet price differentials Wednesday.
FOB Northwest European cargoes were assessed at a $65.25/mt premium to ICE gasoil, down 50 cents/mt on the day, and down from $71.50/mt July 24.
"We're starting to see, slowly, supply eating through," said one jet fuel trader. He added there was a "lot more production" in Northwest Europe, particularly in ARA, as jet has been outperforming diesel.
The ULSD cargo crack spread against ICE Brent closed at $14.50/barrel Wednesday, and the jet cargo crack spread at $16.78/b.
A second trader noted than an easing of buying interest in the Mediterranean meant NWE did not have to price so aggressively.
Just one fixture was heard for jet September arrival into Europe from the Persian Gulf. Total lined up the Atlantic Hope for a PG-UK Continent voyage, lifting 35,000 mt August 10, at $1.475 million, shipbrokers' data showed.
CAO buying supportive in Asia
Fresh buying interest from China Aviation Oil provided some support to the Asian jet fuel/kerosene market Wednesday.
CAO is seeking four cargoes of 240,000 barrels or 300,000 barrels of jet fuel for loading over August 21-31, September 1-10, September 11-20 and September 21-30, and one cargo of 39,000-41,000 mt of jet fuel for delivery into Tianjin, China, over September 25-27.
The tender closes Thursday, with validity within the same day.
CAO last sought seven cargoes for a total of up to 2 million barrels of jet fuel for June/July loading and delivery.
Market sources said the company was last heard to have bought at least 900,000 barrels at a discount of around 50 cents/barrel to Mean of Platts Singapore jet fuel/kerosene assessments, FOB.
Increasing domestic supply due to new plant start-ups and expansions in the local market has capped the need for CAO to import jet fuel, said a trader based in Singapore.
Singapore jet/kero was assessed at a 30 cents/b discount to MOPS Wednesday, up just a penny, but down from a 4 cents/b discount July 16.
In the domestic Chinese market, the ex-refinery prices at which China National Offshore Oil Corp., PetroChina and Sinopec will supply jet fuel to China National Aviation Fuel in August are expected to fall about Yuan 41/mt ($6.70/mt) month-on-month, according to Platts estimates.
The three suppliers' reference ex-refinery jet fuel prices for July are expected to average Yuan 6,933/mt, excluding a premium of Yuan 30/mt, according to Platts calculations. The premium is negotiated between CNAF and its three suppliers on an annual basis.