October 5, 2015
A spike in selling interest on the spot Northwest European jet fuel barge market pushed bar premiums sharply lower to start the new week, with Vitol, KLM, Glencore, Litasco and Shell all seen offering volumes during the Market on Close process.
In an active session, Vitol sold 2,000 mt to BP and bought 2,000 mt from KLM, while KLM also sold 2,000 mt to BP.
The Dutch airline was also heard to have sold 3,000 mt of jet fuel earlier in the day outside the Platts Market on Close process at October plus $1.50/mt for loading from Rotterdam over October 7-11.
"[Summer airline] demand was in line with expectations," one source said. "So [airline] fuel up-flight is not negative versus expectations...The strong supply situation seems persistent. Some airlines are posting strong growth but the industry as a whole is not posting a strong macro growth for jet."
As a result of the selling, FOB Rotterdam barge premiums plunged by $6.50/mt on the day, widening the discount of barges to cargoes to $7/mt from $1.75/mt previously.
Limited ullage in the region was cited by one source as a potential reason for the uptick in selling activity, a fact which could be further exacerbated by a steepening contango on the prompt forward curve.
"Some vessels are still waiting to discharge [in NWE]," a trader said.
Continued problems with water depth on the Rhine have also contributed to the relative weakness of barges to cargoes, with many buyers unwilling to charter barges to pick up material at the currently elevated freight levels.
Water depth at the choke-point town of Kaub was seen at 82 cm at 13:00 local time. The cargo market also moved lower Monday, with BP offering material into both Rotterdam and Le Havre.
In shipping, Morgan Stanley was heard to have the Summit Africa for loading 60,000 of jet fuel from Sikka October 15 for delivery into Northwest Europe.
Bukom, Jurong Island issues bullish
Asian traders have been buying up FOB Singapore jet fuel cargoes in recent days after news that Shell had delayed the restart of its 210,000 b/d CDU at its Pulau Bukom refinery in Singapore till end-December instead of mid-October.
"Buyers are more keen to purchase [now]," a source said, adding that the most recent buying surge was cover for "Singapore Refining Company's shortfall."
He was referring to talk of a shutdown of a CDU and residue catalytic cracker at SRC's 290,000 b/d refinery on Singapore's Jurong Island for around four weeks in early October.
Meanwhile in North Asia, signs of stockpiling for the winter season were apparent, looking at most recent data on exports, imports and domestic sales in Japan.
FOB Korea jet/kero differentials have picked up considerably in recent weeks to minus 85 cents/b against MOPS at last Friday's close, from a multi-year low of minus $1.55/b at the start of September, sources said.
In other news, state-owned India Oil Corp. hiked aviation turbine fuel prices for October by 4.79%-5.49% from the previous month following three straight months of declines.
IOC's ATF rates for domestic flights now stood at Rupees 43,184.17/kl ($514.40/kl) for New Delhi terminals, Rupees 51,681.42/kl for Kolkata, Rupees 44,141.75/kl for Mumbai and Rupees 47,858.56/kl for Chennai.
A company source said the increase was in tandem with similar gains in jet/kero prices published by Platts and Argus.
Gulf Coast drops
The Gulf Coast jet fuel market weakened substantially Monday, partially correcting the market's gains last week and compensating for a jump in the underlying futures market.
Platts assessed the USGC differential down 2.10 cents to NYMEX November ULSD futures contract minus 13.85 cents/gal, or an outright $1.4124/gal.
"Looking like last week may have just been a correction and we are about to resume the downtrend," one source said Monday.
Gulf Coast jet fuel differentials had been rising steadily since the second half of September when the differential was minus 18.25 cents/gal, reaching as high as minus 11.25 cents/gal below the underlying futures on September 29 and October 1.
The underlying futures contract also jumped Monday, helping to drive down differentials in order to keep outright prices steady. The NYMEX November ULSD futures contract rose 2.57 cents/gal from Friday to reach $1.5509/gal.
During the Platts Market on Close assessment process, 575,000 barrels of USGC jet fuel traded for the second day of the prompt 56th cycle, bringing the total traded thus far to 650,000 barrels. The cycle schedules on Tuesday.
Astra was the primary seller Monday, providing 375,000 Gulf Coast jet fuel barrels during the Platts MOC. Shell sold the other 200,000 barrels. Buying interest was more diverse, with Valero, Morgan Stanley and Trafigura buying 150,000 barrels, 125,000 barrels and 125,000 barrels respectively.
On the West Coast, the Los Angeles jet fuel market found additional strength Monday while a jet fuel cargo was seen heading towards Los Angeles Platts assessed Los Angeles jet fuel up 30 points to NYMEX November ULSD minus 5.75 cents/gal, or $1.4934/gal outright.
STI Venere was originally put on subjects to carry jet fuel to the US West Coast from South Korea. However, the ship was instead seen departing from Japan Friday heading to Los Angeles, according to cFlow, Platts flow tracking software, and is set to arrive October 17.
Asian jet fuel markets have firmed in recent days with winter stockpiling of kerosene in North Asia supporting demand and seasonal refinery turnarounds cutting supply.
The New York Harbor jet fuel market fell to a lesser extent Monday, opening up the arbitrage from the Gulf Coast.
Platts assessed the Buckeye jet fuel differential down 1.50 cents to the NYMEX November ULSD futures contract minus 8.50 cents/gal, or $1.4659/gal outright.
The arbitrage from the Gulf Coast was opened for the first day in over a week at 60 points/gal, considering 5 cents/gal for shipping up the Colonial Pipeline and Line 2 linespace moving to a negative value of 25 points.