November 25, 2014
US Gulf Coast jet fuel tumbled 4.15 cents Tuesday, November 25, its largest one-day drop since February as the product struggled to find space in Colonial Pipeline amid the year-end tax selling season.
Platts assessed USGC jet at NYMEX January ULSD futures minus 12.95 cents/gal on a deadline day to schedule barrels for Colonial movement from Houston to New York Harbor. Such scheduling days tend to intensify movements.
The USGC outright price at $2.2184/gal reached a fresh low dating back to October 29, 2010 when it was $2.2141/gal. New York barges were assessed 25 points lower Tuesday to NYMEX December ULSD futures plus 8.25 cents/gal, or $2.4961/gal, a 27.77-cent premium to the Gulf Coast, more than five times the cost of shipping on Colonial, which has been allocated for three years straight.
"To some extent, the demand's there, but you have to have the linespace and you have to get it there," a market source said. "In the USAC, it seems to be the opposite. You can't find much of it. It's the linespace that's going to be the issue."
The open distillate arbitrages have lent support to the secondary line space market, with distillates Line 2 space heard trading at a 7 cent/gal premium Tuesday. If shippers have access to especially profitable products, they will often pay a premium to have another shipper transport their product for them.
Traders also noted that those holding Gulf Coast barrels may want to sell those before the end of the year to avoid taxes on inventory.
"Every December, it happens," the source said. "It tends to happen sooner or later. It's just a matter of how violent it is."
NWE barge discount widens
In the Northwest European barge market Tuesday, some airline length was seen offered back into an otherwise subdued spot market, leaving discounts for barges to CIF cargoes at $7.50/mt, down 25 cents/mt.
While cracks across distillates had fallen below jet at the end of last week, traders said they thought this might be a short-lived divergence from a trend that has seen FOB ULSD barge premiums above jet on a density-adjusted basis.
A legacy of the pressure seen in the cargo market last month saw a few US jet cargoes arriving into Northwest Europe for discharge over the final week of November, including 38,000 mt aboard the Robert Maersk en route to Porvoo and a 38,000 mt cargo aboard the Fidelity II for Galve.
While arbitrage spot opportunities to fix fresh spot cargoes from the Persian Gulf to Europe appeared closed on weak European paper and physical prices and relatively expensive freight, cargoes on the water were continuing to make their way to meet incremental buying appetite.
Some cargoes, however, were heard to have diverted from this route for the US Atlantic Coast, where outright prices were rallying from the cold spell and a seasonal uptick in demand over the Thanksgiving period.
"Lower stocks and cold weather have had a visible impact on the HOGO. New York is Strong, Florida is strong, and there has been quite a bit of length in the Med. Europe is no longer the best netback, the US is," a trader said. "I have seen 2-3 vessels diverting from east to US, a 40,000 mt and an LR1".