August 29, 2014
The New York jet fuel barge differential jumped 10.50 cents Friday to its highest level since the aftermath of Hurricane Ike in 2008 as traders hunted for barrels in a market where stocks are near 18-year lows, demand near eight-year highs and pipeline issues hampering delivery.
Platts assessed New York barges for September 5 delivery at NYMEX October ULSD futures plus 31 cents/gal based on a trade heard at plus 35 cents/gal for September 4 delivery into Buckeye Pipeline, which is the final leg of the delivery chain for nearly all the jet fuel into the area's airports.
"BP sold to World Fuels," one source said. "BP's been buying outer cycles, and freed up the timing of earlier barrels to sell."
The market is heavily backwardated and traders saw little relief going into the long holiday weekend.
"There is absolutely nobody with a barrel to sell before September 10," a jet trader said, referring to a resupply batch arriving on Colonial Pipeline, which runs from Houston to New York Harbor. "This is nuts."
Jet fuel in the Gulf Coast, where half the US' output is produced, rose 75 points to plus 2.25 cents/gal, a 28.75 cents/gal discount to New York barges, the widest spread since it was 29 cents on April 4, 2008.
New York differentials reached as high as 75.50 cents/gal over NYMEX heating oil futures on September 16, 2008, after Hurricane Ike pummeled the Gulf Coast, limiting the amount of supply flowing north on Colonial.
This time around, there is no hurricane, only a Caribbean system given a 30% chance into developing into a tropical cyclone.
But US Energy Information Administration data released Wednesday showed East Coast stocks at 8.83 million barrels August 22, 18.3% lower than at the same time last year.
Strong demand from airlines and even exports from New York Harbor into Canada have put pressure on East Coast stocks, as did the shutdown Tuesday of a key Buckeye terminal for integrity testing.
EIA data showed that demand rebounded 250,000 b/d to 1.69 million b/d, 11% higher than at the same time a year ago and near 2006 highs.
Airlines For America said Friday that John F. Kennedy International Airport is down to a two-day supply of jet fuel, about half the norm.
"Airlines will work to ensure they are able to meet customer need, even if it means tankering fuel in to support their schedules," said Vaughn Jennings, a managing director for the industry group.
Two airline sources agreed New York airport fuel supplies are tight, but said they had not yet needed to consider "economic tankering," or loading more fuel than necessary into New York.
Jennings said airlines have pushed for years for Colonial and Buckeye to invest in more capacity.
"NYC is a very expensive place to fuel right now with a very old and inefficient fuel system with insufficient storage," he said. "That meant that the airlines have been more dependent on pipeline resupply given the limited on-airport storage capacity."
Supply heading to NWE
Easing demand in the Mediterranean has seen suppliers direct more arbitrage cargoes at Northwest Europe, leading to the recent decline in premiums, sources said Friday.
Healthy demand through H1 August saw prices rise in the Med and offer a better netback than the North. But demand has since fallen, while the Med has seen more supply--regular exports from Zawiya, Libya, for example.
FOB Mediterranean cargoes were assessed at a $48.75/mt premium to ICE gasoil Friday, down 50 cents/mt on the day, and down from a $66/mt premium August 7. Over the same period, the FOB Northwest European cargo price has fallen $16.75/mt to a $57.75/mt premium to ICE gasoil.
Vitol, a reliable fixture on the sell-side for cargoes in NWE, was joined by BP and Shell offering during the week. Some of the cargoes had been backed by tankers coming from South Korea and Singapore.
One source said high US jet prices had offered an alternative destination to the Med. But he said the US was not a slam dunk.
"At the end of last week/earlier this week, there had been great potential to move to the US. But if you can't get [the barrels] to work in the Med or US because of specifications or logistics, NWE is now on parity to the other homes," the source said.
Of course, he said that before New York jet fuel price differentials jumped 10 cents/gal Friday.
Vitol was heard to have fixed the Valtellina for a Libya-Med voyage, loading 30,000 mt September 1. Aramco Trading Company lined up the Hellas Explorer for a Jubail to UK Continent voyage, loading 40,000 mt September 5 at $1.63 million.
Asian supplies tighten
Asian jet/kerosene price differentials edged higher Friday, as supply has gradually tightened in recent weeks.
Singapore jet/kero was assessed at a 3 cents/barrel premium to Mean of Platts Singapore, up a penny on the day, and up from a 9 cents/b discount August 25.
Arab Gulf jet was assessed at a $1.48/b premium to Mean of Platts Arab Gulf, up 10 cents/b on the day.
Some market participants have started to build up stocks, sources said Friday.
China Aviation Oil, for one, is seeking to buy 25,000 mt of jet fuel for delivery into Huangpu over October 1-10. The tender closed Friday.
Sources reiterated that trickling East-West arbitrage flows, hampered by rising freight, continued to put bearish pressure on Asian jet. Requirements from Europe was said to be weaker as the peak summer travel period draws to a close.
Singapore's commercial onshore middle distillate stockpiles -- which include gasoil, kerosene and jet fuel -- grew marginally to 11.06 million barrels over August 21-27, from 11 million barrels the previous week, latest data from IE Singapore showed.
Combined jet/kero stocks in Japan at 20 million barrels August 23 were up from 16 million barrels the week ending July 26, Petroleum Association of Japan data showed. That was down 4.74 million barrels year-on-year, because of lower kerosene stocks.