Dubai, 10 October (Argus) — Mideast Gulf jet fuel premiums were steady at $2.20/bl. Deepening discounts on the east-west spread sent large arbitrage volumes to Europe.
The prompt regrade, or the Asian jet fuel premium to gasoil, rose to $3/bl on 12 October –the widest in almost a year. The regrade was last at $3/bl on 18 October 2011 as low winter temperatures in north Japan coupled with limited nuclear power output following the earthquake and tsunami in March 2011 spurred demand for kerosine in Asia. The widening regrade could prompt regional refiners to produce more jet fuel at the expense of gasoil, bringing some calm to a market in which east-west discounts had widened to record levels. A wide east-west spread encourages the arbitrage of jet fuel and gasoil cargoes from the Mideast Gulf and Asia to northwest Europe.
A wide spread will support Mideast Gulf jet fuel premiums, which have been pressured recently by a lack of arbitrage prospects to Europe. The Mideast Gulf jet fuel premium has slipped by 21pc from $2.80/bl a month earlier.
East-west spreads were at -$51.73/t for November, -$36.84/t for December and -$27.44/t for January on 11 October, the deepest discounts in more than three years. These compared to -$33.39/t, -$26.37/t and -$20.96/t for October, November and December respectively a week earlier, and -$10.00/t, -$17.47/t and -$18.45/t a month earlier. The discounts rose slightly to -$35.84/t for November, -$24.82 for December and -$17.68/t for January on 12 October.
The European market was tight for prompt deliveries because of refinery turnarounds and low stock levels. But tightness could ease towards the month-end as air travel demand in the region typically weakens during winter. The widening in the east-west gasoil spread has already led to more cargoes being booked from the Mideast Gulf for delivery to Europe.
Fixtures from the Mideast Gulf to Europe included five 90,000t cargoes. These were booked on the Litasco-chartered Northern Spirit loading on 23 October, BP's Lady Henrietta loading on 1 November, Vitol's Cape Enterprise and Torm Marie loading on 2 November and 10 October respectively, and the Shell-chartered Four Wind loading on 16 October.
A 60,000t cargo on the Aligote was chartered by trader Noble for a voyage from India's west coast port of Sikka to Europe. Among the other long-range 1 (LR1) vessels fixed to move to Europe were the Marilee and N. Mars fixed by Vitol for loading 65,000t cargoes on 25 October and 26 October respectively and the Megacore Philomena fixed by BP for a similar volume loading on 25 October.
Jet fuel stocks in the oil products storage hub of Amsterdam, Rotterdam and Antwerp (ARA) declined by 19pc to a four-month low of 311,000t, from 385,000t a week earlier. Stocks were 22.4pc down on a year earlier.
Kuwaiti refiner KPC's most recent spot sale of 60,000t of jet fuel reflected increased availability in the region. KPC sold the cargo at Mopag +$2.20-2.25/bl on a fob basis for loading on 15-17 November. The premium was lower than it received for two second-half October loading cargoes sold to BP and Vitol at slightly above $2.50/bl.
Indian state-controlled refiner MRPL sold 40,000t (315,000 bl) of jet fuel to BP at about Mops -$0.90/bl on a fob New Mangalore basis for loading on 14-16 November. MRPL exports an average of two or three cargoes of jet fuel a month. A previous sale of 40,000t also to BP was done at about Mops -$1.00/bl for 5-7 November loading.
Jet fuel was available from Yemen, where state-owned Aden Refinery (ARC) offered 30,000t of jet fuel through a tender for 24-26 October loading. The tender closes on 13 October with bids valid until 15 October. Yemen last sold through tender a similar volume of jet fuel for 23-25 September loading at a $3/bl premium to spot Mideast Gulf quotes.
ARC's 150,000 b/d Little Aden refinery restarted operations on 4 August for the first time since mid-November 2011 following the restoration of crude flows through the key Marib-Ras Isa pipeline at the end of July. The refinery was shut because of a series of attacks on the crude pipeline by tribal rebels. Little Aden is functioning at a lower operating rate of about 50,000 b/d, an ARC official said. It operated at about half its nameplate capacity before the shutdown.
Bahrain's state-owned refiner Bapco was expected to shortly issue a tender to sell a medium-range cargo for end-November or early-December. Bapco a week earlier sold a 60,000t cargo of jet fuel loading on 10-15 November from its 262,000 b/d Sitra refinery at Mopag +$2.30/bl. Bapco sold the cargo after cancelling a 40,000t cargo for 6-9 November loading that it had showed the market a week earlier because bids were lower than its target.
UAE's Emarat bought two 40,000t cargoes of jet fuel through tender from BP at about Mopag +$3.50/bl on a cfr Jebel Ali basis for delivery on 25-27 November and 25-27 December. This nets back to around $2.50/bl on a fob basis. Emarat in August bought around 70,000t of jet fuel in two cargoes at a premium of around $2.90-3.00/bl to spot quotes on a fob Mideast Gulf basis for loading in early September and late October.
Emarat's purchase of spot cargoes is in addition to term supplies of about 500,000t of jet fuel it has secured from Adnoc and KPC for this year. Regional aviation demand is expected to rise in the fourth quarter as cooler weather and major events draw more visitors to the region. Emarat is one of the suppliers to the Dubai airport, where jet fuel demand has surged. Total jet fuel requirements at the Dubai airport are estimated at about 150,000 b/d, up from about 130,000-135,000 b/d last year.
Kenya's energy ministry last week announced its intention to purchase about 120,000t of jet fuel and other oil products for second-half November and first-half December delivery. The firm date range, exact quantity and any additional product requirements will be advised with the tender, which is expected to be issued shortly.
The ministry about three weeks ago bought 65,000t of jet fuel from trader Galana Oil Kenya for 18-20 October delivery at about Mopag +$23.60/t and 62,246t from trader Addax Energy for 6-8 November delivery at Mopag +$22.30/t. Fellow east African importer Mozambique's Imopetro also has an outstanding tender to buy 40,000t of jet fuel for January-June 2013 delivery. The deadline for offers into the tender is 19 October.
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