Jet fuel prices in Asia rose to their highest against gasoil in five years on Tuesday, buoyed by strong demand for the fuel used for winter heating and aviation, according to LSEG data and trade sources.
The prompt-month re-grade spread, or the price differential between gasoil and jet fuel swaps, traded at a premium of 85 cents a barrel at the market’s close, the highest level since early 2019, up from a premium of 50 cents a day earlier, LSEG data showed.
A wider re-grade typically encourages refiners to produce more jet fuel instead of gasoil which could tighten the supply of the latter just as China is trimming exports as its refiners are running out of export quotas.
The market is heading into peak heating oil demand during winter in the northern hemisphere and holiday travel season at the end of the year.
Europe and the United States are also pulling more jet fuel supply from Asia to make up for lower imports from the Middle East due to refinery outages there and in the U.S., according to shiptracking data from Kpler and three Singapore-based trading sources.
The “increased pull of kerosene into the diesel pool for producing European winter-grade diesel” is further contributing to the positive re-grade, FGE analysts said in a client note.
Around 287,000 metric tons of jet fuel loading from Northeast Asia in November are headed to northwest Europe, Kpler data showed, despite a narrow arbitrage window.
Jet fuel stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub are also lower than a year ago, data from Dutch consultancy Insights Global showed.
Middle East cargoes bound for northwest Europe for November-loading are set to hit the lowest level since April at 590,000 tons, Kpler data showed.
The arbitrage for Asia jet fuel to head to U.S. West Coast is also open and traders are expected to start shipping jet fuel cargoes that are loading promptly or in the first-half December to the U.S., one northeast Asia refinery source said.
Spot jet fuel cargoes from several South Korean refiners have already been sold at premiums between 70 cents and $1.50 per barrel for December loading since two weeks ago because of arbitrage opportunities, a second northeast Asia refinery source said.
SOURCE: HELLENIC SHIPPING NEWS
