Persian Gulf jet fuel/kerosene premiums hit 33-month low despite firm demand in UAE

Recent strength in the Singapore regrade spread, coupled with sluggish European prices pushed the FOB Persian Gulf cash differential to a 33-month low Sept. 19, S&P Global Commodity Insights data showed.

Platts assessed the cash differential for FOB Persian Gulf jet fuel/kerosene cargoes at plus $1.60/b to Mean of Platts Arab Gulf jet fuel/kerosene assessments at the Asian close Sept. 19, narrowing 5 cents/b on the day and 45 cents/b on the week, as per Commodity Insights data.

The premium was last seen lower on Jan. 6, 2022, at plus $1.50/b, the data showed.

"This Singapore regrade strength is really a challenge for the FOB [Persian Gulf] premiums," said a regional middle distillates trader.

"To keep the arbitrage open, premiums need to go down to compensate, especially as European jet differentials stay under pressure, they didn't move up at all with the Asian regrade strength," he added.

The Platts-assessed FOB Singapore physical regrade -- the spread that measures the value of jet fuel over 10 ppm sulfur gasoil -- was assessed at plus 17 cents/b Sept. 19, bringing the month-to-date average to plus 44 cents/b. In August, the physical regrade averaged minus 74 cents/b.

The decline came despite healthy demand for jet fuel in the UAE, market participants observed.

"Arbitrage is totally shut, only UAE airport [is] pulling [jet fuel], [but] they cannot pull so much forever," a second trade source said.

According to aviation statistics company OAG, seat capacity in the Middle East for September was 3% higher on the year at 22.53 million seats, with the UAE holding the greatest number of seats within the region.

The arbitrage lane to ship jet fuel/kerosene cargoes from the Persian Gulf to Northwest Europe was seen shut by $3.23 cents/b, according to Commodity Insights calculations late-Sept. 19.

"There seems to be good demand here – mainly for travelers and flights transiting via Dubai or Abu Dhabi on their way East or West," said the first source.

"Market is still quite disappointing," a third source said.

Heavy supply, waning demand weigh on Europe

The combination of heavy supply and lower demand is weighing down the European jet fuel market prices, as demand season draws to a close, trade participants said.

"Winter is coming up...It's a period of less consumption," a market source said. "[Winter] will affect the price as well."

While low cost carrier Ryan Air saw an increase in flights, Lufthansa -- one of Europe's largest full service and long haul carrier -- saw flights decline 3.9% on the year, data from OAG showed.

The jet CIF NWE cargo September balance-of-month swap differential was assessed down 25 cents/mt to $35/mt, with October $1/mt lower at $39.50/mt and November down 25 cents/mt to $43.25/mt, Commodity Insights data showed.

Heavy supply from the East of Suez continued to add market length, another source said. "It's a well-supplied market if you look at the volume East of Suez."

Adding to the heavy supply, inventories of jet fuel and kerosene in the Amsterdam-Rotterdam-Antwerp refining hub rose 28,000 mt on the week to 985,000 mt in the seven days ended Sept. 19, marking a second week of consecutive builds, according to data from Insights Global. The rise in inventories put stock levels 32% higher on the year.

Platts, part of Commodity Insights, assessed the jet CIF NWE cargo differential $1.25/mt higher on the day at $34.50/mt.