Asia extends fall

May 17, 2012 -- The Singapore jet fuel outright price extended its fall, shedding 56 cents/barrel to $122.69/b Thursday.

That was down almost $10.80 since May 2, on the back of weaker crude futures and concerns over demand in a slowing global economy.

The June jet/Dubai crack swap dipped by 3 cents to $16.50/barrel, after a sharp fall on Tuesday, while the gasoil/Dubai crack dropped by 19 cents.

The Singapore front-month regrade swap -- which measures the premium jet fuel commands over gasoil -- recovered by 16 cents to 71 cents/barrel, while the Singapore jet/kero cash differential edged back up to minus 19 cents/b against Mean of Platts Singapore, compared with minus 22 cents/b on Wednesday.

Unlike the gasoil and gasoline markets, the Asian jet fuel market is not getting any lift from Vietnam despite the shutdown of the country's sole refinery at Dung Quat.

Sources from Vietnam's two main jet fuel importers said they have sufficient jet fuel and would not need to import more.

"We don't have any inquiries at the moment," one source said. "We are not going out to buy any cargoes at this time, because we have enough stocks."

Traders said that other than South Korea, oil product stocks are high in Japan and China.

Japan's exports of jet fuel fell 0.4% to 1.13 million barrels over May 6-12 versus the previous week, while gasoil exports stood at just 54,710 barrels, down 94.1% from 925,473 barrels in the previous week, Petroleum Association of Japan data showed.

Chinese refineries produced 9% more jet/kerosene at 1.7 million mt last month, and up 16% to 6.8 million mt in the first four months of 2012, official data showed.

In Singapore, stocks of middle distillates, which include jet/kerosene and gasoil, continued to climb in the week ended May 16, up 7.3% against the previous week, to 10.74 million barrels.

In tenders Qatar's Tasweeq export tender, which is valid until Thursday, is seeing bids of a $1.60-1.70/b premium to the Mean of Platts AG jet/kero assessments, traders said.

The tender offers 481,800 barrels of jet fuel for June 5-6 loading.

Abu Dhabi National Oil Company has concluded term jet deals with all its existing buyers and sealed agreements with two new companies at a premium of $2.05/b to the Mean of Platts Arab Gulf jet assessments, industry sources said.

The agreed level was up from the $1.95/b premium that the Middle Eastern refiner had concluded for the year-ago period and was about 5 cents above the January-December 2012 contract level.

Traders said the buyers who had agreed to renew their deals were Shell, Morgan Stanley, Malaysia's Petronas, Vitol and Swiss Singapore. The new term buyers are ConocoPhillips and Brazil's Petrobras, they added.

Economic worries push Europe below $1,000/mt

Fresh worries over the potential economic health of the eurozone economies rattled international markets Thursday, driving outright European jet prices below the $1,000/mt level for the first time since December 31, 2011.

The move seemed to stimulate some buying interest, with swaps in particular leading the charge.

The balance-month May swap climbed $2.75/mt to be assessed at $79.25/mt, with the physical CIF NWE premium climbing $2.25/mt to June plus $79.50/mt.

The move reversed the weaker tone in recent days, and underlined the supremacy of the aviation fuel over its middle distillate counterparts.

But fixtures from Qatar and the Persian Gulf were heard, with much of that volume said to be targeting the Northwest European region.

Along with the flows, the backwardation also acted as a substantial deterrent to holding stock in tank, with the front month ICE gasoil contract extending its lead over the second month July contract to end the day $3 above.

The upward move on the balance month swaps contract, coupled with a more modest 50 cent rise on the June CIF NWE swap, meant that structurally the jet market's backwardation also moved up sharply.

The Platts Market on Close assessment process saw Morgan Stanley and Shell seeking product, with Vitol and BP showing cargoes to sell. Neither barges nor cargoes saw any trades.

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