European jet premiums fell to their lowest levels since December 2010 on Tuesday in response to poor storage economics and strong arbitrage supply, Platts data shows.
The CIF Northwest European cargo market was assessed at a premium of $72/mt above the front-month ICE gasoil contract, down $6.50/mt from Monday. Similarly, premiums in the FOB Amsterdam-Rotterdam-Antwerp barge market have also fallen, dropping $7.50/mt from Monday's value to be assessed at $66.75/mt.
These are the lowest European jet premiums since December 31, 2010, when the cargoes were assessed at $65.50/mt and barges at $64.50/mt.
"There is no contango in the jet structure at the moment, and not a great deal of demand," one jet trader said. "We are still getting arbitrage cargoes entering the market from Venezuela and the Caribbean and those still need to be sold, but they're not going to go into tank in this market."
With the jet market moving toward a flat-to-backwardated structure in recent weeks, storage has become less appealing, even while strong arbitrage flows continue to make their way to the European market from Venezuela, the Caribbean and the Persian Gulf.
"I'm not seeing a decrease in demand for jet in Northwest Europe," one trader said. "But with a flat ICE gasoil structure, people may just be running down what's in tank, rather than using imports to refresh supply."
CIF NWE cargo premiums have been falling steadily since May 10, when they peaked at $107/mt. On August 9, Platts assessed the market at a premium of $79.75/mt, the first time jet cargo premiums had dipped below the $80/mt mark since January 24.
FOB ARA barge premiums have been more volatile throughout the summer, but premiums have dropped substantially within the last week. On August 18, barges were trading at a premium of $82/mt above the ICE gasoil contract; they have dropped $15.25/mt in under a week.
"The barge market has been a little volatile," a barge source commented.
However, he insisted that the market was still largely balanced, if slightly oversupplied to the front.
"Ultimately I still think that we're looking at a balanced market since we are seeing some buying and product movements," he continued.
Some traders said that the continuing drop in premiums is due, in part, to the close of the summer travel season in Europe, which is cutting down on prompt demand for jet fuel and contributing to depressed premiums toward the front-end of the jet curve.
"Airlines have already met most of their demand through the rest of the summer with what's in tank," another jet trader said. "If you don't get a decent draw or interest in cargoes coming in, you've got another issue because no one is going to fill up a tank."
Outright jet prices rose again on Tuesday. Cargo prices rose $8.50/mt to be assessed at $1,004/mt, while barge prices rose $7.50/mt to $998.75/mt.
