New York jet fuel differentials skyrocketed more than 10 cents Monday amid high demand at the end of summer and inventories 12% off year-ago levels.
Traders said 25,000 barrels traded for delivery into Buckeye Pipeline, which takes jet fuel the final leg into most regional airports, at NYMEX September ULSD futures plus 22 cents/gal, compared with plus 11.50 cents/gal Friday. Sources said Vitol bought from Valero, but at least two other companies also have been bidding up all morning, with few offers.
"It might go even higher. It's nuts," one jet trader said.
New York barges and Colonial Pipeline barrels were said to be 1 cent below Buckeye barrels, rising from plus 10.75 cents/gal on Friday. Benchmark New York barges were flat to the NYMEX going into August.
US jet fuel stocks reached 1996 lows in early August before rebounding 891,000 barrels to 35.56 million barrels as of August 15. The East Coast remained the region with the largest year-on-year decline, down 12% to 9.23 million barrels. The region's stocks were whittled down by exports to Canada, with another cargo, Seto Express, heard loading over the weekend.
A second trader was not aware of a USAC jet export but said it could have been fixed much earlier and was too difficult to unwind. He said the more likely reason for the tight USAC market was too few barrels moving on Colonial from Houston to New York Harbor.
"There's been so many issues on Gulf Coast production, so people don't have the oil to ship to NYH," he said.
Export demand, especially to Latin America, could also be taking up high-demand barrels in the Gulf Coast, where it was heard traded 1.25 cent higher to plus 4.50 cents/gal Monday morning.
Friday's Gulf Coast pipeline assessment marked the first time since March 26, 2013, that the USGC differential was a premium to the underlying futures contract, which switched its basis at that time to ULSD grade instead of lesser-quality heating oil, which made further historical comparisons difficult.
Industry group Airlines for America predicted last week that Labor Day holiday demand for air travel would be 2% above last year, with 14 million passengers flying.
