21 December 2010 13:40 [Source: ICIS news]
LONDON (ICIS)--Cold weather conditions across Europe could lead to lower jet fuel differentials, market sources said on Tuesday.
Heavy snow meant that many short haul flights were cancelled and that planes remained grounded in airports such as Heathrow in the UK and Frankfurt, Germany.
One buyer said this had decreased demand and created a surplus of material in the market.
The source said that even if the weather became milder, there would be after-effects which would dampen demand and exert downwards pressure on differentials.
Grounded planes were causing congestion at airports, occupying sparse parking spaces which meant repositioning planes into correct positions for take-off would be a lengthy process when the snow eventually cleared, the source said.
Another source said that airlines were expected to start selling product in open trading as they were consuming less jet fuel, and agreed that this was likely to result in lower premiums.
However, the source also said that differentials could remain supported as there was currently strong demand from European majors.
On Tuesday morning, a major European airline was reported to have sold a 2,000 tonnes parcel for 24-28 December at January plus-$58/tonne (€44/tonne) FOB (free on board) FARAG (Flushing ?xml:namespace>
Jet fuel cargoes and barges in Europe are traded based on a premium to the ICE gasoil futures contracts.
At GMT 12:25, the January ICE gasoil contract was trading at $770.25/tonne, up $6.00/tonne from Monday’s closing price.
Jet fuel barge differentials had been trading in the low January ICE gasoil plus $60s/tonne FOB in recent weeks.
($1 = €0.76)
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