Europe jet fuel premiums reach $100/tonne over Middle East unrest

22 February 2011 17:19  [Source: ICIS news]

LONDON (ICIS)--European jet fuel cargo premiums over ICE gasoil futures spiked above $100/tonne on Tuesday as traders feared unrest in the Middle East could lead to a shortage of supply, market participants said.

Jet fuel traders said cargoes were trading higher, pushed up by the rise in crude oil and concerns over Iranian warships entering Egypt's Suez Canal.

It was feared that if there were problems with the Suez Canal, cargoes would have to take alternative, longer routes in order to supply the European market, pushing up prices and meaning that less material would surface in the market.

Jet fuel prices, which trade at a differential to ICE gasoil futures, increased from March ICE gasoil plus $83-84/tonne CIF (cost, insurance and freight) NWE (northwest Europe) a week ago to above $100/tonne (€74/tonne) on Tuesday, with recent trades heard at $102/tonne, an increase of $18-19/tonne.

With March ICE gasoil futures trading at $885.25/tonne, jet fuel flat prices are therefore assessed at $987.25/tonne, up from the range of $952.75-953.75/tonne seen last week.

Market participants said that demand had increased because players were trying to secure product and minimise the risk of being short of jet fuel, despite the fact that storage in Europe was relatively full.

One trader said that the market was no longer driven by fundamentals and that participants were reacting both speculatively and with panic.

The source added that if unrest in the Middle East spread to countries such as Saudi Arabia, prices could reach even higher levels.

However, another player said that such price levels were unsustainable and would have to fall at some stage.

Some market participants said that illiquidity in the market because of the Presidents' Day holiday in the US on Monday and traders being away from their desks to attend the IP (International Petroleum) Week conference in London had contributed to the spike in jet fuel prices.

($1 = €0.74)

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By: Sarah Trinder
+44 20 8652 3214

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