US spot jet fuel premiums jump on low inventory and turnarounds

10 January 2012 23:38  [Source: ICIS news]

HOUSTON (ICIS)--Premiums for US spot jet fuel over heating oil on Tuesday increased by more than 5 cents/gal from 6 January on the US Gulf and east coast, triggered by inventory data and news of a Gulf coast refinery turnaround, a spot trader said on Tuesday.

On 5 January, the US Energy Information Administration (EIA) reported that USG jet fuel stockpiles slipped by 600,000 bbl to 13.4m bbl during the week of 30 December, from 14.0m bbl from the previous week.

Since then, the premium for jet fuel over the heating oil futures contract has climbed.

The US Gulf jet fuel premium climbed to 6.37 cents/gal on Tuesday from 0.15 on 5 January.

Premiums on the New York Harbor increased to 10 cents/gal from 4.5 cents/gal on 6 January.

The spot market premium for jet fuel reflects traders’ views for jet fuel market fundamentals for moving physical product. The absolute price of jet fuel is largely influenced by the volatility of heating oil futures, where investors do not handle physical product.

With lower production of jet fuel on the east coast with both ConocoPhillips’ 178,000 bbl/day Trainer refinery and Sunoco’s 185,000 bbl/day Marcus Hook refinery in Pennsylvania shut down, the region receives much of its jet fuel from the US Gulf.

Accordingly, when jet fuel values on the Gulf coast increase, the east coast values follow.

The drawdown in inventories increased buying, driving offers and bids higher on the spot market.

In addition, BP has begun a turnaround of an alkylation unit and fluid catalytic cracker (FCC) at its 406,570 bbl/day Texas City refinery near Houston, sources said, which could tighten jet fuel supplies.

BP could not be reached for comment, and the duration of the turnaround was not known.

On 5 January, US Gulf jet fuel was $3.0550-3.0575/gal and east coast jet fuel ranged from $3.0825-3.0850/gal. On Tuesday, US Gulf and east coast jet fuel were priced at $3.1650-3.1675/gal and $3.2025-3.2050/gal, respectively.

By: Sheena Martin
+1 713 525 2653

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