28 February 2012 15:50 [Source: ICIS news]
LONDON (ICIS)--Upstream gasoil prices have flattened off during the past week and now look to be backwardated, but jet fuel prices are in contango as demand should soon improve with the Easter and summer holiday seasons upcoming, traders said on Tuesday.
Jet fuel has been on a bullish run – rising from $1,017.75–1,019.75 CIF (cost, insurance & freight) NWE (northwest Europe) on 2 February to $1,099.25–1,102.25/tonne (€824.44–826.69/tonne) on 27 February – on the back of soaring crude and gasoil prices.“Jet has just been following crude, which has been driven by the Iran headlines [about oil supplies],” said one trader.
Several players think crude prices may have peaked and that gasoil prices should begin to ease off, but jet fuel prices could continue to firm because there is a danger of supply shortages.
One trader said much of the cargo usually sent to northwest Europe from Asia and the Middle East is ending up elsewhere – in places such as Afghanistan – where netbacks are higher.
As a result, jet fuel stocks in the Amsterdam-Rotterdam-Antwerp region are at 574,000 tonnes this week, down from 632,000 tonnes last week.
Buying interest in Europe for jet fuel traditionally picks up around March or April – as weather warms and the holiday season approaches. That trend is expected to be amplified this year, with the Olympics held in London, which could lead to undersupply and high prices, said one trader.
However, for the time being jet fuel demand remains flat. February is traditionally a quiet month and this has been exacerbated by the ongoing strike at Frankfurt airport in Germany.
Airfield workers from trade union GdF are striking over pay and the outsourcing of contracts at Europe’s third busiest airport.
The original walkout was between 16 and 22 February, but it resumed on 26 February – and is due to last until Thursday 1 March – after negotiations broke down between the union and airport operator Fraport.
It is estimated that 1,400 flights have been cancelled since the action began, up to and including the 200 on Monday 27 February.
($1 = €0.75)
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