Supply outstripping demand in Europe jet kerosene market

15 January 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--Demand in the European jet kerosene market is weak, but supply continues to flow into the continent, sources said on Tuesday.

No barge trades were conducted in the five days between 9-15 January, despite up to four offers seen in one day during open market trading. Market participants agreed that demand remains weak, as macro economic conditions continue to deter holidaymakers.

However, the supply-demand imbalance is yet to influence pricing, with ICE gasoil values remaining firm and jet kerosene premiums mostly stable.

A trader said refineries continue to maximise jet kerosene production over diesel, as margins remain attractive, adding to arbitrage supplies arriving on the continent.

Shipping sources noted around 450,000 tonnes of product fixed for the UK andmainland Europe from the Middle East for January loading dates.

Despite a good supply of jet kerosene available, stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region remain low as a result of a backwardated ICE gasoil market structure. Backwardation makes storage unattractive, as it costs more to store fuel than buy on a spot or prompt basis.

The ICE gasoil structure returned to backwardation following the expiration of the January contract last week, with a backwardation of around $9/tonne (€6.75/tonne) between February and March contracts.

Stocks for jet kerosene in the ARA region were at 280,000 tonnes on 10 January, slightly up from 257,000 tonnes the previous week.

A trader said the current ARA stock levels are nearly 50% lower than last year as a result of backwardation.

“Compared with last year stocks are low. The independent stocks in the ARA were around 550,000 tonnes in early 2012 and around 700,000 tonnes in early 2011,” the trader said.

($1 = €0.75)

By: Kate Wilcock
+44 208 652 3214

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