FOB Korea jet fuel cash differential hits near three-year high on strong US demand

Singapore — The cash differential for jet fuel/kerosene cargoes loading from South Korea jumped to a near three-year high Feb. 23 on strong demand caused by inclement weather in the US, coupled with tight regional supply, industry sources said.

The FOB Korea jet fuel/kerosene cash differential rose 5 cents/b, or 9.09%, day on day at the 0830 GMT Asia close Feb. 23, with the assessment settling at a premium of 60 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment, S&P Global Platts data showed.

This marked the highest level since 2018. The last time the FOB Korea jet fuel/kerosene cash differential was assessed higher was on March 8, 2018, at MOPS plus 65 cents/b, Platts data showed.

"I believe the arb [arbitrage] from South Korea to USWC should be open, regional supply is pretty short now, and everyone is trying to lock in the arb window ... it's just a matter of sourcing for enough cargo," a Singapore-based trading source said.

Large parts of the US faced severe winter weather in the week ended Feb. 20, with harsh conditions predominantly seen on the US Gulf Coast while western US had relatively mild conditions. The most recent data from the Energy Information Administration showed that jet fuel stocks for western US totaled 9.54 million barrels in the week ended Feb. 12, down about 580,000 barrels from the week prior.

Weekly imports to the US West Coast simultaneously hit a three-week high of 43,000 b/d, with no other imports to other US regions seen at the time. While the weekly data does not break down imports by country of origin, US customs data showed that two ships discharged S Korean product in Los Angeles in February. The ships totaling 630,000 barrels of fuel discharged on Feb. 16 and Feb. 17.

Shipping data from Kpler showed that three Los Angeles-bound ships have been loaded in South Korea in February. The three ships totaling 905,000 barrels of jet are due to discharge in the US between Feb. 23 and March 4.

A voyage from South Korea to the USWC takes about three weeks.

"The Gulf Coast refinery outages could boost the prospect for Korean jet fuel exports to the US West Coast," S&P Global Platts Analytics said in a report Feb. 19, adding that calculations suggest the trans-Pacific arbitrage is currently marginally open.