Asian jet fuel/kerosene M4-M5 spread flips to backwardation after rare contango

The Asian jet fuel/kerosene July-August time spread flipped into a backwardation of 2 cents/b March 20 after a rare contango from March 17-19.

The last time the Platts-assessed M4-M5 spread was in contango for at least three straight sessions was in September-October 2024. Platts is part of S&P Global Commodity Insights.

Market sources said one reason for the initial flip to contango was the relatively stronger October regrade swap -- a spread that measures the value of jet fuel over 10 parts per million of sulfur gasoil.

"The change is mainly in the October regrade ... which is slightly stronger than the Q3 regrade ... so it made September/October kero[sene] [flip] into a contango," a Singapore-based market source said March 20.

The average September-October regrade derivative time spread widened week over week by 4 cents/b to minus 13 cents/b March 20, Platts data showed.

The October regrade swap was assessed at minus 50 cents/b at the March 20 Asian close, stronger than the Q3 regrade swap at minus 70 cents/b in the same session.

The Singapore-based market source also attributed general weakness in the jet fuel/kerosene complex to weakening crude oil prices following news of Russia-Ukraine peace developments.

"Spreads are reacting with that mainly, and [are] weaker on the curve too," the source said earlier in the week.

Some trade sources attributed it to run-of-the-mill seasonal weakness, where the jet fuel/kerosene market typically experiences poorer demand when there is no need for heating oil.

Meanwhile, one market source attributed the double flip in structure across the summer months to a technical correction.

"It's just a curve thing, not much to read into, in my opinion," a Southeast Asia-based trader said March 21.

On the flip to backwardation, some said it was due to a strengthening complex owing to refinery turnarounds.

"Think [there is] lesser supply ... due to the heavy turnaround schedule, hence ... prices are becoming more expensive," a second Southeast Asia-based trader said March 21.

In the week ending March 21, the total refinery downtime across Asia was expected to rise by 340,000 b/d to 2.2 million b/d, Platts previously reported.