Asian jet fuel seen firmer vs gasoil in Oct despite higher Chinese jet fuel exports

The Asian jet fuel complex will likely remain strong relative to gasoil in October -- despite expectations of China prioritizing clean export quotas for the sale of jet fuel rather than gasoil -- as demand for the former remains strong moving into the year-end holiday season, sources said.

The Platts-assessed FOB Singapore physical regrade -- the spread that measures the value of jet fuel over 10 ppm sulfur gasoil -- was assessed at minus 27 cents/b at the Asian close Oct. 16, narrowing 42 cents/b on the day, S&P Global Commodity Insights data showed.

China is expected to export 1.66 million mt of jet fuel in October, down from an estimated 1.75 million mt in September, sources said.

In contrast, gasoil exports from China are expected to plunge to as low as 200,000 mt in October from an estimated 410,000 mt in September, sources said.

The fall in gasoil exports also coincides with a rise in gasoline outflows. China is seen exporting 720,000 mt of gasoline in October, compared to 300,000 mt in September, market sources said.

"It’s just policy level planning; [China] prioritizes gasoil/gasoline for domestic consumption, whereas jet fuel always has a surplus, so can export more," a Singapore-based trader said in response to possible oversupply concerns.

Despite the rise in Chinese jet fuel exports, jet fuel prices are expected to remain strong as demand for aviation fuel picks up ahead of the year-end holidays, the peak season for air travel, sources said.

"Structure-wise, the jet is still stronger than gasoil. Heating demand for kerosene from Japan could also be supporting Asian jet fuel prices," a trader said.

The FOB Singapore jet fuel/kerosene cargo was assessed at $85.73/b Mean of Platts Singapore jet fuel/kerosene assessment Oct. 16, down 38 cents/b from the previous day, Commodity Insights data showed.

The FOB Singapore Gasoil 0.001% (10 ppm) cargo was assessed at $86/b to the Mean of Platts Singapore gasoil assessment Oct. 16, down 80 cents/b from the previous close, the data showed.