Asia jet fuel/kerosene remains king of the barrel as swing barrels weigh on outlook

Tightness in the Asian jet fuel/kerosene complex has pushed the product to remain the king of the barrel, as the FOB Singapore jet fuel/kerosene swap crack against front-month Dubai swaps maintained its lead over that of co-distillate 10ppm sulfur gasoil for eight consecutive trading sessions, S&P Global Commodity Insights data showed.

Platts, part of Commodity Insights, assessed the FOB Singapore jet fuel/kerosene swap crack against front-month Dubai swaps -- a measure of the product's relative strength to the crude it was refined from -- at $14.29/b at the Asian close Oct. 23.

This figure puts the jet fuel/kerosene swap crack value above that of ultra-low sulfur diesel since Oct. 14. The FOB Singapore 10ppm sulfur gasoil swap crack against front-month Dubai swaps stood at $13.74/b at the Asian close Oct. 23.

"Northeast Asia is very tight," said a North Asian jet fuel trader.

Regional demand remains strong on the back of buying interest from North Asia, nearing the year-end season, further bolstering prices, sources said.

Reflecting the strength, China's Wepec sold via a spot tender 40,000 mt of jet A-1 fuel for loading over Nov. 5-7 at a premium of around $1.12/b to Mean of Platts Singapore jet fuel/kerosene assessments, FOB Dalian.

Downside risks weigh, regrade gains unlikely to tilt production

Against this backdrop, the front-month Singapore regrade -- the spread that measures the value of jet fuel over 10 ppm sulfur gasoil -- has remained in positive territory since Oct. 14. Platts assessed this spread at plus 55 cents/b Oct. 23, wider 17 cents/b on the day and 32 cents/b on the week, Commodity Insights data showed.

Notably, the front-month regrade reached a 10-month high at 73 cents/b Oct. 21, where it was last higher at 88 cents/b on Dec. 21, 2023.

Another regional middle distillates trader suggested "refineries are already maximizing jet fuel," owing to seasonal demand during the winter period.

Despite the strengthening regrade, expectations of arrivals from India and the Middle East will likely disincentivize refiners from tilting the production of gasoil to jet fuel.

"With this regrade, [it's] possible [to tilt] … [But] I don’t think jet strength will last since ample cargoes are coming to Singapore from India and the Middle East," the first trade source said.

The pivot in jet fuel cargoes from India and the Persian Gulf comes amid poor arbitrage economics to send barrels to the West.

The arbitrage lane to ship jet fuel/kerosene cargoes from the Persian Gulf to Northwest Europe was seen shut by $1.91/b, according to Commodity Insights arbFlow calculations released late Oct. 23.

Inventories of jet fuel and kerosene in the Amsterdam-Rotterdam-Antwerp refining hub rose 86,000 mt on the week to 1.109 million mt in the week ended Oct. 17, according to Commodity Insights data. Stock levels were 39.70% higher on the year.