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Platts Jet Fuel

A closer look at Platts jet fuel coverage

Eurobob backwardation rallies as ARA gasoline stocks plummet

London — The prompt backwardation in Northwest Europe's gasoline market widened sharply Thursday amid tighter supply after contaminated Urals crude supplies hit refineries in Central and Eastern Europe. This helped to reduce output from plants in the Amsterdam-Rotterdam-Antwerp hub.

The May/July EBOB swap spread widened to $44.75/mt late this week, out from just $22.75/mt on May 7.

Strong backwardation is hardly a surprise, considering how tight ARA stocks have become. Data this week showed ARA gasoline stocks fell another 45,000 mt to just 802,000 mt, putting them nearly 20% below the five-year average of Insights Global (formerly PJK International) data.

Demand-side concerns into July have also contributed to the wider spread as participants noted less import demand from the US than what is typically seen for this time of year.

JET FUEL, GASOIL MARKETS

Jet and gasoil structure is also backwardated, but the length in stocks for each product has kept structure relatively in check.

The jet CIF NWE cargo June/July swap spread rose to $2.75/mt toward the end of the week, its highest level in over five months.

But stocks for jet, unlike gasoline, were close to 20% over their five-year average this week at 754,000 mt, according to Insights Global.

Jet had been in contango for most of 2019 reaching its widest on April 24 at $4.50/mt, which had incentivized storage.

Imports to the region had been firm from Asia, as that region's demand had been less than expected in throughout winter and cargoes continue to be bound for Northwest Europe.

The Front Lion, carrying 90,000 mt, had turned round the Cape, while the Jag Aanchal, holding 60,000 mt, was off Port Elizabeth, South Africa, according to Platts cFlow.

Another cargo on the Star Energy, carrying 130,000 mt of jet fuel, was initially destined for Europe but it now looks to have been diverted west. ICE low sulfur gasoil futures, the benchmark for diesel, saw the June/July swap spread rise to $5.75/mt at the end of the week.

However like with jet, ARA gasoil stocks are comparatively adequate, sitting 1.44% over its five-year average at 2.653 million mt.

REFINERY CHALLENGES

The prompt support follows the closure, due to organic chloride contamination, of the Druzhba pipeline network in Russia that transits the country's Urals crude, leading to tightness in product production from plants that use the grade in eastern Germany, Poland and Central Europe.

The pipeline has since re-opened through Ukraine and supply is returning to normal, but constraints remain.

Total's Leuna refinery, which supplies much of Germany's gasoline and receives crude via Druzhba, has had some units taken out of operation for "appropriate" technical checks due to the Druzhba issue, Total said Friday.

The French company expects operations to resume Saturday.

Furthermore, BP Raffinaderij Rotterdam B.V. has rescheduled and started a planned major maintenance turnaround on one of its CDUs, at its 400,000 b/d BP Rotterdam refinery in the Netherlands, according to industry sources.

"BP is bringing Rotterdam oil refinery maintenance forward to May, from October," a source said.

BP declined to comment.

Moreover, two refineries in the ARA region were reported to have production issues this week.

"The list of [European] refinery issues is getting closer to 1 million b/d and Russian runs are also low," a source said. Russia's 180,000 b/d year Antipinsky refinery, for instance, has stopped taking crude deliveries due to ownership issues.

SINGAPORE STOCKS PLUMMETING

Singapore commercial onshore light distillate stocks, the region's largest oil trading hub, reported its sharpest drop in seven months, even as gasoline flows from China picked up through the week.

Stocks of light distillates plunged 9.42% week on week to total 11.163 million barrels in the week ending May 15, data released late-Thursday from Enterprise Singapore showed. Stocks were last any lower in October 2018.

The draw comes despite a sharp 46.8% increase in imports, which was led by a massive 78.1% increase from China alone.

Still, Asian traders have seen the stock change as decidedly bearish amid concerns that supply could potentially outstrip demand once refineries in the region return from their scheduled maintenance programs.

The FOB Singapore 92 RON gasoline crack against front month ICE Brent crude futures contract remained below the $5/b mark through the week, averaging $4.67/b over May 13-16, well below the March and April averages of $5.79/b and $7.25/b, respectively.

--Staff Reports with Benjamin Morse, benjamin.morse@spglobal.com, in New York