Europe to see some returning jet supply from the Middle East in May<\/p>\n
Europe is expected to see some jet supply loading out of Oman discharge into the region amid an opening arbitrage between the regions, according to sources close to the matter.<\/p>\n
The Sea Penguin, an LR2 tanker is set to load at Duqm April 25 for discharge into UKC, Platts fixtures reports showed, with a lumpsum rate of $6.75 million. It previously loaded 102,000 mt of jet fuel from Korea for discharge in Malaysia on April 9.<\/p>\n
The fixture comes as an early sign of improving arbitrage incentives. Platts assessed the jet kero FOB Arab Gulf flat price at $171\/b April 23, around $1,365.90\/mt. Meanwhile, the jet CIF NWE cargos were priced at $1517.50\/mt April 23, a $151.6\/mt premium.<\/p>\n
The freight cost for a 90kt LR2 from the Arab Gulf to UKC was assessed at $91.39\/mt.<\/p>\n
\u201cThe arb seems open,\u201d one source close to the European jet market said. \u201cThere have been no barrels to transit but [we are] now starting to see more discussion.\u201d<\/p>\n
A European jet trader commented that the cargo would likely be very expensive. \u201cIt\u2019s not going to be tradable. Its buying for its own system.\u201d<\/p>\n
While some volumes may come from Oman, European swaps continue to show expectations of a weaker market in April compared to May. The jet CIF NWE swap differential prompt spread was assessed at a contango of $2\/mt April 23 from a backwardation of $10.25\/mt April 22. Weakening swaps could put pressure on incentives, effectively closing the route.<\/p>\n
\u201cSwaps are under pressure,\u201d the first source said. \u201cMaybe [the situation will] change quickly.\u201d<\/p>\n
Europe has continued to receive volumes loaded in the Middle East since the beginning of the US-Iran war. Persian Gulf volumes in March reached 1 million mt in March and 200,000 mt in April brought on tankers loaded before the war, S&P Global Commodities at Sea (opens in a new tab)data showed. Volumes from the Red Sea ramped up from 41,000 mt in March to 125,000 mt in April predominantly loaded at the Saudi port of Yanbu.<\/p>\n
\u201cYanbu is a small but reliable amount. In the old days wouldn\u2019t care but 100kt a month is important now so there is more focus on Yanbu,\u201d a second European jet trader said.<\/p>\n
Yanbu volumes continue to head for Europe, despite a strong pull from Asia given the risks associated with traversing the Bab-el Mandeb Strait and lower freight costs to the Mediterranean.<\/p>\n
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