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Jet fuel from Asia to U.S. to rise amid Gulf coast refinery outages




By Jessica Jaganathan

Petroleumworld 08 30 2017

Jet fuel shipments from Asia to the United States are likely to increase in September as the route becomes profitable after Hurricane Harvey caused large-scale U.S. refinery outages.

The outages caused by Harvey will likely cut about 3.5 million barrels from U.S. jet fuel production with 3.5 million barrels per day (bpd) in refining capacity expected to be shut for about 10 days, said Nevyn Nah, analyst at Energy Aspects.

Jet fuel typically makes up about 10 percent of a U.S. refinery's output.

“Jet fuel stocks are already thin, so balance will be tight,” he said. Cancelled flights during the bad weather, though, may reduce jet fuel demand somewhat, he added.

In Asia, on the contrary, refineries are returning from maintenance and supplies are set to rise, which could prompt more shipments to the United States, he said.

Several trading sources said it was now profitable to book a tanker and ship prompt-loading jet fuel to the United States.

“The West Coast market is pretty strong and the arbitrage is now (profitable) from North Asia to the U.S., especially if you already have cargoes on the water,” said a U.S. company's trader, who is not authorised to speak with the media and declined to be named.

Arbitrage is trading goods between regions with the goal of profiting from regional price differences.

Spot jet fuel prices in Singapore JET-SIN, Asia's benchmark, last settled at $502 per tonne, almost $50 a tonne cheaper than on the U.S. West Coast JET-LA.

Prices for South Korean or Japanese jet fuel are typically lower than in Singapore, while U.S. jet prices could rise further amid the outages, traders said.

Asia shipped about 2.94 million barrels of jet fuel to the United States in May, mainly from South Korea to the U.S. West Coast, the latest data from the U.S. Energy Information Administration showed.

So far, about 1.4 million barrels in tanker capacity have been provisionally booked to ship jet fuel on that route in September, though most of the charters were done before the storm hit, shipbrokers said.

U.S. traders and refiners are making enquiries for spot cargoes from North Asian refiners to load as soon as possible, three refining sources familiar with the matter told Reuters.

There is limited availability, however, as refiners have already sold most cargoes for September, they said, meaning the U.S. buyers may need to purchase supplies from middlemen in Asia, likely at a premium.

Another shortage is looming in Latin America, which typically takes large amounts of refined products from the United States, although one trader familiar with the matter said the region has sufficient inventories for now.

Story by Jessica Jaganathan ; Editing by Henning Gloystein and Tom Hogue from Reuters.

08 29 2017

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