Europe Jet Fuel Arbitrages Seen Opening
The jet fuel arbitrage to northwest Europe from Venezuela and the Far East appears to be open on some levels, driving trade flows of the middle distillate to the continent.
The OPIS Tanker Tracker has two vessels chartered to load jet fuel in Amuay Bayand then make the trans-Atlantic voyage, while volumes shipped from the Far East and India and destined for Europe are currently at the highest levels of 2015.
The Cielo Di Salerno was reportedly chartered by Trafigura, with the tanker sailing from Amuay Bay three days ago with 35,000 tons of jet fuel, heading for northwest Europe.
ENI, the Italian oil major, is taking the ship Iron Point to load 40,000 tons of jet fuel, also from Amuay Bay, with options to discharge in the U.K, northwest Europe or ports in the Mediterranean. The vessel is due to arrive at Amuay Bay in two days' time.
These are the first vessels tracked by OPIS taking jet fuel on this route since Jan. 1, 2015. The OPIS Tanker Tracker collects information from traders, brokers and satellite tracking data.
Supplier PDVSA typically negotiates the sale of refined products at prices based on the delivered cost for a particular destination minus freight costs, on terms that preclude the purchaser from discharging elsewhere. This implies that the sale to Europe is more profitable than selling to the U.S. Gulf or other
So far in July, and the first five days of August, 10 tankers carrying 685,000 metric tons of jet fuel are tracked taking jet fuel from the Far East and India and making the 30-day voyage to Europe, OPIS Tanker Tracker data shows. Five ships were seen chartered in June, and seven in May.
Figures compiled by OPIS show the indicative arbitrage was open for at least two days for the week beginning July 12. That was based on the prevailing spot price for jet fuel in South Korea (to which the
cost of freight is added), and compared to the delivered, next-month swap value in northwest Europe.
It is profitable to buy the jet fuel in the Far East, where a seasonal oversupply has lowered premiums, and ship it to Europe for storage until the first quarter of 2016, market sources told OPIS.
With freight spot rates now at six-year highs, arbitrages can be further enhanced if traders can use their own tankers, or vessels they have on longer-term charters for which they would pay a lower rate.
Vitol was today seen chartering the Dubai Brilliance out of South Korea to load 90,000 tons of jet fuel on July 26 with a voyage cost of $3.9 million, on a Long Range 2 tanker, market sources said. That adds to five other Europe-bound tankers coming from South Korea this month.
The Far East voyage cost is lower than when compared to a recent LR2 vessel chartered from the Red Sea, Saudi port Yanbu, which has a sailing time to Europe of 20 days, about 10 days shorter than the Far East.
The LR2 Polaris, said to be loading 90,000 tons of ultra-low-sulfur diesel on July 29 for Noble, paid $4 million for a northwest European destination, according to shipbroker sources.