Slow Ships Drag Down Europe-Bound Jet Fuel Arrivals for August
The estimated number of Europe-bound tankers laden with jet fuel seen arriving at ports in the 28 member countries of the European Union in August has been substantially revised downwards as vessels are seen delaying loading or transiting around the Cape of Good Hope to extend voyage times.
Imports of some 2.12 million metric tons on 36 tankers are now tracked for August, down from the record volumes of nearly 2.5 million tons estimated just weeks' ago.
At least two tankers, SKS Donggang (90kt, Noble) and STI Veneto (95kt, Shell) are seen transiting around the Cape of Good Hope after loading in China and Singapore, respectively. At least one other tanker is also expected to take the rarely used route this month.
By avoiding the normal transit to Europe via the Suez Canal, the Long Range Two product tankers extend their voyage by approximately 21 days.
This suggests that Shell, Noble and others are using trading strategies that take advantage of the contango structure in the market, buying and storing the middle distillate for a later sale at a profit. As a result, longer and slower journeys that use less fuel and lower transport costs are an option.
The future price of jet fuel in the second quarter of 2016 is more than $46 per ton higher than the August price, based on data compiled by OPIS that derives outright paper prices from swaps and low-sulfur gasoil futures settled Aug, 3.
Reflecting storage plays are jet fuel inventories in the Amsterdam-Rotterdam-Antwerp trading hub. They gained 12% over the week ending July 31 to reach another 2015 high, according to BNP Paribas, citing data from PJK International. There are 6 million barrels in storage, 31% higher than the same period last year.