European jet barge premiums are holding steady this week, despite poor refining margins across Europe and talk of run cuts, according to Platts data.
On Wednesday, jet FOB barges in the Amsterdam-Rotterdam-Antwerp region were trading at a premium of $65.75/mt to the front-month ICE gasoil contract, Platts data show, or a $6.50/mt discount to CIF NWE cargoes of $72.25/mt.
While the spread between cargoes and barges has widened over the last several days as cargoes have strengthened slightly -- on Monday, barges were trading at a $3/mt discount to cargoes -- barge premiums have held steady in the mid-$60s for over a week, despite news from the market that poor crack values may lead to run cuts.
"I reckon that the prompt looks pretty well-balanced," a European jet source said. "That spread often blows out when there are shocks in either supply or demand, like we saw a few months ago when there was no real demand at the prompt, but a lot of barrels coming in."
An increase in crude oil prices recently has put pressure on refining margins across Europe. Middle distillate crack spreads -- which measure a product's price performance in relation to crude -- have been falling in recent weeks.
On Wednesday, the jet fuel crack was at $11.75/mt, down from highs of $18.45/mt during the first week of August, Platts data show.
"Runs are awful," another European middle distillates trader said. "We're probably looking at continued cuts in production slates in a short time, despite the need to build up winter stocks of diesel and kerosene."
Jet fuel, because it is a straight-run product, is generally one of the first products to see price jumps when the market becomes concerned about cuts to regional refining runs.
"Right now, the structure of the jet market is not really allowing for a great deal of storage," the second source added. "There is no stock, and with possible cuts in refining runs, you could see some products like jet move very, very quickly."
However, despite these concerns, jet barge premiums have remained steady. Trading sources in the jet barge market said that, while refinery cuts are a possible concern, at the moment there is enough jet fuel available in the Northwest European market to meet demand.
"When jet first started to weaken versus diesel, a lot of refineries in ARA were slow to respond. Now...diesel is taking some of the jet yield," a jet barge trader said. "Although refineries have swung towards minimum jet production, there is still plenty entering the market."
