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Singapore Dec jet fuel derivative crack extends losses on China supply concerns, Europe lockdowns – S&P Global


December jet fuel timespread down 56 cents/b from start of Nov

Lockdowns in Austria, Netherlands dampen sentiment

The Singapore front-month jet fuel/kerosene derivative crack spread against Dubai crude swaps — a measure of the product’s relative strength to crude — has slipped further from recent highs at the Asian close Nov. 22 as China export concerns and a resurgence in COVID-19 infections weighed.

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The December jet fuel/kerosene swap crack against Dubai was assessed at $9.39/b at the 0830 GMT Asian close on Nov. 22, falling 46 cents/b day on day, and also narrowing $3.85/b since it reached a near two-year high of $13.24/b on Nov. 9, S&P Global Platts data showed.

The bearishness was evident in the paper market with the front-month FOB Singapore jet fuel time spread assessed at 17 cents/b at the Asian close on Nov. 22, narrowing 56 cents/b from the start of the month.

“The market sentiment is a bit weak now because of the lockdowns in Europe and concerns that there will be more [jet fuel] exports from China,” a trader said.

China’s Ministry of Commerce has approved the transfer of key oil products’ export quotas of PetroChina, Sinopec and Sinochem — totaling 969,000 mt — from the processing trade route to the general trade route.

Under the processing trade route, export quotas are restricted to specific refineries, volumes and products. The transfer allows the exporting companies to source the volume of barrels without restriction in the domestic market, and to choose the barrels from gasoline, gasoil and jet fuel.

This coincides with softer demand in the downstream aviation sector amid a resurgence of COVID-19 infections in Europe. Austria went into full lockdown starting Nov. 22 for at least 20 days to curb the surge in infections. Germany, Europe’s largest economy, warned it may also have to move to a full lockdown. Elsewhere, the Netherlands has imposed a three-week partial lockdown from Nov. 13.

While there have been no updates to international travel advisory to these countries, market participants are keeping track of lockdown developments, fearing that other countries in Europe would follow suit.

“Everyone will see what happens this week. Aviation demand is still recovering but the lockdowns in Europe has weakened sentiment even if there’s no travel advisory,” the trader added.

Further along the derivatives curve, the Q1-Q2 2022 jet fuel/kerosene spread was assessed at plus $1.07/b at the Nov. 22 Asian close, down 20 cents/b on the week, Platts data showed.

“The jet market structure has come off and this would affect on differentials this week even if aviation demand is recovering,” another trader said.

At the Asian close Nov. 22, the FOB Singapore jet fuel/kerosene cash differential was assessed at plus 20 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessments, down 9 cents/b from the start of the month, Platts data showed.