Jet fuel imports into Fujairah climb to two-year high in contango market

Jet fuel imports into Fujairah on the UAE’s eastern coast climbed to a two-year high in April in another sign that traders may be betting on higher prices as airlines slowly add more passenger flights and countries ease COVID-19 lockdowns.

Jet fuel imports were at 39,800 b/d for the month, the most since 47,600 b/d in April 2018 and up from 6,950 b/d in March, according to cargo tracking data from Kpler. The jump in jet fuel helped boost middle distillate imports to a two-year high at 150,000 b/d.
Emirates, the world’s biggest long-haul flight operator, was allowed to resume partial flights on April 6 to carry outbound travelers, and Etihad, the UAE’s second-biggest carrier, is adding special flights this month from Abu Dhabi. The UAE on March 25 suspended passenger flights for two weeks, except for emergency evacuation and cargo flights, marking the country’s worst aviation crisis due to the coronavirus outbreak.

Airlines in China, Thailand, Malaysia, Australia and Vietnam are also taking to the skies, easing the steep contango in the derivatives market. The steep contango has been enticing traders to seek storage options with the intention of reselling cargoes at a higher price later. There was at least one cargo of jet fuel in floating storage off the coast of Fujairah, according to Kpler data.

“Jet oil import volumes have lately increased in Fujairah,” GPS Chemoil’s general manager Tarun Arora told S&P Global Platts, adding:

“With the aviation industry in a standstill, these increased volumes are mainly for storage due to the contango market.” GPS Chemoil is one of 11 companies that store oil products at Fujairah and report figures weekly.

Record stockpiles
Stockpiles of oil products at Fujairah reached 26.192 million barrels as of May 4, the most on record, according to the Fujairah Oil Industry Zone. Middle distillates showed the biggest jump in the week to May 4, climbing 18% at 4.855 million barrels, the highest since December 23, 2019, the data showed.

In the physical market, the FOB Singapore jet fuel/kerosene cash differential rebounded last week to a discount of minus $3.47/b to the Mean of Platts Singapore jet fuel/kerosene assessments on Friday. The FOB Singapore jet fuel/kerosene cash differential had fallen to an all-time low at minus $4.67/b on May 4.

The positive momentum was also evident in the derivatives market, which saw the front-month June/July Singapore jet fuel/kerosene swap spread rebound to minus $2.75/b, up 55 cents/b since the beginning of the month. Meanwhile, the FOB jet fuel cracking margin against the front-month cash Dubai also soared in the week at minus $4.61/b at the Asian close Friday, from minus 8.05/b last Monday.

Gasoil made up the bulk of middle distillate imports in April at 110,000 b/d, the most since November 2019, according to the Kpler data.

Heavy distillates exports and imports both declined, with shipments outward at 148,000 b/d for April, the lowest since January 2019, and inbound shipments at 204,000 b/d, the lowest since February 2019. Fuel oil imports came at 204,000 b/d, the lowest since February 2019.

Light distillate exports dropped to 113,000 b/d, the lowest since February 2019.
Source: Platts