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Flight ban pushes European jet fuel prices down by $20-25/t

19 Apr 2010 18:30 (+01:00 GMT)
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London, 19 April (Argus) — European jet prices have fallen by more than $20/t since Friday as European jet fuel demand has plunged as a massive cloud of ash produced from a volcanic eruption in Iceland continues to clog European airspace.

European jet prices have fallen by more than $20-25/t since 16 April. A jet barge was priced at $723.75/t fob ARA while a jet cargo was priced at $732.25/t cif Le Havre on Monday.

European jet fuel prices are expected to fall further as demand is hit by the grounding of aircraft across Europe because of a massive cloud of volcanic ash over northern Europe that poses a threat to aircraft engines.

The European jet fuel barge market saw a flurry of deals on Monday, with 12,500t of product traded in the MOC window. Some airlines and traders are beginning to offload product before prices fall further. Lufthansa, Statoil, Shell and Glencore were the sellers while Morgan Stanley bough five barges.

The morning session was quiet today with no traders showing firm levels but by afternoon barge differentials were assessed at May $36/t, a fall of $4.50/t from Friday.

Jet swaps were also much lower on Monday. May jet swaps were trading at a $45-47/t premium to Ice gasoil futures, compared with $52-53/t on 16 April. June swaps were seen at premiums of $50/t compared with $54/t on 16 April.

Differentials on the cargo market were also weaker and were assessed at $44.50/t compared to $47.50/t on Monday. Vitol and Shell were active bidders while BP and Morgan Stanley were on the sell side.

Around 150,000t (1.2mn b/d) of jet fuel is used daily in flights from Europe, and almost 40pc of flights have been cancelled in the last five days, resulting in a loss of almost 300,000t of demand.

The crisis will encourage refiners to blend jet fuel into diesel as jet fuel demand and prices remain low.

Airspace closures and the resultant impact on jet demand come at a time when the jet market is already weighed down by sluggish demand and ample supply.

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