Singapore, 29 July (Argus) — Jet fuel output in Japan fell by almost a third in the week to 24 July but the product's stocks still remain at one of their highest levels since last October. This partly reflects limited arbitrage outlets to the US west coast.

Japan produced 1.86mn bl of jet fuel in the week to 24 July, a 33.1pc decline against the previous week, data from the Petroleum Association of Japan showed. But stocks fell by just 2pc for the same period to 6.5mn bl, still the second-highest volume registered in nine months.

Jet fuel exports, at 1.32mn bl, were 38pc higher than the previous week but 16pc lower than a month earlier. Arbitrage economics to the US west coast have been mostly unviable, although several Japanese and South Korean cargoes were seen heading towards the US and Europe in recent weeks. Los Angeles jet fuel differentials have fallen by 35pc during the past three weeks to just below August Nymex +9¢/USG, a level probably too low to cover northeast Asian freight costs.

But recent supply disruptions in northeast Asia have helped to lift spot differentials in the region from around -$0.50/bl last week to -$0.30/bl. The fire-hit Formosa Petrochemical in Taiwan is expected to delay at least some of its 900,000 bl jet fuel exports in August for an unspecified period. Fresh demand from Chinese buyer China Aviation Oil, which is seeking 720,000-900,000 bl, also boosted market sentiment.

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