European jet fuel premiums to Ice gasoil futures have fallen to their lowest since the early days of the US-Iran war as confidence builds that near-term supply is adequate. But the outlook for the summer peak remains uncertain.
Argus assessed jet fuel delivered to northwest Europe at a $200/t premium to front-month Ice gasoil futures on 30 April, the lowest since 2 March — the first session after the war began on 28 February. Jet fuel traded at $67.80/bl above the North Sea Dated crude benchmark on 29 April, marking the narrowest crack spread in more than two weeks. Market participants said values held steady on 1 May.
Premiums have eased steadily over the past week as fears of supply shortfalls in Europe have receded, at least in the short term. Several airlines and producers played down the risk of shortages. Ryanair and Air France-KLM executives dismissed concerns this week, while refiners including Spain's Repsol and Austria's OMV said they are meeting supply commitments. Some market participants now view supply as secure until at least the second half of May.
Improved sentiment has been underpinned by rising imports from sources outside the Mideast Gulf. Europe sharply increased jet fuel inflows from the US and Nigeria in April, with arrivals from both countries hitting monthly record highs. Although these volumes are not large enough to fully replace supply lost as a result of the US-Iran war, their rapid arrival after Mideast Gulf cargoes dried up has helped stabilise prompt availability.
European refiners have also responded by maximising jet fuel output and postponing maintenance to cash in on strong margins and safeguard supply. The UK has asked its refiners to prioritise jet fuel production, while Sweden and Germany said strong domestic refining capacity is supporting the market.
At the same time, Europe has relied heavily on inventories to offset the loss of Middle East supply. Stocks are replacing more than half of the missing volumes, according to Argus Consulting. But this buffer is finite. Independent jet fuel inventories in the ARA hub have fallen to six-year lows of about 550,000t, while stock cover varies widely across European countries. The IEA expects Europe to hold an average of 23 days of jet fuel stocks by June — a level it classifies as a shortage.
Market participants also point to higher Chinese jet fuel exports in May, which will support global balances even if most volumes do not flow directly to Europe.
Beyond early summer, however, fundamentals become less clear. Near-term supply relief comes ahead of the seasonal peak in aviation demand, which the IEA does not believe current supply levels can meet, particularly given Europe's reliance on inventories. Some participants expect demand destruction later in the year if high prices persist.
The jet fuel market remains structurally tight. Global balances are still undersupplied because the strait of Hormuz remains effectively closed to normal commercial flows. Outright jet fuel prices in Europe are close to double pre-war levels, reflecting ongoing geopolitical risk and fragile supply. Most market participants do not expect the market to stabilise until Hormuz flows resume and inventories can be rebuilt. In the meantime, high prices are needed to keep arbitrage flows from the US and Nigeria viable, participants said.
