London, 20 April (Argus) — European jet prices rose by $10/t-15/t helped by the easing of recent flight restrictions. This is expected to boost jet fuel demand, which was depressed because of aviation fears as a result of the Icelandic volcanic ash cloud. Jet fuel prices were up partly in response to a $12.75/t rise on the May gasoil futures contract.
The price gains have been helped by the reopening of parts of Europe's airspace and the resumption of flights from some European airports, as the threat from volcanic ash dissipates. UK airports, with the exception of a few Scottish airports, are still closed today.
Differentials on the barge market rose by $1/t as five barges were traded at May +$37/t for 23-27 April loading dates. KLM, Glencore and Lufthansa were all sellers and Hetco, BP, Shell and Morgan Stanley were active buyers.
The cargo market also saw a trade on Tuesday. BP sold a 30,000t cargo to Vitol. 15,000t were traded at a $1/t discount to Platts, while the remaining 15,000t was sold at May +$45/t cif Le Havre for 30 April to 4 May delivery.
But jet fuel demand has taken a big hit because of the flight ban and this is encouraging traders to put product in floating storage. About 800,000t of jet fuel was being stored in long-range vessels outside northwest European ports before the ash cloud disrupted European airspace. This figure is expected to have risen by more than 200,000t since flights were halted on 15 April. This has cut jet fuel demand by 350,000t-380,000t.
The amount of jet fuel in floating storage in northwest Europe has increased to over 1mn t after a volcanic ash cloud disrupted European airspace.
Prompt jet fuel prices have fallen by almost $40/t since 15 April and traders are finding it more profitable to sell product at higher prices for future delivery and bear the cost of storage, than to sell now at lower spot prices.
Traders say this is likely to substantially widen the contango — the premium of forward to prompt prices — on jet fuel cargo and swap markets, thereby encouraging yet more volumes to be placed into offshore storage tanks.
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