Chinese state-owned jet fuel importer China Aviation Oil (CAO) has bought cargoes for August to September delivery at smaller discounts than its previous purchase, reflecting slightly improved market fundamentals amid limited arbitrage outlets to the US west coast.
CAO is thought to have bought through a tender up to 900,000 bl of jet fuel at discounts of $0.20-0.40/bl to Singapore quotes, depending on the loading port and the delivery date. The cargoes are to be delivered in three lots between mid-August and end-September. CAO last bought a similar volume at discounts of $0.70/bl or less for end-July to late August delivery.
Discounts have narrowed despite scarce arbitrage outlets to the US, only intermittently accessible to traders able to secure low freight rates. Los Angeles jet fuel premiums have fallen over the past month from 12.50¢/USG to 8¢/USG yesterday, a level unviable to cover northeast Asian freight costs for most refiners.
But sporadic jet fuel shipments to the US west coast and Europe have still be seen, which might have helped to ease supply pressures in Asia. Shipping fixtures show at least three jet fuel cargoes, totalling 1.93mn bl, scheduled to head to western destinations between late July and mid-August.
The narrowing discounts could also be attributed to supply disruptions in northeast Asia in recent weeks. Pipeline explosions disruption loadings at northeast China's Dalian port and a fire at Formosa Petrochemical's 540,000 b/d Mailiao refinery in Taiwan affected middle distillates exports in both locations, boosting market sentiment.
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