European jet fuel prices surged to fresh multi-year highs on Tuesday as the threat to supply from the US–Israel conflict with Iran deepened, extending sharp gains posted on Monday.
Prompt jet fuel swaps over-the-counter closed at a $220/t premium to front-month Ice gasoil today — almost double Monday's close — in what traders described as "off the charts" and "absolute chaos". The underlying futures contract rose by a further 13pc, surpassing $1,000/t for the first time in 29 months and lifting jet cracks to Ice Brent crude above $70/bl.
Argus assessed physical jet delivered to northwest Europe at $1,001.50/t on Monday, its highest in 28 months and more than 20pc higher than the previous close. The physical premium to front-month Ice gasoil widened to $115/t, the broadest in 27 months. The European regrade — jet versus diesel — moved above $8/bl, the widest in almost 36 months.
Regional market participants said the conflict has had a more pronounced effect on jet than on other products. More than half of Europe's jet imports come from the Mideast Gulf, according to Kpler and Vortexa, and around 40pc transit the strait of Hormuz, including shipments from Kuwait, Europe's single-largest jet supplier. But ship traffic through Hormuz has almost ground to a halt since US and Israeli forces struck Iran on 28 February, with only three tankers recorded sailing through the waterway on 1 March, according to the Joint Maritime Information Center.
Concern is mounting about European supply after cargoes already on the water arrive in the coming weeks. Refiners are expected to maximise jet output, traders said, but this is unlikely to offset any prolonged loss of Mideast Gulf supply. Europe had already become structurally tighter on jet ahead of the conflict.
Global freight rates for those still able to ship have surged, with westbound Mideast Gulf–Europe rates hitting a 21-month high of $7mn on Monday.
Asia-Pacific refiners, which had been considering sending more jet to Europe last week, are now weighing run cuts and export reductions because of disrupted crude flows from the Mideast Gulf. Market participants say the arbitrage window from Asia-Pacific to Europe is shut.
Participants have refrained from firm predictions on price direction, citing extreme volatility. Some said jet fuel values could ease when alternative supply routes reopen or arbitrage options re-emerge.
