Singapore, 2 June (Argus) — Japan's exports of jet fuel are adding to supply in Asia-Pacific with few arbitrage opportunities to the US.
Japanese exports of jet fuel in the week to 29 May rose 66.5pc from a week earlier to 1.28mn bl, according to data from the Petroleum Association of Japan. But Japan's output of jet fuel fell as the country's refinery runs fell further to 63.8pc, after falling from 74.6pc to 66.2pc a week earlier. Jet fuel production fell to 1.54mn bl, down by 14pc from the previous week and down 21pc from a month earlier.
Asia Pacific jet-kerosine markets are fundamentally bearish on the back of oversupply and slowing demand. Disruptions to global flight schedules following the closure of European airspace caused by the Icelandic volcanic eruption resulted in a stockbuild. Reflecting the weak market, the forward curve or intermonth spread is at a wide $1/bl contango, although this could encourage storage plays on expected higher prices.
The arbitrage to the US west coast is unworkable on paper. Los Angeles jet fuel differentials are hovering at around July Nymex +9¢/USG, undermining the region as a viable outlet for Asian jet fuel.
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