By Trixie Yap and Shariq Khan
Jan 8 (Reuters) – The premium for prompt U.S. West Coast jet fuel to Asia has reached its widest in nearly two years, LSEG data showed on Thursday, as refinery outages curbed U.S. supply and slower Chinese demand increased the fuel’s availability in Asia.
The February Los Angeles jet fuel derivative price is nearly $40 a barrel higher than Asia’s benchmark, according to the data, a level last hit in mid-February 2024.
Traders say they hope the increased jet fuel price spread for the two regions on paper will lead to more shipments from Asia to the U.S. West Coast.
Weak demand for jet fuel in China has added to the downward pressure on Asia’s prices, said Matias Togni, analyst at NextBarrel. China’s total flight numbers have fallen by 1.6% so far this year from the same period last year, data from flight tracking service Airportia showed.
CLOSURES AND REFINERY OUTAGES REDUCE US OUTPUT
In the United States, refinery outages have reduced fuel output and permanent plant closures will further tighten supplies, analysts said.
The Asia-US West Coast jet fuel price spread has widened as the availability of jet fuel barrels in the US West Coast has shrunk, mainly because of an extended outage at PBF Energy’s refinery in Martinez, California, Vortexa’s head of APAC analysis Ivan Mathews said.
In addition, a jet fuel unit at Chevron’s 285,000 bpd El Segundo refinery has been under repair since a fire in October.
U.S. West Coast jet fuel stocks were near two-month lows of 11.19 million barrels on January 2, data from the U.S. Energy Information Administration showed. The region’s refinery utilisation fell to 80% in the week ended January 2, compared with 85.4% in the same period last year, the data showed. [EIA/S]
Further tightening supply, Valero plans to gradually wind down operations at its 145,000 bpd Benicia refinery in California from February, the company said on Wednesday, after Phillips 66 shuttered its 139,000-bpd Los Angeles site late last year.
Together the two plants account for about 11% of the total refining capacity in the U.S. West Coast.
ASIA-USWC SHIPMENTS MAY RISE
Two trade sources said they expected Asian jet fuel exports to the U.S. West Coast to hit 500,000-600,000 tons (3.94-4.72 million barrels) this month as sellers try to cash in on higher margins despite the prompt delivery timeframe.
So far this month, shipments are slightly below 100,000 metric tons, ship-tracking data from Kpler and LSEG showed.
(Reporting by Trixie Yap in Singapore and Shariq Khan in New York; Editing by Florence Tan and Barbara Lewis)
