Asia July jet cracks hit two-month low on firmer Brent, Q3/Q4 stable

London, (Quantum Commodity Intelligence) – A rebound in the value of Brent late Friday amid news that US shale supply would be slow to ramp up has squeezed refining margins for jet fuel in Asia, at a time when demand in the region is only just starting to recover.

Jet kero cracks for July hit $3.59/b FOB Singapore at 1630 Singapore time, their lowest level since 20 April, according to Quantum data, as rising demand for crude oil front-runs demand for jet fuel in the region.

Conversely, the crack, which is a proxy for jet demand in the region, for both Q3 and Q4 were largely steady on the day, chalking up just three-day lows as the firmer Brent complex squeezes cracks.

The structure of the jet-kero flat price swaps curve is largely unchanged, indicating that it is the short-term squeeze in Brent futures that is impacting margins, while the east-west spread for July fell slightly to indicate regional weakness.

Brent crude oil futures rebounded on Friday amid news that OPEC officials were told that US supply would not rise significantly to meet higher prices.

That meant Brent managed to claw back much of Thursday's losses, where inflationary expectations and reports of a sooner-than-expected return of Iranian crude exports saw many traders close out long positions.

On Monday, reports emerged that Iran could move quickly to export as much as 200 million barrels of oil from offshore and onshore storage facilities should sanctions be eased.

Jet fuel demand is only just starting to return to Asia, amid easing of restrictions in the second and third-biggest oil consumers - Japan and India.

Refining margins for 10ppm diesel also fell, but not by as large an amount.

July 10ppm cracks - a proxy for diesel demand in the region - hit the lowest level in three weeks at $6.14/b FOB Singapore.