Jet arbs into Europe open as rising Chinese exports cap the East despite Middle East escalation

• Bias remains lower for jet, especially relative to diesel. Geopolitical escalation can still lift outright prices, but rising Chinese exports, weak Asian pricing and open arbitrage flows leave the near-term physical picture bearish. The main support to watch in Asia is Japanese kerosene stocking ahead of winter, which could absorb part of the regional surplus later in the quarter.
• Geopolitical risk remains elevated as the US-Iran conflict around Hormuz continues to escalate. Further Houthi strikes on energy-sector facilities in the south, where the Jizan refinery is located, add to the risk. Trump’s statement that the war with Iran will end “immediately after” the US midterm elections (Nov) offers no relief in the near term.
• The EU Oil Coordination Group said on 8 September that there is currently no supply problem in Europe. Jet demand is being met through higher EU refinery runs, alternative imports and adequate commercial and emergency stocks, although a prolonged Middle East conflict and seasonal winter demand could tighten balances later.
• East continues to remain weak as compared to West. Jet Oct E/W is close to -$140/mt and one of the main factors is supplies from China. Chinese refined-product exports are expected to exceed 4mn tonnes in September with jet accounting for as much as 2.4mn tonnes, up from around 2.2mn tonnes in August.
• Asia is already reflecting the heavier supply. Singapore jet regrade remains deeply negative at around -$2.50/bbl, down $0.80/bbl w-o-w, while the October jet cash differential has softened to a discount of around -$0.25/bbl, negative for the first time in the last three months.
• Weak regrade and softer jet East-West economics have opened virtually every major Asian and Middle Eastern LR2 route into Rotterdam. Alongside Yanbu and WCI, arbs from as far east as Singapore and South Korea are now workable. Singapore economics are around +$68/mt for Oct and +$57/mt for Nov, while Ulsan is open for November at around +$30/mt. Houston is the only shut route, and only marginally so at -$2.3/mt for Oct while open at $2/mt for Nov. More details on the relevant arb are in the attached table from Leonidas AI. Korean loadings for Europe jumped to more than 500kt in August as per Signal data, against just a single LR1 in July. With transit times of close to 40 days, that points to heavy South Korean jet arrivals into Europe this month.
• The same relative-value setup continues to make Asian jet competitive into the US West Coast. That should keep pressure on LA jet premia, which have fallen to around -22.25 cpg, particularly with PADD 5 jet stocks at 11.37mn bbl, comfortably above the five-year average, while peak summer aviation demand is fading.

(Jet fuel arb to Rotterdam)

(Los Angeles jet premium)

(Jet fuel regrade in Europe and Singapore)

(PADD-5 jet fuel inventory)

About the Author
Abhishek Kumar | Senior Oil Market Analyst, Sparta Commodities
Abhishek is a Senior Oil Market Analyst at Sparta Commodities, based in Dubai, with a background spanning trading and analytics. Before joining Sparta, he held roles at Litasco, LSEG, and Reliance, where he focused on oil market analysis, spec trading, and broader oil market dynamics.
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