Jet arbs swing open as regrades fall; NWE CIF diff up over $20/mt, but the cap is now in sight

• Last call status: correct. Last week’s commentary and Thursday’s podcast argued the Singapore regrade would need to decline from here to reopen the arbs, with more positivity in European jet pricing in the short term. Both have played out: USGC and Singapore regrades have declined over the past three or four days, extending a move Carrie Ho’s Asia update already captured in the week to 22 July, with the Singapore regrade down $5.19/bbl w/w to -$3.82/bbl.
• August’s NWE jet CIF differential has jumped by over $20/mt over the same period. The events set out by June Goh and Aaron Kildow’s content today are key here: Lloyd’s of London reportedly withdrawing war cover for Saudi-linked vessels, Yanbu barrels facing a forced reroute north up the Red Sea via Sumed or Suezmax transit, and only a handful of tankers now crossing Bab el-Mandeb, with the Suez Canal Authority raising surcharges on top.
• These occurrences have combined with weakening in both the HOGO and the jet and GO e/w spreads to open up pretty much every major jet arb into Europe. Michael Ryan’s TC11 note corroborates the direction of travel: Ulsan jet arbs into Los Angeles are shut across August and September, leaving Europe as the destination pulling Eastern barrels.
• This should be enough to cap further gains in the NWE jet CIF differential in the medium term at least. Though much of it depends on a resolution to the Middle East conflict, which continues to affect exports through the Strait of Hormuz and Bab el-Mandeb.
• The impending end of European peak summer jet demand, at the end of August or start of September, would remove the demand pillar underneath the current differential independently of anything happening on the supply side.

About the Author
James Noel-Beswick | Head of Commodities, Sparta Commodities
James is Head of Commodities at Sparta, leading the distillates vertical and covering the full oil barrel. He held analyst roles at BP and Shell before joining Sparta, and his market commentary is regularly cited by Reuters, Bloomberg, Financial Times, New York Times, the Wall Street Journal, and BBC News.
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