SINGAPORE (Reuters) -China Aviation Oil, a subsidiary of state-owned China National Aviation Fuel Group, is seeking to buy two cargoes of jet fuel for November delivery into Shanghai and Huangpu via tenders in a rare move, four sources with knowledge of the matter said on Monday.
CAO is seeking one 30,000 metric ton cargo for delivery on Nov. 7-11 to Shanghai and one 25,000 ton cargo for delivery on Nov. 28-Dec. 4 to Huangpu.
The tender closed at 3 p.m. local time (0700 GMT) on Oct. 28, with validity up to 8 p.m.
The company did not immediately respond to a Reuters request for comment.
It has been years since CAO last imported jet fuel for China, one of the sources said.
CAO is the key supplier of imported jet fuel to China’s civil aviation industry, according to the company’s website.
This buying interest probably stemmed from tighter fuel export quota allowance for the fourth quarter, a second source said, adding that these cargoes could end up being used for the refuelling of international flights.
Beijing allocated around 8 million tons of export quotas for refined fuels in its third batch of issuance late last month, lower compared with last year’s third batch of 12 million tons.
Out of the 8 million tons, around 1.53 million tons are allocated for the trade processing route, under which aviation fuel for the refuelling of international flights falls.
The purchase could also involve some “arbitrage price play” as well, given that jet fuel export margins for China refiners remain better than gasoline or diesel, a third source said.
The spread between Asia and the U.S. West Coast prices remains economically feasible for sellers to trade on this route, Reuters calculations showed.
This slight spurt in demand will likely be supportive of Asian jet fuel prices and its cash market discussion levels, while attracting swing suppliers to direct their sale cargoes east instead of west in the near term, several trade sources said.
Spot premiums for the aviation fuel have shot up in recent weeks because of healthy demand and overall tighter supplies regionally given lower refinery output, with deals for cargoes loading in the first half of November done at premiums of 50 cents to $2 a barrel to Singapore quotes. [MDIS/TENDA] [MDIS/A]
(Reporting by Trixie Yap and Florence Tan; Editing by Tom Hogue, Mrigank Dhaniwala and Janane Venkatraman)
