European Fuel Analysis July 2016

Fuel tanker

What factors influenced the changes in jet fuel prices this July? Our fuel expert takes us through the month’s price fluctuations.  

On the first day of July, we saw a drop in the fuel prices by 6 USD/ton but due to demand from Greece, Italy, and Spain, the price then went up by 2 USD/ton. The price again dropped by 16 USD/ton the next day when more vessels arrived from the Middle East and India. European storage was then sufficient to comply with the aviation jet market demand, and the demand index slowing down made the price drop further as the Asian cargoes loaded in European ports. The drop increased the buyers’ appetite to purchase the floating storages especially as it went down to 424.75 USD/ton.

To bring the prices up again, ARA, Indian, and Asian suppliers decided to take the long route around the Cape of the Good Hope rather than go through the Suez Canal. On July 14, the price rose by 13 USD/ton, bringing some improvement to the price by the middle of the month. The diversion of vessels around the Cape of Good Hope was creating a small supply gap but the remaining balance would still be forwarded to August.

On July 22, the demand was still unchanged with high stock levels and the price dropped to 14 USD/ton. By the 26th, there were some arrivals of jet fuel in Europe from ARA and extra floating storages saw the price significantly drop to 409 USD/ton after it had hit 440 USD/ton (the highest price in the second half of July month).

On Wednesday, July 27, the suppliers announced floating storages and traders were demanding to cut the supply through the Suez. All the factors such as floating storages, less demand, and oversupply combined to bring the price down to 395.25 USD/ton by the end of July.

We won’t see the real effect of the diversion on the price at the beginning of August, the prices will more than likely begin to rise again in the second week of August, especially as the vessels stopped using Suez to supply Europe and instead used the long route.