Airline Treasury & Risk Management Forum Jet Fuel Spot Markets & Price Reporting Andrew Bonnington, Platts
JET FUEL SPOT MARKETS AND PRICE REPORTING Andrew Bonnington Editorial Director, Strategic Oil Markets Development October 2016
AGENDA Introduction to Platts The role of Price Reporting Agencies (PRA s) Liquidity in assessment processes Current trends in jet fuel prices
PLATTS AN INTRODUCTION Enabling the markets to perform with greater Transparency & Efficiency Sinc e
PLATTS AN INTRODUCTION Editorial and market assessments are conducted with complete Independence & Impartiality
PLATTS AN INTRODUCTION
PLATTS AN INTRODUCTION
BENCHMARK PRICE ASSESSMENTS THE SIGNIFICANCE Focus, Impact and Relevance Benchmarks are used to price term contracts Futures settlements are often tied to spot market assessments Derivatives price out against spot price assessments or futures settlements
USE OF BENCHMARK ASSESSMENTS Main applications of assessments in the physical markets Frame agreements (long-term contracts) at market price which mitigate price volatility Lower-risk, assessment-linked spot transactions, which help to manage cash flow New trading strategies (sell fixed / buy floating priced cargoes in a falling market, for example) A reference for current market price (for analysts, investors, traders just returned from holidays ) Applications of assessments for derivative markets The index functions as the underlying price for settlement basis for derivatives Used for OTC (over the counter) paper swaps and exchange-cleared futures & options Settlement mechanism tends to use average of the month of assessment prices Liquidity tends to concentrate in the first few months where spot cargo hedging takes place Speculative position-taking in paper markets is an important liquidity provider for market players seeking true risk management (hedging)
AMSTERDAM / ROTTERDAM / ANTWERP (ARA) United States Atlantic Coast ARA is the centre of Europe s oil markets North Sea Crudes INLAND EUROPE Russian Crudes MEDITERRANEAN South America Middle Eastern Crudes West Africa ASIA African
SINGAPORE Middle Eastern Crudes India China Japan Singapore is the centre of Asia s oil markets Australia
HOW DATA IS COLLECTED With price assessments, not all information can be taken at face value Bids, offers and transactions in Heard & Intra-day pages Transparent, verifiable price assessments out.
HOW DATA IS COLLECTED Transparent: named bids / offers Assessments reflect tradable value (or the traded value) at market close Real-time technology for open price competition Values are based on Market on Close (MOC) principles End of day assessment windows / e- window Assessments based on firm bids/offers and traded activity
TRANSPARENCY OF INFORMATION
WHY PLATTS? Consistency of methodology across markets Performance tracking of transactions Transparency of information is key Global usage of Platts assessments - 90 IOSCO Oil Benchmarks - assessments used across whole value chain
EUROPEAN NWE CARGO MOC LIQUIDITY DATA Source: Platts
Tonnes EUROPEAN NWE CARGO MOC LIQUIDITY DATA 2,500,000 2,000,000 1,500,000 1,000,000 2014 2015 2016 Jan-June 500,000 0 Vitol BP Shell TOTSA Trafigura Morgan Stanley Noble Source: Platts
Barrels SINGAPORE MOC LIQUIDITY 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 2013 2014 2015 2016 1,000,000 0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Source: Platts
Barrels SINGAPORE MOC LIQUIDITY DATA 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 2014 2015 2016 Jan-June 3,000,000 2,000,000 1,000,000 0 Hin Leong BP Vitol shell Unipec Total Trafigura Winson Glencore Petrochina Rest Source: Platts
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Barrels DERIVATIVES MOC LIQUIDITY 25,000,000 20,000,000 15,000,000 10,000,000 Jet CIF NW Singapore Jet Kero 5,000,000 0 Source: Platts
$/mt EUROPEAN JET PRICES FALL SHARPLY 1200 1000 800 600 400 200 0 December-13 April-14 August-14 December-14 April-15 August-15 December-15 April-16 August-16 Source: Platts
$/barrel JET FUEL REFINING PROFITS UNDER PRESSURE 30 25 20 15 10 5 0 Aug-2012 Jan-2013 Jun-2013 Nov-2013 Apr-2014 Sep-2014 Feb-2015 Jul-2015 Dec-2015 Jet Source: Platts
$/barrel RELATIVE STRENGTH IN GASOLINE RETURNS 30 25 20 15 10 5 0 Aug-2012 Jan-2013 Jun-2013 Nov-2013 Apr-2014 Sep-2014 Feb-2015 Jul-2015 Dec-2015 May-2016 Diesel Gasoline Jet Source: Platts
$/barrel REFINING MARGINS COMING UNDER PRESSURE 12 10 8 6 4 2 0-2 -4 Forties ARA Cracking Netback Margin Oman Singapore Cracking Netback Margin Source: Platts
EUROPEAN JET DEFICIT GROWS -0.1-0.4-0.7 0.0-0.1-0.2-0.3 0.0-0.1-0.1-0.2-0.2 0.2 0.2 0.1 0.1 0.0 Source: Eurostat
EU-28 MONTHLY JET IMPORTS/EXPORTS TOP 2015 EXPORTERS (MT/MONTH) Baltic flow TOP 2015 IMPORTERS (MT/MONTH) 316,697 mt 284,283 mt 264,332 mt 204,238 mt 175,629 mt Holland (269,279) UK (663,545) Spain (165,480) France (367,380) Italy (144,346 ) 1,852,592 mt 663,545 mt 367,380 mt 262,990 mt 165,480 mt USA flow 26,257 Saudi Arabia 284,283 Kuwait 264,332 UAE 316,697 Source: Eurostat AG/Far East flow
MIDDLE EAST REMAINS TOP JET SUPPLIER TO EUROPE RUWAIS IMPACT: UAE JET EXPORTS SURGE 70% FROM 2014 (Mt / month) 2,250,000 Other 2,000,000 1,750,000 1,500,000 1,433,626 1,381,856 1,461,784 1,555,856 1,654,132 1,661,766 1,852,194 South Korea UAE 1,250,000 1,000,000 India 750,000 Kuwait 500,000 250,000 Saudi Arabia 0 2009 2010 2011 2012 2013 2014 2015* Source: Eurostat
Tonnes JAN-JUNE 2016 EU IMPORT DATA 600000 500000 400000 300000 200000 100000 0 UAE SAUDI ARABIA KUWAIT INDIA USA S KOREA RUSSIA REMAINDER Source: Eurostat
MIDDLE EAST REFINERY EXPANSIONS Refinery 1 2 3 4 5 6 7 8 9 10 11 Yanbu Rabigh Jazan Al Zour Jubail Ras Tanura Ras Laffan Fujairah Sohar Duqm Ruwais Owner Aramco/Sinopec Aramco/Sinopec Aramco KNPC Aramco/Total Aramco QP/Total IPIC QRPIC IPIC/OOC ADNOC Capacity/ Expansion Completion 400 kb/d Upgraded (Phase 2) 400 kb/d 615 kb/d 400kdb Upgrade +146 kb/d 200 kb/d +86 kb/d 230 kb/d +417kbd 2014 2016 2018 2019 2013 Relaunch 2016 2016 2015 1 2 Yanbu Rabigh 3 Jazan Jubail 4 Ras Tanura 5 Al Zour 6 7 Ruwais Ras Laffan 11 8 Duqm Fujairah 9 10 Sohar
FUJAIRAH STORAGE GROWTH Source: Platts
NEW OUTRIGHT JET MIDDLE EAST ASSESSMENTS In response to strong market demand, S&P Global Platts will begin publishing independent price assessments for a range of refined oil products in the Middle East market starting October 3, 2016. These new spot price assessments will be labeled as "FOB Fujairah" in Platts publications and databases, and run alongside Platts' existing MOPAG netbacks. The new assessments -- for gasoline, gasoil, jet fuel and fuel oil -- will be published alongside Platts existing physical netback values for these products. The new assessments will reflect trade on a freeon-board basis at good ports across the Gulf, fully normalized to an FOB Fujairah basis. The Middle East has seen substantial growth in refining and storage capacity over the past decade, as well as widespread growth in physical oil trading and market participation. These factors have led to a more vibrant and active spot physical market for oil products, which will be the basis for these assessments. NEW ASSESSMENTS: From October 3, Platts will begin publishing independent, outright assessments on a free-on-board basis for 95 RON gasoline; 10 parts per million sulfur gasoil and 500 ppm gasoil; jet fuel; and 380 CST high sulfur fuel oil.