August Pricing Analysis - European Jet

SUMMARY

Jet CIF NWE rose 7.4% MoM to average $1,278.89/MT, with the range compressing to $185.75/MT and CV falling to 4.60%, the calmest reading in six months. The driver was jet losing ground specifically to diesel: Hormuz hostilities, the collapse of Russian product supply and Russia's diesel export ban tightened the gasoil pool harder than jet, pushing the Regrade to -$10.18/bbl, as refiners already pivoted toward diesel reinforced the move. Three independent physical gauges confirm a genuine CIF-side squeeze across 10-13 August, coinciding with record-low Rhine levels, even as the M1-M12 curve flattened (bear steepening). Trading activity flipped offer-heavy overall, but that flip was concentrated almost entirely in the CIF Cargoes vs LSGO diff derivative complex; physical Barges and Cargoes trading stayed balanced both months. Gunvor's pullback hit both physical and paper activity proportionally, while Unipec's sell-side surge was overwhelmingly a derivatives story rather than confirmed physical flow in the window. The prompt structure never re-normalized, closing at a fresh two-month low: the physical squeeze persisted into September even as the curve kept flattening.

MARKET ACTIVITY

• The bid/offer flip was almost entirely a derivatives story; physical Barges and Cargoes activity stayed balanced
• Physical trading (FOB Barges + CIF Cargoes physical/EFP) stayed roughly balanced both months: 47 bids/48 offers in July (0.98) vs 43 bids/38 offers in August (1.13), a mild bid-lean if anything
• The overall flip to 0.75:1 offer-heavy was concentrated in the CIF Cargoes vs LSGO diff derivative complex (~70% of all activity): 172 bids/144 offers in July (1.19, bid-heavy) reversed to 130 bids/181 offers in August (0.72)
• Gunvor SA's pullback hit both legs proportionally: physical offers fell 21 to 5 (-76%) and derivative offers fell 42 to 13 (-69%) following the 13-Aug Rotterdam terminal explosion (one fatality, six injured), consistent with a firm-wide operational disruption
• Unipec surge was overwhelmingly a derivatives story: derivative offers rose 5 to 33 (+560%) while physical offers actually fell 16 to 9, reading as intermediary positioning on the Jet-LSGO diff rather than confirmed physical cargo redirection
• BP Oil International remained the largest physical bidder both months and grew into the largest single derivative offeror in August, consistent with two-way market-making across both legs

PRICE ACTION

• Jet CIF NWE rallied 7.4% MoM despite a sharp opening gap, with the range compressing to its tightest since March
• Averaged $1,278.89/MT vs $1,190.60 in July (+7.4% MoM), $706.13 August 2025 (+81.1% YoY)
• Opened $1,247.25/MT (3-Aug), closed $1,334.75 (28-Aug); high $1,359.50 (18-Aug), low $1,173.75 (6-Aug); range $185.75/MT, narrowest since March
• Largest move: -$103.25/MT (-7.6%) on 3-Aug, a weekend gap setting a choppy tone before the market found direction
• Weekly: W31 $1,201.05; W32 $1,281.70 (+6.7%); W33 $1,347.20 (+5.1%, strongest); W34 $1,285.60 (-4.6%), easing into month-end

CROSS-MARKET DYNAMICS

• Regrade widened to -$10.18/bbl as diesel outpaced jet, while the crack vs Brent still expanded
• Regrade averaged -$10.18/bbl vs -$6.01 in July, reaching -$14.47 (11-Aug) before recovering to -$8.01 at month-end, as Hormuz, the Russian product collapse and diesel export ban tightened diesel harder than jet as jet demand softened
• Jet-LSGO diff fell to +$35.71/MT from +$54.58 (-34.6%), touching -$24.25 on 10-Aug (pre-expiry) before reversing to +$54.50, consistent with refiners pivoting output toward diesel since June
• Jet vs Brent crack still expanded to $74.25/bbl from $67.24 (+10.4%), confirming jet stayed supported against crude even while losing ground to diesel specifically

CROSS-REGIONAL DYNAMICS

• NWE-Singapore premium widened to $179.54/MT on a pricing basis; NWE-USGC compressed and briefly inverted
• NWE-Singapore spread averaged +$103.50/MT vs +$90.00 in July, month-end +$179.54 from +$142.79 (+25.7%)
• NWE-USGC narrowed to +$4.18/bbl from +$6.63 as USGC rallied harder in dollar terms, briefly inverting (11-Aug: -$5.60)

CURVE STRUCTURE

• Bear steepening on the Month curve as deferred tenors outpaced the front; three independent signals confirm a genuine physical tightening event across 10-13 August

• M1 gained $78.00/MT vs M12 +$94.25 and M6 +$98.00; the back rallied harder than the front, narrowing backwardation even as the whole curve rose
• Three physical gauges confirm genuine tightening across 10-13 Aug, not curve noise: the assessed-vs-implied basis hit -$89.79/MT (physical weakest vs paper), the prompt swaps structure deepened to -1.21 from a July average of -0.44, and the cargo-barge spread inverted (-$9.50/MT)
• The cluster lines up with record-low Rhine levels trapping barge barrels at ARA and the Gunvor terminal explosion; the prompt structure never re-normalized, closing at a fresh low of -1.45 on 28-Aug, so the squeeze persisted into September

PRICE VOLATILITY

• August CV fell to 4.60%, the calmest of the past six months

• CV fell to 4.60% on both legs, less than half July's ~11.7%, the lowest of the window; notable given the 7.6% gap and four-week rally, as prices tracked an orderly step-up after 3-Aug rather than March-July's wide swings
• Hedging models calibrated to the 8-12% prior range may overstate near-term risk if this holds, though the physical gauges argue the market has not fully normalized

SOMETHING TO WATCH

• Regrade as the diesel-jet canary:
  • Observation: -$8.01/bbl at month-end, recovering from -$14.47 but still well negative
  • Why it matters: A move toward zero signals jet reclaiming ground; a push toward -$15 confirms diesel pulling further away
  • What to monitor: daily Regrade close; the Russian export ban or Hormuz status
• Prompt swaps structure as the tightness gauge:
  • Observation: closed at -1.45, a new two-month low
  • Why it matters: Continued deepening signals scarcity intensifying even as the curve flattens
  • What to monitor: daily print; Insights Global ARA stock release
• Gunvor's Rotterdam status:
  • Observation: offers down across both physical (-76%) and derivative (-69%) legs post-terminal explosion
  • Why it matters: A return to prior pace confirms the disruption was operational, not structural
  • What to monitor: Gunvor offer count next pull; official site status update

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.