FEATURE: Brazil imports jet fuel from Northwest Europe in irregular move

Highlights

Brazil imports jet fuel from NWE

Brazil leads regional air travel recovery

US exports to Brazil nearly halt in 2020 New York -- Brazilian jet fuel importers are sourcing barrels from Europe in an irregular move following a particularly barren year for demand amid the coronavirus pandemic, sources said the week starting Jan.

10.

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One 40,000 mt jet fuel cargo from NWE was seen headed toward Brazil, a voyage multiple European sources deemed a "strange move" and "unusual." The Ridgebury John B was heard on subjects for an Amsterdam-Rotterdam-Antwerp to Brazil shipment of a jet cargo basis 37,000 mt at w97.5 basis 2020 flat rates, with a laycan date of Jan.

11-13, according to data from cFlow, Platts trade-flow software. This was heard in the market to be a BP cargo, with Shell said to be looking for another ship for the same purpose. Sources in the Latin American and European refined product markets expressed keen interest in the activity but were unsure of the reason for these purchases.

"Then again, there's a thin [Arab Gulf] pool of jet, and the US and Caribbean are too strong, so [importers] came to the weakest market, NWE," one European market source said.

Supply trends

Brazil, South America's largest refined product importer, regularly sources a large portion of its supply from the US Gulf Coast. US Energy Information Administration data showed the US exported 3 million barrels of jet fuel to Brazil in 2019, nearly half of the year's 6.17 million barrels of imports reported by the National Petroleum Agency, Brazil's energy regulator. But over January-October 2020, the US sent just 640,000 barrels, a 72.77% fall year on year, EIA data showed.

The EIA data showed the only Brazil-US jet fuel commerce in 2020 took place in January, March and July, with no renewal of activity since then. Platts Import Parity Price for jet fuel delivered at the Brazilian port of Santos was £67.07/b Jan.

8, down from £93.83/b on the same day in 2020. However, jet fuel prices at Santos have slowly increased since reaching a record low £32.47/b on April 28, 2020.

Brazil's jet fuel demand bullish Brazil's economy has only been moderately affected by the coronavirus pandemic overall, as President Jair Bolsonaro has not implemented heavy social distancing measures, leaving prevention measures instead to individual states and counties. For international Latin American flights, revenue passenger kilometers, a measure of air travel demand, fell 78.6% year on year in November, according to a Jan.

7 report by the International Air Transport Association. But in Brazil, domestic RPK fell just 34.5% during the same period, the third shallowest dip behind China and Russia. The third wave of the coronavirus pandemic, seen in the country's peak in cases to 87,843 on Jan.

7, is expected to weigh heavily on data for December and afterward as Brazil's government implements measures to discourage even domestic travel. However, jet fuel markets in Latin America and around the world are expected to continue rising with the introduction of COVID-19 vaccines.

Future shipments

Freight rates on Medium Range tankers for UK Continent-USAC shipments basis 37,000 mt were last assessed at Worldscale 110, basis 2021 flat rates, rising from w89.5 on Jan.

4, with some suggesting that a wave of Baltic-load cargoes in January could spell a rise in overall shipments. Should this be the case, the open arbitrage for jet shipments to Brazil could close, with some charterers already looking at forward laycan dates to secure vessels.

Others, however, believe the continued lack of a US Gulf market for backhaul shipments will provide a ceiling to levels for freight loading in Northwest Europe.

Recent pressurized freight indications for NWE-loading to US Atlantic Coast shipments have allowed the possibility for spot shipments of UK Continent-Brazil shipments to materialize, but opinion has been mixed on market direction in the near term.

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