May 24, 2011 by staff
Icelandic Volcano, Jet Fuel traders are on alert for suspension of flights after a cloud of ash from a volcano in Iceland reached airspace in parts of Great Britain and Ireland on Tuesday, hitting the lowest fuel prices. The explosion of the volcano Gr? Msv? Tn in life on Saturday, sending ash and steam and rising fears of a repeat of the chaos that followed last year traveling the volcanic eruption in Iceland.
Asking price of fuel was reduced to and 88 – and 89 per tonne fob ARA on the ICE gasoil futures in June on Tuesday, premiums and 94 ton FOB ARA Friday as air traffic controllers warned that the disruption was expected and the first round of flights in the United Kingdom were canceled.
But jet fuel prices have touched the highest levels since September 2008 in this quarter and could be overstated,anlysts and operators, who argue that the fall in prices may overstate the concern about the disruption of flights.
“I think running is overrated in any case, the ash cloud is placed only in front of people’s minds,” one trader said distillate.
Olivier Jakob, an oilanlyst at Petromatrix, had similar views.
“If some people think airplane is expensive, maybe now is a good time to take profits and if you need to cover may be better to wait and see how it develops,” he said.
Airlines hedge fuel consumption of aircraft, so if there is a big drop in consumption due to a disruption in flights, which will cover more and have to sell.
Jakob said the physical market could also be affected by the disruption in the major airlines that are traditionally active in the market to buy boats can hold until a clearer picture emerges.
The impact is already felt in the labor market – June swaps have begun to fall, reflecting a fall of at least 7 percent over last year interruption ash cloud.
1436 GMT (10:36 GMT) on Tuesday, June cargo jet fuel swap spreads were 93.15 and a tonne cif NWE, and from 99.45 per tonne if ENO on Monday.
More flight cancellations could accelerate the fall, according to someanlysts and traders.
“Ouranlysis shows that the differential current aircraft is at a price slightly above its average of five years,” said James Zhang, energyanlyst at Standard Bank Commodities in a note Tuesday. “Therefore, our view is that further disruptions to air travel could see an increased risk of a decline in the differential response.”
But so far, the substitution of fuels such as diesel and gasoline used in other forms of transport, have not jumped on the reaction as they did a year ago when some of the lost air travel made by other means.
During the last volcanic eruption airline kerosene demand fell by about one-fifth, or 1.2 million barrels a day, as more than 100,000 flights were canceled and the ability of airlines around the world reduced by 30 percent.
The scale of the interruption on this occasion it is believed unlikely to match last year, although Germany has insisted on the closure of the heavens as a precautionary measure, where there are strong indications of ash.
Analysts and traders have largely downplayed the impact of volcanic ash cloud, which indicates a more favorable wind direction, the density of the clouds and the fact that regulators were heavily criticized for over reaction last time.
“I heard a report that this ash is much more dense than the previous tag so that its dynamics will be very different,” said a trader of distillates, highlighting a difficulty in predicting an outcome.
Authorities have dismissed fears of a massive disruption of European airspace and the Icelandic Meteorological Office said on Tuesday that the reduction of volcanic activity could indicate that the worst of the explosion may be higher.
About 250 flights were canceled in the United Kingdom on Tuesday, and the amount of ash in the airspace of northern Germany is expected to reach the threshold of a ban on flights in around 0600 GMT (2 GMT) on the morning of Wednesday.
“I think the UK cancellations are only ex-Scotland, and experts are claiming the south will not be affected, but I guess only time will tell,” said a trader of jet fuel.
He added that the volcanic ash cloud was unlikely to be less concerned about disruptions in the markets started to hit the major airports and any impact on demand so far has been slight.
“I think this time the market impact will be less panic-like,” agreed Thorbj? Rn Bak Jensen, ananlyst with Global Risk Management.
“Last year the aviation community was taken by surprise, nobody knew what the impact on aircraft. This year there is a better plan for what should happen.”
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