Tanker bookings for jet fuel exports from the Middle East to Europe will have fallen for the second month running in August after exports hit seasonal peaks in June, a survey of fixtures by Dow Jones Newswires shows.

And with stockpiles of middle distillates in the Amsterdam-Rotterdam-Antwerp region at historically high levels - and demand not expected to recover until next year - market participants say the flow of Middle East cargoes may next month fall further below the monthly average.

Thus far, volumes of Middle Eastern jet fuel booked to Europe are almost 100,000 metric tons below July's totals, when at least 550,000 tons were booked to be shipped along the trade route.

Fixture lists show at least 446,000 tons of jet fuel have been booked this month to arrive off European shores in September.

Monthly flows of between 300,000 tons and 500,000 tons along the route are normal, according to a Singapore-based trader.

Anticipation of a rise in demand and a widening contango price structure, in which the premium of forward-month contracts to prompt prices made holding onto the stocks worthwhile, saw at least 700,000 tons of jet shipped to Europe from the Middle East in June.

Seasonal demand for jet fuel typically rises in June and July with the onset of the northern hemisphere holiday season. Meanwhile, restocking in preparation of holidays in December and January sees a relatively smaller uptick in demand during September and October, market participants said.

Jet fuel stockpiles held in independent storage in Northwest Europe are 96.1% higher compared with a year earlier, according to Patrick Kulsen, an independent oil analyst at PJK International B.V. He added that as long as a contango exists in the futures market, middle distillate inventories - including jet fuel - will remain high.

Incoming cargoes not snapped up by the aviation industry will typically be stored offshore in tankers to sell at higher prices later or used as blending components in the diesel pool, Kulsen said.

Despite the contango-driven interest in jet cargoes, the demand outlook for aviation fuel is likely to remain bleak without a significant global economic recovery, market participants said.

According to the latest data released Thursday by the International Air Transport Association, European carriers suffered a 3.1% annual decline in passenger traffic in July as a result of the global economic downturn. However, July figures also indicated a slowdown in the fall in passenger traffic compared with previous months, as airlines slashed fares to attract seasonal travelers, the number of whom typically rise in summer months.

"It does seem that there is an oversupply of jet around, and I am surprised that the market hasn't weakened further," said a U.K.-based jet broker. "It will be interesting to see if any pick up in the economy will provide support for jet in September and October."

Major oil companies dominated the Middle East jet fuel trade in August, with Royal Dutch Shell PLC (RDSB), BP PLC (BP), Total SA (TOT), Compania Espanola de Petroleos SA (CEP.MC) and Chevron Corp. (CVX) all heard to fix cargoes to Europe.

 
Vessels shipping Middle East jet fuel to Europe as of Aug. 28 
 
=============================================== 
VESSEL             VOLUME   DATE    CHARTERER 
                   (TONS) 
=============================================== 
 
Pacific Innovator  35,000   Aug 28  Cepsa 
Raysut             80,000   Aug 26  BP 
Bro Caroline       40,000   Aug 25  Unknown 
Peonia             33,000   Aug 25  Total 
British Security   40,000   Aug 25  Total 
Horizon Aphrodite  40,000   Aug 25  Chevron 
Reliance II        40,000   Aug 21  Cargill 
Bro Promotion      40,000   Aug 15  Unknown 
Starling           65,000   Aug 10  Shell 
Melody             33,000   Aug 3   Shell

-By Wayne Ma and Reza Amanat, Dow Jones Newswires; 4420-7842-9487; reza.amanat@dowjones.com