Analysis: Los Angeles Jet Fuel Reprices for Local Balance but Pays for Global Risk

The Los Angeles jet fuel market is telling two stories at once. The weekly average cash differential fell to its deepest discount since 2024 for the week ended July 17, at roughly 31cts below the NYMEX ULSD futures contract while the outright price is still climbing, according to OPIS data.

The local physical market has worked off its shortage. The global market that sets the region’s cost floor has not come down.

The Los Angeles weekly average jet fuel cash price spent most of 2025 within 15cts/gal of futures in either direction, averaging near flat.

The first structural break came in October, driven by a simultaneous loss of capacity in the Los Angeles area. Phillips 66 wound down operations at its 156,000 b/d refinery and a fire broke out at Chevron’s 290,500 b/d El Segundo facility, causing the differential for jet fuel to jump to 38cts/gal over futures as Northern California temporarily bore the brunt of supplying the south, according to market participants.

While Chevron soon resolved its outage, Phillips 66 proceeded with its planned permanent closure, prompting the jet fuel premium to surge again to nearly 60cts/gal over futures in January as the physical spot market fully priced in the capacity loss.

Then came the Feb. 28 U.S. and Israeli strikes on Iran, effectively closing the Strait of Hormuz, and the weekly outright price for Los Angeles jet fuel jumped 45.1% in a week, from $2.5892/gal during the week ended March 27 to $3.7571/gal during the week ended March 6.

The weekly average price differential leapt 38cts/gal in the same week following the strikes, according to OPIS pricing data. Crude and basis differentials moved together because the shock threatened both the cost of the barrel and the ability to land it in California.

The two shocks peaked together in early May.

Valero’s 149,000-b/d Benicia refinery ran its last crude at the end of April, completing a combined loss of approximately 305,000 b/d, about a fifth of California’s capacity.

PADD 5 jet fuel stocks fell to their 2026 low of 10.6 million bbl the week ending May 8, according to EIA data. The weekly average cash price peaked at $4.7849/gal with weekly average cash differentials peaking at 87cts/gal over futures. Local scarcity was priced locally.

Remaining PADD 5 refiners pushed utilization to 94% by mid-June, 10 points above the year’s average, and rebuilt 1.7 million bbl of jet stocks in eight weeks.

The average weekly basis differential collapsed 95cts in four weeks, from plus 87cts to minus 8cts. By the week ended July 10, stocks stood at 12.1 million bbl, 17.8% above the 2021-2025 seasonal average, and the cash discount had stretched to 31cts/gal under futures, the widest so far this year. The physical market looked at full tanks and repriced accordingly.

But the outright price was still rising with futures doing all the heavy lifting. Over the three weeks ending July 17, the weekly average price of Los Angeles jet fuel climbed 58cts to $3.6146/gal.

Dissect the move, and the implied futures component rose roughly 80cts while the cash basis fell 21cts/gal. Los Angeles is not bidding up jet fuel.

Volatility followed the price path. First quarter volatility for LA jet fuel reached 87.2%, the highest Q1 reading in the data back to 2010, above 82.8% of pandemic-era 2020 and 78.3% of 2022. From 2010-2019, Q1 volatility averaged 27.5%. From 2020-2026, it averaged 60.7%.

Second-quarter volatility of 65.5% ranked third of any Q2 reading for the same 16-year range, behind 2020 and 2023.

The Q2 figure reflects range rather than a single jump. The quarter contained both the $4.7849/gal weekly average peak and a retracement low of $3.0307/gal in late June, a peak-to-trough decline of 36.7%. Even that low sat above almost every weekly average in 2024 and 2025.

Imports statistics help underline the point. PADD 5 jet fuel imports have run a four-week average of 66,000 b/d, after averaging 102,000 b/d before the shock. A cash market 31cts/gal under futures is not a market pulling cargoes in.

LA jet fuel as of July 22 was just 4.3cts/gal ($1.81/bbl) over Singapore jet fuel, falling drastically short of the roughly 24cts/gal ($10/bbl) premium necessary to cover freight and landed costs. The arb signal and the basis signal imply that the West region, for now, does not need the barrels.

Reporting by My Nguyen, mynguyen@opisnet.com; Editing by Bayan Raji, braji@opisnet.com and Michael Kelly, mkelly@opisnet.com