This is followed by a possibility for players to redirect their surplus jet and ultra-low-sulfur diesel cargos to Latin America, which has been the main importer around the world in the past six months.
This could then plug or slow the flow of ULSD out of the Gulf Coast and the Caribbean to Latin America.
The push towards floating storage and possible exports will depend on how long the airport air traffic would remain grounded.
On Friday, OPIS reported that volcanic ash spreading from Iceland across Europe began to interfere with jet fuel demand as nearly 58% of flights in European airspace were canned.
A Vienna-based consultancy, JBC Energy, forecasted European 2010 jet fuel consumption at an average of 1.17 million b/d. If some 80% of European airports were closed for 48 hours, the disruption would cut jet fuel demand by about 1.87 million bbl.
The sharp drop in demand is accelerating the rise in the already high inventory levels in Europe.
“An airport shutdown for one week has limited impact on the jet fuel market and demand, but if this carries on for another week or two, there will be a big impact,” a trader said. “It will depend a lot on the volcano.”
Early on Monday, the volcano in Iceland delivered new tremors, but the ash clouds and production have fallen.
In the oil tanker chartering market, a few Middle East jet fuel exporters have sought storage options for their Large Range tankers delivering jet fuel to Europe, shipping sources said.
An LR 1 tanker could deliver up to 450,000 bbl or 60,000 tons of jet fuel.
The flow of jet fuel from the Middle East to Europe is a normal monthly fixture.
On Monday, one company is rumored to be inquiring about booking an LR ship for floating storage purpose.
Floating storage play in Europe has quietened down significantly since the end of last year as the price contango for gasoil weakened from more than $10/ton to about $4-$5/ton.
The lower jet demand has widened the gasoil contango only slightly so far.