Military Jet Fuel on NATO Pipeline Squeezes Civil Supply

Military deliveries into NATO's Central Europe Pipeline System (CEPS) have crowded out part of the commercial jet fuel flow through the network in recent weeks, according to a commodity trader that uses the system, Bloomberg reported.

Orkhan Rustamov, founder and chief executive of Malta-based trading firm Alkagesta, told Bloomberg that additional volumes of military-grade jet fuel were injected into CEPS at Rotterdam during March and April. The result, he said, was that some civilian jet fuel supplies were displaced, reducing deliveries to European airports connected to the system, among them Frankfurt. Rustamov said his firm supplies jet fuel into CEPS but did not deliver through Rotterdam in the period concerned, and that his account of the heightened military deliveries came from other users of the network.

Rustamov declined to specify the additional military volume, citing potential security concerns, but said it was equivalent to several days of Italian jet fuel and kerosene demand, according to Bloomberg. On the scale of the wider European market that is a modest quantity, though it adds to pressure on a barrel that is already in short supply.

Bloomberg said Fernleitungs-Betriebsgesellschaft mbH, which operates the German sections of the NATO pipeline systems, did not immediately respond to requests for comment, and that NATO and Deutsche Lufthansa declined to comment. The Pentagon and the military commands covering Europe and the Middle East did not immediately respond, while Frankfurt airport operator Fraport said it does not hold its own fuel stocks.

Built during the Cold War, CEPS has long been open to civilian traffic on the standing condition that military requirements take priority. The network today moves roughly 225,000 barrels a day of refined product across more than 5,000 kilometres of pipeline linking refineries, depots, military airbases and civil airports. It mainly carries jet fuel but can also move diesel and other grades. Alkagesta was granted access to the system earlier this year, a development reported by Bloomberg in February and subsequently by Energy Intelligence and Malta Today.

The disruption lands on a market already under strain. Europe leans on jet fuel that in normal conditions transits the Strait of Hormuz, where traffic has been largely halted for weeks because of the Iran conflict. Northwest European prices reached a record earlier this month and some airlines have cancelled flights. German airport association ADV pointed to a statement from chief executive Ralph Beisel, who said jet fuel supply in Europe is coming under increasing pressure and that airports have no influence over pricing or supply chains but are directly exposed to supply risk.

Forward indications are cautious. The International Energy Agency has said shortages could begin to appear in Europe in June, while Ryanair has said its suppliers are guaranteeing shipments until at least mid-May. Traders quoted by Bloomberg expect the European jet fuel market to be tighter in May than in April.

For commodity, bunkering and shipping desks the episode is a reminder of how thin the margin for error has become in middle distillates. Pipeline capacity that is contractually subordinate to military use behaves as a variable rather than a fixed asset in supply planning, and with waterborne arrivals from the Gulf curtailed, replacement barrels must come from longer-haul routes at higher freight cost. That combination supports both jet differentials and tanker earnings on Atlantic Basin and East of Suez routes, and keeps distillate-linked bunker grades exposed to further volatility.