Asia’s jet fuel margins climb near 21-month highs as governments lift border restrictions

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A business jet is refueled with Jet A at Henderson Executive Airport during the National Business Aviation Association (NBAA) exhibit in Las Vegas, Nevada, USA on October 21, 2019. REUTERS / David Becker / File Photo / File Photo

  • Pent-up travel demand emerges as restrictions on Asian borders have eased
  • But air travel in Asia still has a long way to go

SINGAPORE, Oct. 15 (Reuters) – Asian refining margins for jet fuel climbed in October to their highest levels since January 2020 as demand for air travel in Asia picks up, analysts and Refinitiv Eikon data show .

Jet refining margins also hit their highest level in Europe since the first quarter of 2020 amid rising air travel as excess reserves disappeared as refiners cut fuel production, a the International Energy Agency (IEA) said in its monthly report Thursday. Read more

Asia-Pacific countries, which have some of the world’s strictest pandemic travel rules, are gradually easing border restrictions, resulting in increased flight bookings and travel requests. Read more

The recovery in aviation fuel demand coincides with the peak heating season for kerosene – which belongs to the same grade of refined oils – raising the outlook for middle distillate fuel which has been the biggest drag on margins of global oil refiners since 2020.

However, analysts expect jet fuel consumption to recover fully no earlier than 2023, when demand for flights normalizes.

“We are now seeing pent-up demand starting to translate into bookings,” said Mayur Patel, Asia manager at global travel data provider OAG Aviation.

“This will undoubtedly lead to a period of strong and strong demand, but we expect, based on other markets, that this will soon transition to a normalized demand profile by maybe the middle of next year. “, he added.

Jet fuel refining margins in Asia’s benchmark Singapore were $ 13.47 a barrel on Friday, just 3 cents from the nearly two-year high reached the week before, according to data from Refinitiv to Eikon .

FGE Asia Director of Oil Sri Paravaikkarasu expects demand for jet fuel in Asia to climb to 1.8 million barrels per day (bpd) by the end of the year, from a average of 1.5 million bpd in September, but still down from an average of about before the pandemic. 2.3 million barrels per day.

Asia’s jet fuel margins hit highest since January 2020 as governments lift border restrictions

The increase in seasonal demand for kerosene ahead of the winter season in North Asia and the decline in inventories due to production cuts at refineries since the pandemic crippled air travel have also helped to increase the profit margin. fuel refining.

But there is still a long way to go before demand for jet fuel returns to normal.

Among other transportation fuels, jet fuel will be the last to return to pre-pandemic levels, as uneven vaccination rates in several Asian countries will continue to hamper regional demand for air travel through 2022 and will not reach normal levels until 2023, Paravaikkarasu said.

While a recovery is underway, “we have a long way to go to reach previous levels of capacity and demand … once the initial pent-up demand has been exhausted,” Patel said, adding that demand for travel to Asia could return to pre-pandemic levels by the start. -2024.

“The key variable and the market segment that has yet to come back are business travelers and until they do, the market will be soft.”

Reporting by Roslan Khasawneh; Editing by Florence Tan and Emelia Sithole-Matarise

Our standards: Thomson Reuters Trust Principles.

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