Asia’s jet gas refining income hit all-time document, seen climbing additional

An Air China plane takes off from Sydney Airport as countries respond to the new Omicron variant of the coronavirus amid the coronavirus disease (COVID-19) pandemic in Sydney, Australia, December 1, 2021. REUTERS/Loren Elliott

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SINGAPORE, June 9 (Reuters) – Profits from Asia’s kerosene refining – already at all-time highs – have enough legroom for further profits in the coming weeks as relaxed border restrictions boost demand for summer travel and airlines’ global capacity exceeds 100 million seats for the first time since early 2020.

Despite rising air fares and fuel surcharges, the number of scheduled airports has risen steadily over the past three months, industry data showed. Continue reading

“The release of pent-up travel demand continues as people are eager to travel and make up for time lost over the past two years. This demand support should continue in the coming months barring new virus outbreaks,” said Sandy Kwa, a senior analyst at Boston Consulting Group.

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Seat maps of world passenger airlines

Asia’s benchmark refining margins for aviation fuel, also known as cracks, hit a record high of $50.75 a barrel in Singapore this week versus Dubai crude, according to Refinitiv data dating back to 2009.

“With travel demand increasing, the (jet fuel) rift is likely to continue,” a Singapore-based trade source said.

The rifts have more than tripled since the start of the Russia-Ukraine conflict in late February and are up nearly 100% since late March as airline capacity increased by about 12 million seats to 95.2 million this week, Das says Aeronautical data company OAG.

China alone added more than 3 million domestic seats to its schedule this week.

Kerosene prices and refining margins are rising as global travel demand picks up

“Jet fuel demand is likely to remain very constructive in the coming months…Governments have become very adept at managing outbreaks and have moved from imposing restrictions on living with the virus,” said Peter Lee, Senior Oil and Gas Analyst at Fitch Solutions.

Global flight schedules will hit 100.6 million seats next week, rising to 108.5 million seats by mid-August, OAG data showed, though the recovery remains uneven.

“International air travel to and from China is expected to remain subdued for some time to come as the country continues to adhere to its zero-Covid policy and will likely seek to minimize the import of COVID cases,” said Jane Xie , senior oil analyst at Data and analytics firm Kpler.

“But broadly outside of China, we expect jet/kero demand in Asia to rise rapidly during this period (by about 200,000-220,000 barrels per day month-on-month) as June through July would be peak travel times.”

Demand growth could slow towards the end of the third quarter before picking up again in November-December on stockpiling ahead of the main winter months, market watchers said.

On the supply side, refiners’ prioritization of diesel over kerosene could underpin jet market sentiment.

“As refiners economically optimize diesel for aircraft production, the limited supply of jet fuel due to rising demand is supporting jet fuel cracks,” said Serena Huang, senior market analyst at oil analysis firm Vortexa.

“Open arbitrage to the west will pull more casks from the region and tighten regional supplies. I expect diesel shortages to prevail over jet production, which should continue to encourage refiners to prioritize diesel over jet production in the near term.”

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Reporting by Koustav Samanta in Singapore; Adaptation by Gavin Maguire and Rashmi Aich

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