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Asia Distillates-Jet fuel cracks hover near multi-month highs amid demand hopes

Asian jet fuel refining margins slipped on Thursday, but stayed within close sight of a multi-month high touched in the previous session, buoyed by pockets of aviation demand emerging from some domestic flight routes in the region.

Refining profit margins or cracks for jet fuel were at $11.48 per barrel over Dubai crude during Asian trading hours, down from Wednesday’s $13.50 a barrel that was the highest since January 2020.

“Jet demand is driven by an increase in flight capacities in Asia and higher demand for kerosene for winter heating,” said Daphne Ho, senior analyst at Wood Mackenzie.

“We see around $3/barrel of potential upside for jet cracks towards the year end, but demand remains below pre-pandemic levels through 2021 and 2022.”

The jet fuel cracks have surged about 62% in the last month, but were still 35% lower compared with their levels for this time of the year in pre-pandemic 2019, Refinitiv Eikon data showed.

“Even as conditions in aviation seemingly improve, the near-term outlook is one of caution – new infection waves from the Delta variant continue to loom large alongside derailing airport reopening plans across many markets, while strict border controls still continue to be the norm across most of Asia,” said Peter Lee, senior oil and gas analyst at Fitch Solutions.

“This indicates room for further rebound in jet fuel demand in the coming quarters, but require stabilisation in Delta variant infections, and for restrictions to be further eased, before more travel bubble arrangements between lower-risk countries can take shape, allowing for partial recovery in aviation demand.”

Meanwhile, cracks for 10 ppm gasoil were at $13.52 per barrel over Dubai crude on Thursday, lingering near multi-month highs, while some traders were expecting the industrial fuel to outperform other refined products in the run-up to year-end.

– Singapore’s middle distillate inventories slipped 1.3% to a four-week low of 10.4 million barrels in the week to Oct. 6, according to Enterprise Singapore data.

– Weekly Singapore middle distillate inventories have averaged 12.7 million barrels this year, compared with an average of 13.9 million barrels in 2020, Reuters calculations showed. This week’s stocks were 30% lower than a year earlier.

– U.S. distillate inventories, which include diesel and heating oil, fell by 396,000 barrels in the week to Oct. 1, versus expectations for a 1 million-barrel drop, the Energy Information Administration said on Wednesday.

– Two gasoil trades, one jet fuel deal

– Some of the world’s biggest importers of liquefied natural gas (LNG) are reducing orders in the face of a 500% price surge within a year, raising concerns among major producers about potential long-term destruction of demand.

Brent M1
Gasoil M1
Gasoil M1/M2
Gasoil M2
Regrade M1
Regrade M2
Jet M1
Jet M1/M2
Jet M2
Gasoil 500ppm-Dubai
Cracks M1
Gasoil 500ppm-Dubai
Cracks M2
Jet Cracks M1
Jet Cracks M2
East-West M1
East-West M2
Crack LGO-Brent M1
Crack LGO-Brent M2
Source: Reuters (Reporting by Koustav Samanta; editing by Uttaresh.V)

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