Asia Distillates: Jet cracks drop as aviation sector continues to struggle

SINGAPORE: Asian refining margins for jet fuel dropped for a second straight session on Friday, weighed by worries that renewed coronavirus lockdowns in several markets would dampen aviation demand recovery.

Refining margins, or cracks, for jet fuel dropped to $4.59 per barrel over Dubai crude during Asian trading hours, 15 cents lower from Thursday.

Jet cracks have gained 10% this week, but still remain 63% lower than the ten-year seasonal average for this time of the year, Refinitiv Eikon data showed.

While pockets of demand have emerged from some domestic routes, a majority of international flights remain grounded due to prolonged border restrictions amid fresh virus waves in many parts of Asia.

Business travel is still being avoided as much as possible across sectors, while a lot of families are not making plans to fly as vaccinations are based on different age groups and nobody wants to risk the younger ones, who are not vaccinated, a Singapore-based trader said.

Jet fuel supplies in the region are limited as refiners have kept a cap on production due to weaker refining margins, but persistent weakness in demand continues to put a damper on sentiment, market watchers said.

Cash discounts for jet fuel were at 36 cents a barrel to Singapore quotes on Friday, compared with a discount of 62 cents per barrel a day earlier.

China’s daily crude oil throughput surged 19.7% in March from a year earlier, as refiners ramped up operations to meet robust fuel demand and to build up inventory before shutting down for overhaul.

China processed 59.79 million tonnes of crude oil last month, data issued by the National Bureau of Statistics (NBS) showed on Friday. That is equivalent to 14.08 million barrels per day (bpd), easing off 14.13 million bpd averaged in the first two months.

Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub dropped 2.6% to 2.3 million tonnes in the week to April 15, data from Dutch consultancy Insights Global showed. The data showed ARA jet fuel inventories fell 4.6% to 862,000 tonnes.

Three gasoil deals, no jet fuel trades. Oil rose above $67 a barrel on Friday, gaining for a fifth session, as a stronger demand outlook and signs of economic recovery in China and the United States offset rising COVID-19 infections in some other major economies.