SINGAPORE: Asian refining margins for jet fuel have climbed in October to their highest levels since January 2020 as air travel demand recovers in Asia, according to analysts and data on Refinitiv Eikon.
Jet refining margins have also surged in Europe to their highest since the first quarter of 2020 amid a boost to air travel while excess supplies disappeared as refiners cut output of the fuel, the International Energy Agency (IEA) said in its monthly report on Thursday.
Asia-Pacific nations, home to some of the world's strictest pandemic-related travel rules, are gradually easing border restrictions resulting in a surge in flight bookings and travel enquiries.
The recovery in aviation fuel demand coincides with the peak heating season for kerosene - which belongs to the same grade of refined oils - lifting the outlook for the middle distillate fuel which has been the biggest drag on global oil refiners' margins since 2020.
However, analysts expect jet fuel consumption to fully recover no earlier than 2023 when flight demand normalises.
"We are now seeing that pent up demand beginning to translate into bookings," said Mayur Patel, head of Asia at global travel data provider OAG Aviation.
"This will undoubtedly lead to a sharp and strong period of demand but we expect based on other markets that this will soon pass to a normalised demand profile by perhaps the middle of next year," he added.
Singapore jet fuel refining margins, Asia's benchmark, were at $13.47 a barrel on Friday, just 3 cents shy of a near two-year high reached in the previous week, Refinitiv data in Eikon showed.
FGE's director for Asia oil, Sri Paravaikkarasu, expects Asian jet fuel demand to climb to 1.8 million barrels per day (bpd) by year end, up from an average of 1.5 million bpd in September but still down from a pre-pandemic average of about 2.3 million bpd.
Rising seasonal demand for kerosene ahead of North Asia's winter season and lower inventories due to refinery output cuts since the pandemic crippled air travel have also helped lift the fuel's refining margin.
But there's a long way to go before jet fuel demand returns to normal.
Among other transportation fuels, jet fuel will be the last to recover to pre-pandemic levels as uneven vaccination rates across several countries in Asia will continue to hamper regional air travel demand over 2022 and will only reach normal levels in 2023, said Paravaikkarasu.
While a recovery is underway, "we have a long way to reach previous levels of capacity and demand ... once the initial pent up demand has been exhausted," said Patel adding that Asian travel demand may return to pre-pandemic levels by early-2024.
"The key variable and market segment that has yet to return is the business traveller and until they do the market will be soft."