Asia Distillates: Jet fuel cash premiums post second straight weekly drop

SINGAPORE: Asia’s cash premiums for jet fuel dipped on Friday, posting a second consecutive weekly decline, weighed down by lacklustre buying interest for physical cargoes.

The jet fuel cash premiums dropped by 1 cent to $1.23 a barrel to Singapore quotes. The differentials have shed 18.5% this week. The aviation fuel market is expected to pick up strength in the coming months as more flights return to the skies, but any major upside would likely be limited, trade sources said.

“Momentum toward normalizing traffic is growing... While recent progress is impressive, the world remains far from 2019 levels of connectivity,” Willie Walsh, director-general of the International Air Transport Association (IATA) said in a statement on Thursday.

“Thirteen of the top 50 travel markets still do not provide easy access to all vaccinated travellers. That includes major economies like China, Japan, Russia, Indonesia, and Italy.”

There has been an 11-percentage point increase for international tickets sold in recent weeks, in proportion to 2019 sales, IATA data showed.

Refining margins, or cracks, for jet fuel slipped to $13.49 a barrel over Dubai crude during Asian trading hours, the weakest since Jan. 26. They were at $14.33 per barrel on Thursday.

The jet cracks, which also determine the profitability of closely-related kerosene, have shed about 14% in the last two weeks, partly hurt by weaker demand for kerosene as peak winter is coming to a close, traders said.

China’s state planner on Friday issued rules to promote faster recovery from the COVID-19 pandemic in the services sector, including providing tax incentives to the catering, retail, tourism and aviation industries.

China will stop collecting value-added tax from airlines for 2022 and keep subsidizing key routes and small airports, according to the National Development and Reform Commission.

Gasoil stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub dropped 3.4% to 1.5 million tonnes in the week ended Feb. 17, their lowest level since April 2014, according to Dutch consultancy Insights Global.

ARA jet fuel inventories rose 1.1% this week to 839,000 tonnes.

Oil prices extended losses on Friday and were headed for a weekly fall, as the prospect of extra supply from Iran returning to the market eclipsed fears of a possible supply disruption arising from a Russian invasion of Ukraine.

Europe’s liquefied natural gas (LNG) terminals have limited available capacity to absorb extra supply from the United States or other major producers in the event of Russian gas disruption if it invades Ukraine.