Asia Distillates: Jet fuel cracks rise to near 3-week high on firming demand

SINGAPORE: Asian refining margins for jet fuel rose for a third straight session on Wednesday, as aviation demand is expected to strengthen further in the coming months with international travel gradually picking up pace.

Refining margins, also known as cracks, for jet fuel climbed to $28.40 per barrel over Dubai crude during Asian trading hours, the strongest since March 24. They were at $27.43 a barrel on Tuesday.

The jet fuel cracks have nearly doubled from their levels a month ago.

Cash differentials for jet fuel were at a premium of $1.81 a barrel to Singapore quotes, compared with $2.05 per barrel a day earlier.

The April/May time spread for the aviation fuel in Singapore remained in backwardated structure to trade at $2.70 per barrel on Wednesday, while the May/June spread was at $4.90 a barrel, Refinitiv data showed.

Two years after tourism in Southeast Asia ground to a halt, travellers are getting back on planes as entry and COVID-19 quarantine rules are lifted in the region, but a full recovery will be slow and some long-time hotspots are falling out of favour.

International airline bookings to Southeast Asia reached 38% of pre-pandemic levels by late March, according to travel firm ForwardKeys. They were at less than 10% of 2019 levels at the start of the year. Singapore and the Philippines led a sharp uptick in bookings.

Australians started arriving in New Zealand on Wednesday after it opened its borders to travellers from its neighbouring nation for the first time since mid-2021.

Middle-distillate inventories in the Fujairah Oil Industry Zone plunged 36.9% to a five-week low of 1.2 million barrels in the week ended April 11, data via S&P Global Commodity Insights showed.

Weekly stocks in Fujairah have averaged 1.8 million barrels so far this year, compared with 3.5 million barrels in 2021, Reuters calculations showed.

US distillate inventories, which include diesel and heating oil, fell by 5 million barrels in the week ended April 8, according to market sources, citing American Petroleum Institute figures.

Oil prices edged higher on Wednesday after Moscow said that peace talks with Ukraine had hit a dead end, fuelling supply worries, while weak economic data from China and Japan kept a lid on gains.

US President Joe Biden unveiled plans to extend the availability of higher biofuel blends of gasoline during the summer to curb soaring fuel costs and to cut reliance on foreign energy sources.