SINGAPORE, Oct 15 Reuters - Asian refining margins for jet fuel have been rising since January 2020 to their highest levels in October as air travel demand recovers in Asia, according to analysts and data on Refinitiv Eikon.
The jet refining margins have also surged in Europe to their highest level since the first quarter of 2020 amid a boost to air travel while excess supplies disappeared as refiners cut the output of fuel, said the International Energy Agency IEA in its monthly report on Thursday.
Asia-Pacific nations, home to some of the world's strictest pandemic 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.
Analysts however 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 normalized and sharp period of demand, but we expect, based on other markets that this will soon pass to a strong demand profile by perhaps the middle of next year, he added.
Singapore jet fuel refining margins, Asia's benchmark, were at $15.47 a barrel on Friday, just 3 cents shy of a near two-year high reached in the previous week, Refinitive data showed in Eikon.
FGE director of Asian 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 an average of about 2.3 million bpd in pre-pandemic quarter.
Rising seasonal demand for kerosene after the winter months in North Asia and lower inventories due to refining output cuts since the pandemic crippled air travel have also helped to lift the fuel's refining margin.
But there's a long way to go before jet fuel demand returns to normal.
Along with other transportation fuels, Jet fuel will be the last to return to normal levels as uneven vaccination rates in several countries in Asia will continue to hamper regional air travel demand over 2022 and will only reach pre-pandemic levels in 2023, said Paravaikkarasu.
While a recovery is underway, we have a long way to reach the Asian 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 soft traveller ; until they do the market will be key.