Japan's Aug jet fuel demand drops on resurgence in coronavirus infections

Tokyo — A resurgence in coronavirus infections has slashed Japanese refiners' estimated domestic jet fuel shipments by 19.2% to 300,536 kl or 1.89 million barrels in four weeks to Aug. 22, indicating a slow recovery in aviation fuel demand during the peak summer holiday season.

The estimated shipments, which were calculated by S&P Global Platts based on weekly Petroleum Association of Japan data, were down from 372,084 kiloliters, or 2.34 million barrels, in the four weeks to July 25.

Similarly, Japan's jet fuel exports, a substantial portion of which are bonded shipments for international flights, came in at 1.24 million barrels in the four weeks to Aug. 22, down 28.6% from the previous four weeks.

"Generally, there are fewer and fewer exports of jet fuel due to poor international and domestic demand. Export volumes could also be lower due to lower jet production," a Northeast Asian refining source said Aug. 26.

Refineries in Northeast Asia are "still running at relatively low rates, and refineries are still blending jet fuel into the diesel pool or simply minimizing jet output whenever possible," the source added.

September jet fuel demand is expected to be lower than August's because of the increase in coronavirus cases after having peaked during the summer holiday season, a source with a Japanese refiner said.

Pandemic resurgence

The decrease in estimated domestic jet fuel shipments in August came as Japanese airlines cut back their domestic passenger flights following a recent uptick in the number of coronavirus cases in Japan.

Japan Airlines, for example, expects its jet fuel loadings to be lower than expected in August and September mainly due to fewer domestic flights, a company official told Platts on Aug. 20.

JAL plans to load 25% more jet fuel in August from July, down from the 37% month-on-month rise it had expected on July 17, the official said. It also expects its jet fuel loadings in September to be 21% lower than in August, a steeper drop than the 12% forecast on July 17.

The drop in the latest four-week estimate of domestic jet fuel shipments was in contrast to a sharp rise in the previous four weeks as more domestic flights took to the skies from July 1.

Estimated domestic jet fuel shipments were 372,084 kl or 2.34 million barrels in the four weeks to July 25, more than double the 178,967 kl or 1.13 million barrels in the previous four weeks.

Prices falter

FOB Singapore jet fuel prices have come under downward pressure from the bleak outlook for a recovery in air travel.

At Platts 0830 GMT Singapore close on Aug. 25, the front-month September/October jet fuel/kerosene timespread was in a contango of 86 cents/b, widening 2 cents day on day. At 0300 GMT Aug. 26, brokers pegged the contango even wider at 90 cents/b. Further out, the Q4 2020/Q1 2021 as also in a steep contango assessed at $2.79/b on Aug. 25, widening 12 cents day on day.

The bearishness was also reflected in the jet fuel cash differential, which was assessed at a discount of 48 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment Aug. 25, widening 11 cents day on day, and 10 cents since the beginning of the month.

The FOB Singapore jet fuel/kerosene crack against the front month cash Dubai crude was minus 59 cents/b on Aug. 25, down 22 cents day on day and 71 cents since the start of the month, Platts data showed.