China to lift jet fuel/kerosene output amid domestic flight recovery, border reopening

China's jet fuel/kerosene output is expected to rise for meeting potential demand growth from domestic and international flights as Beijing has decided to scrap quarantine measures for overseas arrival, effective Jan. 8, 2023, following the targets set for a domestic aviation recovery, refining sources and analysts said Dec. 27.

However, jet/kerosene demand increase is likely to be modest until late January as it takes time to kickstart the aviation sector amid soaring new infections, analysts added.

The National Health Commission announced late Dec. 26 the downgrading of COVID-19 from the top tier of infectious diseases to a second tier with 12 measures to eventually loosen pandemic controls starting Jan. 8, 2023.

With the new measures, international travelers would only need a negative result from a polymerase chain reaction (PCR) test taken 48 hours pre-flight to enter China without any quarantine requirement.

Before this announcement, China targeted to lift domestic air traffic to up to 9,280 daily flights, or 70% of levels in 2019 by Jan. 6, 2023, and to no more than 11,667 daily flights by Jan. 31, or 88% of the pre COVID-19 level, the Civil Aviation Administration of China had said Dec. 14, adding that the number of daily domestic flights has reached 8,000 from 3,000 in early December.

The administration set the aviation industry to be in a "stable recovery period" in February and March 2023.

"All these help pull jet fuel demand to an upward trend and requires higher jet fuel supply. But we don't expect a strong rebound until late January, around Lunar New Year, as the rocketing COVID cases cap the number of people who are willing to travel, and the number of pilots, captain crews are healthy and qualified to serve," said Sun Sijia, an analyst with S&P Global Commodity Insights.

S&P Global estimated Dec. 14 China's jet fuel demand to hit the bottom of 448,000 b/d in the fourth quarter and rebound 20% on the quarter to 538,000 b/d in first-quarter 2023.

"Jet demand will be more resilient in the early stage of reopening, but international travelers may at first remain vigilant on China's border policy and concerned about high infection rate in China, thus domestic flights will lead jet demand recovery in H1 2023," said Sun Jianan, an analyst with Energy Aspect.

Italy and India recently require Chinese arrivals to present the mandatory PCR test. In addition to the mandatory arrival PCR test for travelers departing from China and a seven-day quarantine for those with positive test results, Japan on Dec. 27 announced to limit flights between the two countries, effective Dec. 30.

Jet fuel output hits high

China's jet fuel output hit a 13-month high in November at 3 million mt (790,000 b/d), jumping 33% year on year and 23.1% from October, data from the National Bureau of Statistics showed Dec. 26.

The previous high was 3.07 million mt in October 2021.

A refining source with Sinopec said it has further lifted jet/kerosene production in December, but sales remained slow.

At the same time, gasoil output hit another new record at 19.01 million mt in November after gaining 16.4% year on year and 1% from a record in October.

The high middle distillates yield, 36.9% for gasoil and jet fuel, led to a 9.4% year-on-year reduction in fuel oil output to 3.9 million mt, NBS data showed. The middle distillates yield was 31.3% in November 2021.

China's production of the six oil products -- LPG, naphtha, gasoline, jet fuel/kerosene, gasoil, and fuel oil -- rose 4.6% year on year to 477.04 million mt in the first 11 months of 2022, despite crude throughput falling 3.9% to 615.99 million mt (13.52 million b/d) as demand for petrochemicals products has been weak this year.

China's petroleum output:

(Unit: million mt)

*Figures for 2021 differ from volumes reported earlier due to NBS revisions

Source: China's National Bureau of Statistics