Asian jet fuel/kerosene market extends uptick as air passenger traffic rebounds

The Asian jet fuel/kerosene market is poised to extend its recent recovery into May, with latest data showing a steady improvement in passenger traffic numbers, but soaring flat prices could rein in the extent of the upside, market sources said May 5.

The Platts FOB Singapore jet fuel/kerosene flat price was assessed at $147.99/b at the 0830 GMT Asian close May 4 -- the first trading day of the month, S&P Global Commodity Insights data showed.

This was notably higher than the $134.38/b the marker averaged in April and $133.45/b averaged in March.

While ongoing volatility in the crude and freight markets may weigh on the Asian jet fuel/kerosene market in May, traders said jet fuel demand was expected to strengthen further in the month.

"Jet oil demand is forecast to recover as airlines are set to resume flights on international routes as many countries have lifted entry restrictions," a refinery official said.

Latest Association of Asia Pacific Airlines data showed the Asia-Pacific sector posting improvements in international air passenger demand on the back of easing travel restrictions, but the air cargo segment registering its first year-on-year decline in 14 months.

Asia-Pacific carriers flew 3.5 million international passengers in March, up almost threefold from 1.2 million passengers a year earlier, the AAPA data showed. However, this still equated to just 10.8% of the 32.5 million passengers carried in pre-pandemic 2019.

"After two years of coping with the pandemic, a growing number of Asian governments have begun to treat COVID-19 as endemic as high vaccination levels are achieved in parallel," AAPA Director General Subhas Menon said.

"The progressive reopening of borders and easing of restrictions, including the removal of quarantine for vaccinated travelers and reduced testing requirements, have positively impacted international travel demand," Menon added.

International passenger demand -- measured in revenue passenger kilometers, or RPK – surged 205.4% year on year in March, surpassing the 64% year-on-year expansion in available seat capacity. This led the average international passenger load factor to rise by 23.9 percentage points to 51.6%, breaching the 50% mark for the first time since 2020.

Air cargo demand dips

However on the air cargo front, AAPA said production disruptions and congestion at China's major ports and international trade sanctions on Russia for invading Ukraine were straining global supply chains, resulting in short-term effects on Asia-Pacific air freight markets.

International air cargo demand, measured in freight ton kilometers, fell 1.3% year on year in March, although the decline was mitigated by continuing strong demand from major economies, AAPA said. Growth in commercial passenger operations also helped to drive up offered freight capacity by 5.1% year on year, resulting in a 4.5 percentage point decline in the average international freight load factor to 70.4% for March.

Looking ahead, AAPA noted that some uncertainty remains as the pace of reopening continues to vary across the region.

"While the recent easing of travel restrictions is very much welcome by the industry, incoherent and uneven border control measures across economies continue to confuse travelers and hinder travel recovery," Menon said, adding that key markets including China and Japan were still closed to international visitors.

He added that elevated fuel prices, inflation across major economies and the weakening of several Asian currencies may also affect the pace of recovery in the region's travel markets.