Asia's jet fuel demand growth likely to taper off in H2 after a robust H1

Asia's jet fuel appetite surged 430,000 b/d on the year in first-half 2024 as the region saw the sharpest rise in air travel, but the demand growth may taper off in H2 due to the fading impact of aviation demand normalization after the pandemic, analysts and trade sources said.

Asia's jet fuel demand growth is expected to be around 270,000 b/d in H2 2024, which would eventually pull down the annual rate of demand growth in 2024 below 2023 levels, according to S&P Global Commodity Insights,

"Asian jet/kerosene demand will maintain its upward momentum, growing by around 320,000 b/d year over year in Q3 [2024] due to the summer travel season. Mainland China and Southeast Asia will continue to lead regional jet/kerosene growth at a rate of 198,000 b/d and 67,000 b/d, respectively," said Wang Zhuwei, director of East of Suez Oil Market Research at S&P Global Commodity Insights.

"We estimate that annual Asian jet/kerosene demand growth will moderate to 361,000 b/d in 2024, from 620,000 b/d, in 2023, before further easing to 190,000 b/d in 2025 due to fading impact of aviation demand normalization. Regional jet/kerosene demand will recover to 99.5% of the 2019 level by 2025," he added.

Global air passenger demand, measured in revenue passenger kilometers (RPK), rose 13.4 % year on year in H1, led by growth in international passenger market, data from the International Air Transport Association showed.

Total capacity, measured in available seat kilometers, was also up 11.6% year on year in H1.

International passenger demand rose 17.4% on the year over the same period, with Asia-Pacific driving the growth at 35.4%, followed by Latin America at 17% and Africa at 15.4%. Global domestic passenger demand in H1 climbed 7.4% year on year, with China leading at 16.1%.

Reflecting stronger demand for jet fuel in H1, the Platts-assessed FOB Singapore jet fuel/kerosene cargo flat price averaged $100.48/b over the six-month period, up $1.52/b on the year, Commodity Insights data showed.

Outlook for India, North Asia

"Apart from Southeast Asia and China, the growth story for jet fuel in India is also very interesting if you look at the numbers," one refining source in India said.

India's jet fuel witnessed the sharpest growth among all oil products in H1, rising about 9.25% year on year to 4.37 million mt, from 4 million mt in H1 2023, according to the Petroleum Planning and Analysis Cell.

Even Japan is witnessing a surge in passenger flight traffic and aviation fuel demand in 2024 as a weaker yen has significantly increased the purchasing power of holiday seekers from South Korea, China, Taiwan, Hong Kong and Singapore, trade sources said.

Japan's overall supply of aviation fuel has been tight in recent weeks as the country is at its peak refinery maintenance, with close to a third of its total 3.11 million b/d refining capacity shutting down.

To resolve the country's aviation fuel shortages, Japan's biggest refiner ENEOS has indicated it was considering jet fuel imports to ensure stable supplies.

Japan's Narita International Airport may bring in more jet fuel on ocean liners from abroad through trading houses, after the airport became the first to receive imported jet fuel directly at its facility in July, S&P Global Commodity Insights reported previously.

Two July-loading jet fuel cargoes were sold to two Japanese trading companies, a middle distillate marketing source at a major South Korean refiner told Commodity Insights.

Jet fuel exports from South Korea to Japan jumped to 3.56 million barrels in the Q2 2024, more than double on the year from 1.5 million in Q2 2023, latest data from state-run Korea National Oil Corp. showed.

Oversupply eclipses summer demand

Despite an uptick in demand from the seasonal summer travel period, the Asian jet fuel/kerosene complex remained under pressure from heavy supply.

The Platts-assessed the cash differential for jet fuel/kerosene cargoes loading from Singapore averaged minus 16 cents/b in July, Commodity Insights data showed. At the Asian close Aug. 7, the cash differential was assessed at minus 78 cents/b, posting a week-on-week fall of 71 cents/b.

For comparison, the cash differential averaged plus 33 cents/b in July 2023, remaining in positive territory throughout the month and reaching a peak of 77 cents/b on July 27, 2023, Commodity Insights data showed.

"Things are looking quite bearish until the winter heating demand comes in," a North Asian middle distillates trade source said. "Inventories are just too heavy."

In the near term, supply could lengthen further as China's jet fuel exports remain strong. "China will probably export more in September," another regional middle distillates trader said.

China's jet fuel exports in August are estimated at 1.7 million mt, from about 1.87 million mt in July, following the summer holidays.

Sinopec could save more of its export quotas for jet fuel, which has been bringing in steady profits, according to the sources. The oil giant is targeting exports of 900,000 mt of jet fuel and 400,000 mt of gasoil in August.