Asian jet fuel demand softens as global seat capacity extends decline

Asian jet fuel demand softened amid a second week of declines in global seat capacity, with the key aviation region of Northeast Asia accounting for a large segment of domestic capacity reduction.

"Global capacity this week falls again, dropping down to 110.5 million, which is a decrease of 1.1% [week on week] and equivalent to 1.3 million seats coming out of the schedule," aviation data company OAG said in their latest publication on global seat capacity.

Reflecting weaker demand from the aviation sector, the Platts-assessed FOB Singapore jet fuel/kerosene cash differential narrowed 6 cents/b on the day to a two-month low of 76 cents/b at the Asian close Oct. 10, S&P Global Commodity Insights data showed. The cash differential was last lower on Aug. 4 at 32 cents/b.

Domestic capacity declined 925,000 seats to 66.4 million seats in the week commencing Oct. 9 compared with the previous week, while international capacity fell 359,000 to 44.2 million seats over the same period.

International capacity saw the largest proportional decline in Northeast Asia, falling 3.1% on the week, while the region, which includes China, also accounted for the bulk of reductions in domestic capacity.

"Reductions in Northeast Asia drive the domestic changes this week, with 83% of the reductions coming from carriers in the region," OAG said.

While the reduction in seat capacity broadly tracks a seasonal lull ahead of the winter travel season, global seat capacity struggled to surpass 2019 levels despite coming close in the week prior.

"Compared to the same week in 2019, capacity has fallen back again this week to 1.6% below," OAG noted.

Looking ahead, OAG said domestic and international capacity for the rest of the year will continue to fluctuate and likely to settle at or around 65 million and 40.7 million seats per week, respectively.

Consequently, demand for jet fuel/kerosene could remain uneven in the near-term with an uptick in cargo prices further curtailing consumption.

Platts assessed FOB Singapore jet fuel/kerosene at an average of $122.90/b in September, widening 5.37% from the August average of $116.64/b, S&P Global data showed.

Industry sources are keeping tabs on the November-loading spot program for Northeast Asia jet fuel/kerosene cargoes for further pricing direction.

"Supply of jet fuel/kerosene is still healthy so it is difficult to tell which way the market will go," a regional middle distillate trader said.