India's jet fuel demand will likely face headwinds in the coming months, tempering hopes of a robust recovery in 2022, as a third pandemic wave appears imminent after a sudden surge in infections in recent days, industry sources said.
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However, supply-side constraints amid elevated demand elsewhere in Asia were expected to keep jet fuel prices supported, the sources said.
Fresh coronavirus cases in India have jumped about 55% to 58,097 in the past 24 hours, local media reported Jan. 5. Active cases rose 42,174 day on day to 214,004 at 08:00 IST (0230 GMT) Jan. 5, according to the Ministry of Health and Family Welfare website.
This comes despite a generally high vaccination rate, with 1.47 billion doses administered as of Jan. 5 according to the ministry, as well as continuing curbs on international passenger arrivals.
India's Directorate General of Civil Aviation on Dec. 9 extended the suspension of incoming and outgoing international passenger flights to Jan. 31. The restriction does not apply to all international flights under existing bubble arrangements until then, as well as to cargo operations.
The explosion in infections in recent days has prompted many states and cities to re-impose regional restrictions. West Bengal has suspended all direct flights from the UK since Jan. 3 and reduced the frequency of domestic flights from Mumbai and Delhi, while Delhi last week announced a "yellow alert" under which schools, colleges, cinemas and gyms were closed. The yellow alert is triggered when the COVID-19 positive rate is higher than 0.5% for two consecutive days.
Maharashtra also recently announced new rules for international arrivals including quarantine requirements and other stricter checks on passengers arriving from "at risk" and "high-risk" countries.
India's kerosene/jet fuel demand is projected to rise by 57,000 b/d in 2022, after a sharp contraction of 104,000 b/d in 2020 and a modest 9,000 b/d increase estimated for 2021, JY Lim, adviser oil markets at S&P Global Platts Analytics, said Jan. 4.
The country's kerosene/jet fuel demand in 2022 is expected to be 16% lower than in 2019 as international traffic is likely to remain weak, especially in the near term due to omicron, he added.
Domestic jet fuel consumption rose 5.22% month on month in November to 504,000 mt, a 21-month high, latest preliminary data from the Petroleum Planning and Analysis Cell showed. It was last higher in February 2020 at 689,000 mt. India's jet fuel demand over January-November 2020 was up 45.36% year on year at 2.98 million mt.
The country's jet fuel production also surged 44.8% year on year in November, hitting a 20-month high of 1.06 million mt, and rose 12.4% month on month, preliminary data from PPAC showed. India's jet fuel output was last higher at 1.13 million mt in March 2020, and the November figure marked a fourth straight month of increase since July, when COVID-19 woes forced Indian refiners to cut production to a nine-month low of 604,000 mt.
"Omicron has definitely changed and canceled some travel plans. People will think twice if they want to take that risk," an industry source said Jan. 5, adding that domestic demand could drop sharply ahead.
Jet fuel prices supported
Tight jet fuel availabilities in the Asian spot market owing to curtailed production and lower jet fuel/kerosene yields will likely prompt refiners to maintain steady output levels.
"Production will be stable...we are monitoring the situation," an Asian refiner said.
China's overnight announcement of a lower oil product export quota for 2022 was likely to further exacerbate the tight supply. China's Ministry of Commerce has allocated 13 million mt of oil product export quota in the first round to seven oil companies for 2022, down 55.9% from the same round in 2021.
"We will see less from China this month and next. Lunar New Year is coming, Chinese refiners will keep [jet fuel] for domestic use; it's the peak travel season," an industry source said.
The FOB Singapore jet fuel/kerosene cash differential was steady day on day at plus 2 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment at the 0830 GMT Asian close Jan. 4, S&P Global Platts data showed.
"December is usually a quiet month, [it was the] same for this year... but activity should start to pick up from this month," a trader based in Singapore said.
"The [jet fuel] market was nervous about omicron and there were many flight cancelations. A knee-jerk reaction, but now things are looking steady [in Asia]. I think prices will rebound," the trade source added.