Airplanes of Jetstar Japan, Spring Japan and ZipAir, low-cost airlines which owned subsidiary of Japan Airlines, are displayed at Narita international airport in Narita, east of Tokyo, Japan June 30, 2021. REUTERS/Maki Shiraki
July 15 (Reuters) - Fresh travel restrictions due to a resurgence in COVID-19 infections have dashed hopes for a recovery in Asian jet fuel demand this year and worsened the outlook for the entire refining sector as jet supplies mount and erode overall refining margins.
While aviation in the U.S. and Europe recuperates on eased lockdown measures and summer travelling demand, Asia's worsening pandemic is expected to keep flights grounded and poses a serious challenge to refiners who are already facing the highest oil prices since 2018 and crude refining margins of less than $2.50 a barrel.
"The persistent weakness in jet fuel cracks would definitely weigh on overall refining margins in Asia," said Sukrit Vijayakar, director of Indian energy consultancy Trifecta.
"There is a part of the jet pool that cannot be blended away elsewhere. And its poorer cousin, kerosene, sells for far less than jet."
STALLED RECOVERY
Several Asian countries were among the first to emerge from COVID-19 lockdowns in 2020, but fresh flare ups of new strains in recent months have forced many key destinations to tighten movement restrictions again, including Japan, South Korea, Indonesia and Vietnam. read more
Scheduled flight capacity in Japan this week was 55.6% below the corresponding week in pre-pandemic 2019, while capacity in South Korea, Australia and India were down 46.4%, 56.7% and 40.1% respectively, according to aviation data firm OAG.
In contrast, European and U.S aviation capacity is recovering much faster, presenting refiners in those markets with a growing outlet for the fuels they produce.
Refiners in Asia, however, are saddled with growing quantities of excess jet fuel that they are unable to store for long due to its tendency to deteriorate in quality. That leaves them with two options: either hope to sell it to other regions, or blend it into other lower-value fuels and eat away at overall refining margins.
"Kerosene molecules continue to flow into both the gasoil and naphtha pools – and some into the bunker pool even – and will continue to do so as long as weak jet pricing calls for these blending operations," said Philip Jones-Lux, head of downstream at consultancy JBC Energy.
Some refiners in Southeast Asia might even be forced to cut runs temporarily if jet fuel's weakness persists, traders and analysts said.
WINTER RESPITE
Jet fuel's demand outlook is expected to improve by year end as vaccine rollouts accelerate and seasonal heating demand for kerosene kicks in, according to two refining sources.
That should help lift Asian jet refining profits, also known as cracks, from around $6-8 per barrel over Dubai crude during Q3 to $7-9 per barrel in Q4, market watchers said.
The cracks, which are currently 52% lower than their 10-year seasonal average for this time of the year, have averaged $5.53 per barrel in Q2, compared with $4.03 per barrel in the first three months of the year, Refinitiv Eikon data showed.
ROAD VS AIR
Although an uptick in domestic flights in recent weeks has brought some respite, overall jet fuel demand remains far below pre-pandemic levels as a majority of long-haul flights remain grounded.
This has led to a disconnect between consumption of jet fuel and ground transportation fuels which have benefited from more regular use this year as most governments avoided the full-scale lockdowns that were common in 2020.
This in turn has kept the price spread between jet and gasoil, called regrade , negative.
"Given our expectation for international leisure travel to be among the last sectors to see a 'normalisation' in demand, it is fair to assume that there will continue to be a disconnect between demand for motor fuels and that for jet fuel," said Peter Lee, senior oil & gas analyst at Fitch Solutions.
Jet fuel is expected to remain subdued well into next year, and it will likely take until December or January for jet regrade to recover to near its historical average.
"Jet/Kero is the key lagging product from a demand perspective, and we can expect negative regrades to continue well into next year," said Richard Gorry, managing director at JBC Energy Asia.
"The global recovery of air traffic is simply not sufficient to absorb rising production, and a strengthening diesel crack is keeping the regrade subdued."
Reporting by Koustav Samanta; Editing by Gavin Maguire and Kim Coghill
Our Standards: The Thomson Reuters Trust Principles.
"asian" - Google News
July 15, 2021 at 11:46AM
https://ift.tt/3wFI5SK
Fresh travel curbs amid COVID-19 surge mars outlook for Asian refiners - Reuters
"asian" - Google News
https://ift.tt/2STmru2
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
No comments:
Post a Comment