SINGAPORE: Asia’s cash premiums for jet fuel slipped on Wednesday due to muted buying interests in the physical market, while refining margins for the aviation fuel hovered close to a record high touched in the previous session amid persistent demand recovery.
Cash differentials for jet fuel, which have gained more than 40% in the last month, were at a premium of $3.04 a barrel to Singapore quotes, compared with a premium of $3.29 per barrel a day earlier.
Global airline capacity is expected to exceed 100 million seats by next week for the first time since February 2020, according to aviation data firm OAG’s estimates.
Despite rising fares, the numbers of scheduled airline seats have steadily risen in the last few months, thanks to pent-up demand, but there are growing questions over the sustainability of air travel recovery once the summer travelling season ends and inflation begins to bite.
Refining margins, also known as cracks, for jet fuel slipped to $59.12 a barrel over Dubai crude during Asian trading hours on Wednesday, down from an all-time high of $61.77 per barrel hit on Tuesday.
Major oil companies must speed up the development of alternative fuels crucial to the aviation industry meeting its 2050 net-zero emissions target or risk losing out to businesses that will, airlines warned on Tuesday.
The airline industry requires huge investments in so-called sustainable aviation fuels (SAF), which are currently in short supply and far more expensive than conventional jet fuels. Commercial aviation contributes about 2% of global carbon dioxide emissions.
The development of SAF, made from feedstocks such as cooking oils and animal waste, is expected to make the biggest contribution to airlines achieving net-zero. Future technologies such as electric and hydrogen-powered aircraft are still unproven and will likely take decades to replace existing aircraft if developed.
Middle-distillate inventories in the Fujairah Oil Industry Zone rose 26% to 3.5 million barrels in the week ended June 20, data via S&P Global Commodity Insights showed.
This week’s stocks were about 19% lower compared with the corresponding week last year.
Weekly stocks in Fujairah have averaged 1.95 million barrels so far this year, compared with 3.5 million barrels in 2021, Reuters calculations showed. Capacity for US oil refiners fell in 2021 for the second year in a row, the most recent government data showed on Tuesday, as plant shutdowns kept whittling away on their ability to produce gasoline and diesel.