Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
The UAE, Saudi Arabia and India have dominated jet fuel flows to
Europe, accounting for almost half of the volumes shipped to
Europe. The seasonality patterns with Q2 and Q3 volumes supported
by typically stronger demand in the continent have not been
followed this year. The COVID-19 pandemic has sharply affected
demand and flows in Europe.
Implications
Jet fuel demand has been severely affected once most flights in
Europe were grounded since April. Meanwhile the strong imports till
the end of April due to the contango in the forward curve lead to
increased volumes kept on floating storage in North Western Europe
and the Mediterranean, with similar increases observed onshore. The
recent heavy refinery maintenance in the Middle East Gulf
refineries resulted in lower jet fuel output and exports from the
Middle East Gulf to Europe. Exporters turned their interest to
Asia-Pacific.
Outlook
Flows of jet fuel to South East Asia have been supported by low
prices, which recently allowed the fuel to be used as a blending
component for shipping fuel. Jet fuel components were used for
blending in April and May in Singapore and the switching is picking
up again due to the recently weaker price of aviation fuel. The
destruction of demand for aviation fuels might last as the globe
seems to be entering a second wave of the COVID-19 pandemic.
.......................
Jet fuel trade flows has been one of the hottest topics to
discuss during the last couple of months, with all eyes on how its
much lower price has been shaping its three major trade routes,
from the Middle East to Europe, from Asia-Pacific to the USWC, and
then from the US Gulf to South America.
European refineries which have been feeling the pressure of
fresh competition in emerging regions, with rationalisation of
their operations left as their only option, have been typically not
producing enough volumes for the continent's demand. As a result,
Europe has been one of the major importers of jet fuel, with large
portions of its requirements sourced from producers east of Suez.
Europe imported more than 22 million tonnes of jet fuel last year,
according to data by IHS Markit Commodities at Sea,
with the UK, France, Netherlands and Italy having absorbed more
than 68% of the total flows to the continent.
Among major suppliers of jet fuel to Europe, the UAE, Saudi
Arabia, and India have dominated the market, accounting for almost
half of the volumes shipped to Europe. Other producers in the
Middle East together with Russia and South Korea are among major
suppliers. Another interesting aspect of jet fuel flows to Europe
that we need to highlight refer to the seasonality patterns
typically observed, with Q2 and Q3 volumes supported by typically
stronger demand in the continent. 2020 seems to have been a rather
different year so far, with COVID-19 having sharply affected demand
and flows in Europe.
Since the pandemic started, we hadn't really observed any
dramatic change compared to volumes carried during the last two
year, but once most flights in Europe were grounded since April,
jet fuel demand has been severely affected. Meanwhile the strong
imports till the end of April due to the contango in the forward
curve lead to increased volumes kept on floating storage in North
Western Europe and the Mediterranean, with similar increases
observed onshore. Inventories at the ARA ports reached new high
levels, as demand remained weak and could simply not absorb all
flows to the continent.
Jet fuel floating storage in North Western Europe and
the Mediterranean
Focusing on suppliers of jet fuel to Europe, producers across
the Middle East Gulf underwent a heavy refinery maintenance when
the COVID-19 outbreak commenced, which was already scheduled for
late Q1/ early Q2 2020. This has resulted in lower jet fuel output
during that period. This caused jet fuel exports from the Middle
East Gulf to drop. But since, several refineries of the region have
returned from maintenance. These refineries started shipping much
more jet fuel to Europe in May, with several barrels remaining in
storage as demand weakened. This resulted in much weaker flows to
Europe in July and August, with exporters turning their interest to
Asia-Pacific, where prices have been much healthier.
Flows of jet fuel to South East Asia have been supported by low
prices, which recently allowed the fuel to be used as a blending
component for shipping fuel. This has been a rather unthinkable
shift, as the strong demand from the aviation industry typically
kept prices at much higher levels. Jet fuel components were used
for blending in April and May in Singapore and the switching is
picking up again due to the recently weaker price of aviation fuel.
The destruction of demand for aviation fuels might last as the
globe seems to be entering a second wave of the COVID-19
pandemic.
