By Koustav Samanta
SINGAPORE (Reuters) – Asian refining margins for jet fuel turned positive for the first time in a month, bolstered by deep supply cuts and an uptick in domestic flights in regional markets such as China and Vietnam after governments eased in-country travel restrictions.
The jet fuel refining margin in Singapore flipped to $1.83 per barrel above Dubai crude on Tuesday, in the positive territory for the first time since April 20.
Measures imposed to curb the spread of the coronavirus have caused jet fuel demand to plunge since February, leading to refining losses of as much as $7.23 a barrel on May 5.
“The jet fuel market in Asia has already hit a bottom, with some airlines even filing for bankruptcies… I think the countries easing or removing their lockdowns would definitely help the market a bit,” a Singapore-based trader said.
“But I’m not so optimistic that it can turn the market around or bring it to pre-pandemic level.”
Planned refinery turnarounds and run cuts at regional refineries have helped curb excess supplies from the market, while domestic demand in China kindled hopes for a gradual recovery, trade sources said.
China Aviation Oil (CAO) has been actively bidding for jet fuel cargoes in the Singapore physical trade window this month, lapping up 245,000 barrels of the fuel in the last one week, which represents half of the traded volumes in an otherwise subdued market.
Aviation data provider Cirium showed six of the top ten airlines ranked by number of scheduled flights operated with passenger jets last week were Chinese.
Vietnam Airlines with a little over 1,150 scheduled services operated last week ranked 21st, Cirium said, as the country tries to boost domestic tourism.
Still, the aviation market is expected to take years to recover to pre-crisis levels as passengers continue to shy away from travelling to avoid quarantine even after countries have reopened their borders.
(Reporting Koustav Samanta; Additional reporting by Jamie Freed in Sydney; Editing by Florence Tan & Simon Cameron-Moore)
