MOSCOW (MRC) -- Global jet fuel markets are coming back to life, resuscitated by a rebound in air cargo demand, gradually recovering passenger traffic and hopes that COVID-19 vaccines will spur more international flights in 2021, said Hydrocarbonprocessing.
The pandemic brought air travel to a virtual halt this year, and analysts say it may take years before global appetite for jet fuel returns to pre-pandemic levels. But refining profits for the fuel surged to multi-month highs in all key trading hubs in December on hopes of higher demand in 2021, with U.S. and European margins underpinned by a recovery in air cargo volumes and Asian margins also by a rebound in domestic travel and heating consumption.
Jet refining margins in Asia - the world’s top fuel market - have soared 580% and export prices by 45% since mid-September to their highest since March. Domestic air travel picked up as some countries eased coronavirus curbs.
"We expect vaccines will become available by (the) end of Q1 2021 and some travel restrictions will remain in place," said Qiaoling Chen, research associate at consultancy Wood Mackenzie in Singapore, forecasting Asian jet fuel demand at 1.4 million barrels per day (bpd) in the first quarter of next year. The consultancy expects appetite for jet fuel in the region to hit 1.3 million bpd in the fourth quarter of 2020, up by 460,000 bpd from Q2, but still 41% below the same period in 2019.
In the United States, margins to refine crude into distillates, which includes jet fuel, have about doubled since mid-September to more than USD13 a barrel, but are still about $10 per barrel below year-ago levels, according to Refinitiv data. Artyom Tchen, senior analyst at Rystad Energy in Norway, said U.S. jet fuel demand is currently around 1.34 million bpd, 30% off pre-coronavirus levels in January. International flights account for over 60% of global appetite for jet fuel.
"We will see the demand recovery going forward, but it will take some time and is especially dependent on how quickly international traffic volumes from the U.S. recover,” he said. While passenger air travel globally has recovered from its plunge to near total stoppage in May, the number of scheduled flights remained around 45% below year-ago levels in November.
Cargo traffic, however, has recovered far more briskly, and in October was only 6% below year-ago levels thanks to booming e-commerce. Global air cargo demand is expected to receive a further boost as airlines prepare to play a key role in mass vaccine roll-outs.
As MRC informed previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.
Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40% in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.
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