China’s jet fuel demand boosts refiners

China’s Jet fuel demand is recovering as flights resume, relieving refiners facing low diesel and gasoline consumption. In June, total air traffic rose 14 per cent from 2019 levels, with domestic flights up nearly 18 per cent.

State-owned and private refiners are struggling due to a slowing economy, increased electrification of cars, and trucks shifting from diesel to gas.

“Double-digit growth in jet fuel consumption this year may be able to narrow the plunge in gasoline and diesel,” said Amy Sun of GL Consulting. However, the smaller market size of jet fuel limits its impact on overall margins.

Domestic travel in China has rebounded faster than international, with further expansion expected. “We foresee a further expansion in foreign passenger flights, which will likely reach 90 per cent of 2019 levels over end-24,” said Jianan Sun of Energy Aspects Ltd.

On the other hand, China’s oil imports slowed last month, and privately owned plants operated at less than 50 per cent capacity. Refiners are maximising jet fuel production, with Sinopec Yangzi and Shanghai boosting output by 23 per cent and 12 per cent, respectively, and PetroChina’s Huabei refinery also increasing supplies.

Globally, jet fuel consumption remains 15 per cent below pre-pandemic levels, partly due to newer, more fuel-efficient planes. “Major airlines are replacing their fleets with new, modern airplanes that are 25 per cent more fuel efficient,” said Sun.

Attribution: Bloomberg