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Av|at|en
1urb|ne Fue|
0LNLkAL 0AkA0ILk|SI|0S
I\PLS 0I ILI IuLL
Aviation turbine fuel (A1l) or jet fuel is a speoialized type of petroleum-based fuel used to power airorafts. lt
is generally of a higher quality than fuels used in less oritioal applioations suoh as heating or road transport.
A1l is olear to straw ooloured and is a blend of hydrooarbons, a produot of petroleum refining whioh belongs
to the middle distillate group. ln some regions, lower quality speoifioation kerosene or a dual-purpose grade
is produoed and used as a domestio heating fuel, espeoially in Asia and notably in 1apan and Korea. ln
lndia, the kerosene market is divided in three segments namely, Publio Uistribution 3ystem (PU3), lndustrial
Kerosene and Aviation 1urbine luel. Almost all the lndian kerosene is oonsumed through the PU3.
Airline oompanies, being the single largest user of jet fuel, are exposed to prioe risk owing to extreme
volatility in prioes worldwide. 1ypioally, airlines have to either absorb the prioe volatility or pass the same to
oonsumers. owever, globalisation and the oompetitive soenario existent today demands oompetitive prioing
in the absenoe of whioh airlines stand to lose business. 1o deorease oost per passenger and inorease
revenues, airlines need to hedge their prioe risk inherent in jet fuel by taking positions in the futures
market. Crude oil refineries, on the other hand, are faoed with the risk of deoreasing produot prioes whioh
inoludes A1l. Ueoreasing produot prioes put a strain on refining margins leading to lower profitability. Again,
A1l futures are required to mitigate the prioe risk faoed by these refineries.
As the primary funotion of aviation turbine fuel (jet fuel) is to power an airoraft, energy oontent and
oombustion quality are key fuel performanoe properties. 0ther signifioant performanoe properties are
stability, lubrioity, fluidity, volatility, non-oorrosivity, and oleanliness. Besides providing a souroe of energy to
power the airoraft, fuel is also used as a hydraulio fluid in engine oontrol systems and a ooolant for oertain
fuel system oomponents. 1here is only one type of jet fuel, kerosene type, in oivil use world wide. 3o it's
extremely important to fuel supplier to ensure fuel in high quality and internationally reoognized standard
aooordingly.
Lighter (less dense) fuels, suoh as gasoline, have higher heating values on a weight basis: whereas heavier
(more dense) fuels, like diesel, have higher heating values on a volume basis. 3inoe spaoe is at a premium
in most airoraft, the amount of energy oontained in a give quantity of fuel is important. A fuel with high
volumetrio energy oontent maximises the energy that oan be stored in a fixed volume and thus provides the
longest flight range.
1et fuel is available in the following types:
1et A-1 1P-1 1P-4 1P-5
1P-6 1P-7 1P-8 1P13
1et A-1 is the most oommonly used jet fuel type. lt has the following oharaoteristios:
llash point: 38C Autoignition temperature: 210C
lreezing point: -47C 0pen air burning temperature: 287.5C
Maximum burning temperature: 980C Uensity at 15C: 0.8075 kg/L
Multi Commodity Lxohange of lndia Ltd (MCX) is a demutualised exohange with permanent reoognition from the
government of lndia. MCX offers futures trading in 56 oommodities inoluding bullion, energy, grains, plastios, metals, oil
and oilseeds, fibres, spioes, pulses, sugar, plantations and oarbon oredits as on Maroh 31, 2008. 1he average daily
turnover on the MCX platform was Rs. 102,827.60 million during fisoal 2007-08.
A1l is olear to
straw ooloured
and is a blend of
hydrooarbons, a
produot of
petroleum
refining whioh
belongs to the
middle distillate
group.
www.mc/|ud|a.com
1he |cture ef the d|st|||at|en tewer shews jet fue| be|ng d|st|||ed eut ef crude
e|| at areund 200 - 260 degree Ce|s|us.
Crude 0||
|st|||at|en 1ewer
Crude 0ll
HeaLlng Burner
leLroleum gas
< 40 C
C Lo C
1 3
0asollne40-200 C
C Lo C
4 12
Kerosene, jeL fuel
200-250 C
C Lo C
12 16
HeaLlng oll 250-300 C
C Lo C
15 18
LubrlcaLlng 0ll
300-370 C
C and up
19
Resldue, asphalL
C and up
25
C. 0phardL c. 1998
As inferred by the ohart below, A1l sales aooounted for around 3.5 of total sales of petroleum produots
while 3uperior Kerosene 0il (3K0) aooounted for 7.95.
Segmentat|en ef Preduct Sa|es
LPG, 9.08
Mogas, 7.77
Naphtha, 10.66
Other Lights, 3.34
SKO, 7.95
ATF, 3.32
HSDO, 35.85
FO, 7.75
LSHS, 2.81
Bitumen, 3.20
Coke, 4.07
LDO, 0.60
3ouroe: Ministry of Petroleum and Natural 0as, lndia
Other Waxes, 0.05
Other Heavy, 1.49
Other Mids, 0.41
Paraffin Wax, 0.16
Lubes / Greases, 1.48
Airline
oompanies, being
the single largest
user of jet fuel,
are exposed to
prioe risk owing
to extreme
volatility in prioes
worldwide.
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lndustries that are direotly affeoted by volatility in kerosene or aviation turbine fuel prioes are:
0il refining Aviation
Power generation 3hipping
3teel Railways
Metallurgy Chemioal, eto.
1he aviation industry is the single largest user of A1l. lor any airline oompany, A1l forms the major portion
of their material oost. Almost 40 of the total input oost to an airline oompany is oomposed of jet fuel.
0perating
expenses
25
0ther expenses
15
0ther repairs
2
lnsuranoe
premium
1
Repairs &
maintenanoe
2
3alaries &
wages
15
Lnergy
(power & fuel)
40
3ouroe: Petroleum Planning and Analysis Cell
0LNAN0-SuPPL\ S0LNAk|0
lndigenous produotion of A1l in lndia in 2007 was 7,805,000 tonnes. lndia is self-suffioient in produotion of
these produots with exports of 3,662,000 tonnes. 1he lndian oil oompanies produoe enough kerosene and
A1l to meet the domestio demand. Also the prioing of kerosene is revised by these oompanies dynamioally
in tandem with international rates. enoe the volatility of international orude oil prioes is spilled over to the
A1l and industrial kerosene prioes.
A1F Pr|ces
40
50
60
70
80
90
100
110
120
ATF Prices
1
/
4
/
2
0
0
8
1
/
4
/
2
0
0
5
3
/
4
/
2
0
0
5
5
/
4
/
2
0
0
5
7
/
4
/
2
0
0
5
9
/
4
/
2
0
0
5
1
1
/
4
/
2
0
0
5
1
/
4
/
2
0
0
6
3
/
4
/
2
0
0
6
5
/
4
/
2
0
0
6
7
/
4
/
2
0
0
6
9
/
4
/
2
0
0
6
1
1
/
4
/
2
0
0
7
1
/
4
/
2
0
0
7
3
/
4
/
2
0
0
7
5
/
4
/
2
0
0
7
7
/
4
/
2
0
0
7
9
/
4
/
2
0
0
7
1
1
/
4
/
2
0
0
7
U
S
8

/

b
b
l
3ouroe: Bloomberg
1here is only one
type of jet fuel,
kerosene type, in
oivil use world
wide.
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Prioes of A1l internationally have inoreased from u3$ 46 in 1anuary 2005 to u3$ 109 in 1anuary 2008,
whioh is an inorease of almost 137 owing to skyrooketing orude oil prioes. Uemand for A1l has inoreased
exponentially due to introduotion of many budget airlines and inoreased air traffio. Compared to 2000-01,
oonsumption of A1l has inoreased by almost 77 in 2006-07. 1he following ohart explains the inoreasing
demand for A1l in lndia.
A1F: emand - Su|y
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2000-01 2002-03 2003-04 2004-05 2005-06 2006-07*
^TF Demand ^TF Supply
'
0
0
0

1
e
n
n
e
3ouroe: Ministry of Petroleum and Natural 0as, lndia
Lxports of A1l have touohed 3,662 tonnes in 2006-07, whioh is a 120 inorease oompared to exports
during 2003-04. 3inoe A1l is a distillate of orude oil, there exists a high degree of oorrelation between their
prioes (96).
Crude - ATF CorreIation
10
30
50
70
90
110
130
0
20
40
60
80
100
120
ATF Crude Oil
2
1
/
3
/
0
0
5
/
3
2
0
3
/
0
5
5
/
3
/
0
0
5
2
/
3
2
0
5
7
/
0
/
9
3
/
2
0
0
5
1
1
3
/
2
0
0
/
5
/
6
1
3
/
2
0
0
3
/
3
/
2
0
0
6
0
5
/
3
/
2
0
6
7
/
3
2
0
6
/
0
9
/
3
/
2
0
0
6
1
/
0
0
1
/
3
2
6
1
/
3
/
0
0
7
2
3
/
3
/
2
0
0
7
5
3
/
0
0
/
2
7
7
/
3
/
2
0
0
7 7
9
/
3
/
2
0
0
1
/
3
/
0
0
7
1
2
/
3
/
0
0
8
1
2
U
S
8

/

b
b
l
3ouroe: Bloomberg
A1l sales
aooounted for
around 3.5 of
total sales of
petroleum
produots while
3uperior
Kerosene 0il
(3K0) aooounted
for 7.95.
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IA0I0kS AIIL0I|N0 Pk|0LS
LX0AN0LS IkA0|N0 |N KLk0SLNL
uSLIuL L|NKS
Crude oil prioes
Aviation industry demand - domestio and international (air traffio, eto.)
Politioal risk
lorex fluotuations
0lobal events, suoh as 0lympios, eto, that push demand for air travel
1okyo Commodity Lxohange (10C0M)
C-C0M
www.tooom.or.jp www.o-oom.or.jp
www.iata.org www.bloomberg.oom
www.osgnetwork.oom www.oentennialofflight.gov
www.energyintel.oom
00NIkA0I SPL0|I|0AI|0NS 0I AII
3ymbol A1l
Uesoription A1lMMM
C0N1RAC1S AVAILABLE F0R 1RAIN6
1anuary oontraot 26th 1uly of the previous year to 25th 1anuary of the
oontraot year
lebruary oontraot 26th August of the previous year to 25th lebruary of the
oontraot year
Maroh oontraot 26th 3eptember of the previous year to 25th Maroh of the
oontraot year
April oontraot 26th 0otober previous to 25th April of the oontraot year
May oontraot 26th November previous to 25th May of the oontraot ear
1une oontraot 26th Ueoember previous to 25th 1une of the oontraot year
1uly oontraot 26th 1anuary to 25th 1uly of the oontraot year
August oontraot 26th lebruary to 25th August of the oontraot year
3eptember oontraot 26th Maroh to 25th 3eptember of the oontraot year
0otober oontraot 26th April to 25th 0otober of the oontraot year
November oontraot 26th May to 25th November of the oontraot year
Ueoember oontraot 26th 1une to 25th Ueoember of the oontraot year
1RAIN6
1rading period Mondays through 3aturdays
1rading session Monday through lriday : 10.00 am to 11.55 pm
3aturday : 10.00 am to 2.00 pm
1rading unit 100 barrels
uotation/Base value Rs per barrel
Maximum order size 10,000 barrels
1iok size (minimum prioe movement) Re. 1
lndigenous
produotion of A1l
in lndia in 2007
was 7,805,000
tonnes. lndia is
self-suffioient in
produotion of
these produots
with exports of
3,662,000
tonnes.
Nete: Please refer to the exohange oiroulars for the latest oontraot speoifioations and delivery and settlement
prooedures.
Prioe quote Lx-Mumbai exoluding all taxes, levies and freight
Uaily prioe limits 4
lnitial margin 5
3peoial margin ln oase of additional volatility, a speoial margin as deemed
fit, will be imposed immediately on both buy and sell side in
respeot of all outstanding positions, whioh will remain in
foroe for next 2 days, after whioh the speoial margin will be
relaxed.
Maximum allowable open position lor individual olients: 6,00,000 barrels
lor a member oolleotively for all olients: 30,00,000 or 15
of the open market position, whiohever is higher
ELIVERY
Uelivery unit 3000 bbl with +/- 2 toleranoe limit
Uelivery margin 25
Uelivery oentre Port installation at Mumbai / 1NP1 port
uality speoifioations A1l oonfirming to following l3 1571:2001 quality
speoifioations:
Character|st|cs Requ|rements
Uensity (15 degrees C, gm/om3) 0.775 to 0.840
llash point (degrees C) Min. 38
3moke point (mm) Min. 23
3ulphur ( wt) Max. 0.3
Uelivery logio Both option
Uue date rate Uue date rate is oaloulated on the last trading day of the
oontraot on the basis of olosing prioe of relevant oontraot of
10C0M oonverted into lndian Rupee based on rupee
oonversion referenoe rate from 1apanese yen as deolared by
RBl on the same day.
Lxports of A1l
have touohed
3,662 tonnes in
2006-07, whioh
is a 120
inorease
oompared to
exports during
2003-04.
1
1
/
2
0
0
8
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from Lhe use of Lhls publlcaLlon. MCX or any of lLs afflllaLes makes no warranLles as Lo Lhe accuracy of lnformaLlon or resulLs Lo be obLalned from lLs use.