Jet Set Go!

November 2021

Date of issue: 03/11/2021

 Jet Set Go! 2

Table of Contents
Contents
Executive Summary: .......................................................................................................................................................................3
Impact on Global Economy and Aviation demand ..........................................................................................................................4
Impact of Covid-19 on Global economy ......................................................................................................................................4
Impact of Covid-19 on Aviation Industry and Jet Fuel .................................................................................................................4
Covid Cases and Vaccination .....................................................................................................................................................6
Cases: .....................................................................................................................................................................................6
Vaccination: .............................................................................................................................................................................7
Current Situation: .....................................................................................................................................................................7
Impact on Jet Fuel demand: ....................................................................................................................................................8
West of Suez Jet/Kero Market ........................................................................................................................................................8
Americas .....................................................................................................................................................................................8
European Saga ......................................................................................................................................................................... 13
Trade flows ............................................................................................................................................................................ 13
European Airport Passenger Traffic ...................................................................................................................................... 14
Inventories: Jet Kerosene ARA Stocks .................................................................................................................................. 14
Prices..................................................................................................................................................................................... 14
East of Suez Jet/Kero Market ....................................................................................................................................................... 15
Asia-Pacific: .............................................................................................................................................................................. 15
Trade Flows ........................................................................................................................................................................... 15
Major Exporters: .................................................................................................................................................................... 17
Top Destination: .................................................................................................................................................................... 18
Asia-Pacific Fundamentals ........................................................................................................................................................ 19
Japanese winter .................................................................................................................................................................... 19
Slowdown in Chinese blending activity .................................................................................................................................. 20
Travel prospects .................................................................................................................................................................... 20
Pricing, Arbitrage ................................................................................................................................................................... 20
Middle East ............................................................................................................................................................................... 23
Trade Flows: .......................................................................................................................................................................... 23
Top destination for Middle East Jet fuel: ................................................................................................................................ 25
Middle East Jet/Kero demand Fundamentals:........................................................................................................................... 26
Conclusion: ................................................................................................................................................................................... 28

Date of issue: 03/11/2021

 Jet Set Go! 3

Executive Summary:
1. Decline in global GDP in 2020 has been the deepest since the end of World War II because of Covid-19
pandemic. The global economy contracted by 3.5% in 2020 according to IMF, a 7 % loss relative to the 3.4%
growth forecast back in October 2019.
2. Refined products, the fuel for economic activity, saw an unprecedented drop in demand. But demand
destruction amongst the marquis products – gasoline, diesel, and jet fuel – was uneven, with diesel (gasoil)
recovering more quickly than other products. Jet fuel, the obvious focus of this report, was the most affected,
and continues to be so to this day.
3. Although economies across the globe have reopened gradually with various checks in place, waves of
infections in different times across the continent have delayed the global recovery as each had a different
pace of recovery.
4. US jet fuel demand reached a historical peak of over 1.8 million bpd in the years prior to the early-2002’s
recession that accompanied the burst of the Dot-Com bubble. Post 2002 recession demand recovery
reached the high of ~1.7 million bpd in 2005-06. However, the next recession in 2008-09 witnessed the
demand levels dropping to 1.3 million bpd in 2009. Following this the demand slowly recovered to the
historical high of 1.8 million bpd in 2018 and 2019 before the pandemic brought the entire aviation sector to
a standstill with demand dropping to historical low of ~600 kbpd in May 2020.
5. With the onset of the pandemic, US exports pulled back to nearly zero. This due to the fact that approximately
50% of US jet fuel exports make their way to either Canada or Mexico, and where y-o-y the US saw a 38%
drop in jet fuel demand, Mexico, for example, saw a full 78% loss.
6. Despite US refining utilization returning to more normal levels, jet fuel production has remained subdued.
7. Jet fuel tracked by Refinitiv arriving in Europe has picked up pace over the summer months, buoyed by the
implementation of the EU Digital COVID Certificate (EUDCC) in July which allowed vaccinated citizens to
travel within Europe without quarantining. Refinitiv tracked a doubling of seaborne imports compared to July
2020, the majority of the 1.2 million tons of arrivals originated from the Middle East. Despite the sharp pick
up in flows, imports over the summer months remain around a third below their seasonal average in line with
lower flight demand.
8. The pickup in summer flying demand in Europe served to provide some much-needed price support to jet in
Europe, which had been struggling to find traction over the beginning of 2021 amid quickly changing
quarantine and testing for arriving air passengers. The roll out of the EUDCC appears to have increased
confidence in flight booking although prices did not see a notable rise until August.
9. Asia Pacific (APAC) is the top exporter of Jet/Kero in the world with yearly volumes averaging around 32.7
million MT between 2017-19. In terms of global share in export, APAC contributes roughly 40% of the total
volumes. Year 2020 caused havoc for Jet/Kero as Covid-19 pandemic brought the aviation industry,
especially the passenger segment to standstill. Jet/Kero exports in year 2020 was just ~70% of previous
three years average export volumes.
10. Upcoming winter demand season in Asia Pacific is expected to be a relatively muted one for the aviation
fuel. The confluence of bullish factors – a cold snap in Northeast Asia, and consistent demand for kerosene
in the diesel blending pool – that led the Singapore cash market to a two-year high of plus 45 cents/bbl in
January 2020 is conspicuously missing this year. Instead, the Asian spot market must contend with the
likelihood of a tame winter in Japan – the single largest regional consumer of kerosene as a heating oil –
and a recent crash in China’s domestic blending market.
11. In the Middle East - Saudi Arabia, UAE and Kuwait are the top three exporters of Jet/Kero. Saudi Arabia is
the largest jet fuel producer followed by the UAE and Kuwait. These three countries together account for
more than 75% of the total regional outflows.
12. Middle East Jet/Kero consumption is expected to improve in coming quarters as more and more travel
restrictions are lifted. Middle Eastern airlines’ dependence on connecting international flights and the lack of
large domestic markets delays the recovery in the region.

Date of issue: 03/11/2021

 Jet Set Go! 4

Impact on Global Economy and Aviation demand

Impact of Covid-19 on Global economy

Global GDP (y-o-y % change)

7
6
5
4
3
2
1
0
-1
-2
-3
-4
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Source(s): IMF, Refinitiv

Much has been written about the global response to the COVID-19 pandemic and its variants that have caused
global economies to shut down. Not even during the Great Recession, was the economic activity affected to such a
great extent, as evident in many economic measures, but adequately exemplified in global estimates of GDP
growth.

Impact of Covid-19 on Aviation Industry and Jet Fuel

Refined products, the fuel for economic activity, saw

an unprecedented drop in demand. But demand
destruction amongst the marquis products –
gasoline, diesel, and jet fuel – was uneven, with
diesel (gasoil) recovering more quickly than other
products. Jet fuel, the obvious focus of this report,
was the most affected, and continues to be so to this
day.
Jet fuel fundamentals, including any structural
changes to supply or demand are more of a regional
story and will be discussed herein. However,
sovereign policy has continued to be a headwind to
some recovery in inter-regional flight demand, as
higher traffic regions of the world continue with
policies of either closed borders or quarantine for
individuals arriving from high risk regions. In many
cases an end to these policies is uncertain,
especially given the periodic appearance of COVID-
19 variants that have caused panic and increased
strain on the healthcare systems.

Date of issue: 03/11/2021

 Jet Set Go! 5

Global Air Passenger Volumes (RPKs) Trend in Passenger Bookings

Note: RPK (Revenue Passenger Kilometres) = Total Revenue Paying Passengers * Distance Travelled in Kilometres

Recovery in the global jet fuel market has

not been completely thwarted by
headwinds in passenger air travel. In fact,
even as passenger travel has struggled to
return to pre-pandemic highs, air cargo has
recovered significantly to reach levels not
seen even prior to when the pandemic
begun.
The strength in the global air cargo market
is owed in part to strong demand for goods
emerging from the lockdown-induced
recession, but also to issues with other
Source(s): IATA
supply chains, such as waterborne and
trucking, where issues such as lack of
workers and port delays drive up costs and
render them less attractive. Though these
issues have been seen across the globe, the
most pronounced has been North America,
which has pushed traffic for the North Pacific
trade lane well above pre-pandemic levels.
Regional analysis in this report sheds more
light on the variables that roll-up and affect
global passenger and cargo data, which by
extension influence jet fuel demand. But that
said, from a gestalt view of the world, the
current headwinds and support that we see
in the jet fuel market will persist well into
2022.
Source(s): IATA

Date of issue: 03/11/2021

 Jet Set Go! 6

Covid Cases and Vaccination

Cases:
First Covid case was reported in China in Dec 2019 and it took just couple of months to take the whole world in its
grips. On the 11th of March, COVID-19 was declared a pandemic by the WHO and by September 2021, more than
200 million confirmed cases and over 4.6 million lives were lost to the pandemic.

At the onset China was reporting thousands of new cases each day but by March the cases reduced to dozens. On
the other hand, cases were rising rapidly in Europe, with Italy recording 250 deaths in the 24-hour period between
March 12th and March 13th. As a result, on March 13th the WHO declared that Europe had become the epicenter of
the pandemic. In the same month, vaccine trial started, with the first COVID-19 human vaccine trials beginning with
the Moderna mRNA vaccine. By the 2nd of April, total global COVID-19 cases had shot up to 1 million.

New Covid Cases- Global

1000000 300100000

800000 250100000
200100000
600000
150100000
400000
100100000
200000 50100000
0 100000

New Cases- Global Cumulative Cases- Global (RHS) Vaccination Administered-World(Daily)-RHS

Source(s): WHO/ Refinitiv Eikon

Daily Cases For Top 5 Affected Nations

450
400
350
300
Thousands

250
200
150
100
50
0

Source(s): Refinitiv
USA Brazil UK India Russia
Source(s): Refinitiv Eikon

Date of issue: 03/11/2021

 Jet Set Go! 7

The first wave peaked in Europe between 6 March 2020 and 20 April 2020, and the second wave between 6
December 2020 and 21 January 2021. The Americas had an extended first wave that folded into a second wave,
without witnessing any decline between the two, as in Europe. A large spike in U.S. COVID-19 cases occurred over
the winter months of 2020–21 when people traveled and gathered for the winter holidays. Another surge began in
July 2021 as the contagious delta variant began to circulate and eventually become dominant.

As evident in the chart, in India, by early-April 2021, a major second wave of infections took hold in the country with
destructive consequences; on 9 April, India surpassed 1 million active cases, and by 12 April, India overtook Brazil
as having the second-most COVID-19 cases worldwide. However, the cases have fallen significantly and are stable
for the past couple of weeks. These waves of infections in different times across the continent delayed the global
recovery as each had a different pace of recovery.
Vaccination:

Source: our world in data

To curtail the spread of infections, vaccination became one of the major responses across the globe and 48.5% of
the world population has received at least one dose of a COVID-19 vaccine as on 25th October. In total 6.84 billion
doses have been administered globally, and 25.52 million are now administered each day.

In terms of absolute numbers, India and China are the only countries crossing billion doses. However, when it is
viewed against the percentage of the population covered the United Arab Emirates and Portugal lead the list of
countries with 86% and 87% of their population fully vaccinated. The vaccine rollout is not equitably distributed around
the world and developed nations have vaccinated their populations far faster than less developed countries.
Current Situation:
Though many countries slowed down the rate of infection with various strategy including mass vaccination and
lockdowns to curb the spread. Few countries again have started to witness a rise in cases.

United Kingdom recorded close to 50,000 new Covid cases a day on 21st Oct— meaning it has one of the worst daily
infection rates in the world. However, the numbers of hospitalizations and deaths have been rising at a much slower
rate than earlier in the pandemic, largely due to Covid vaccines being highly effective at preventing severe infection,
hospitalization, and deaths.

Date of issue: 03/11/2021

 Jet Set Go! 8

Russia has recently reported 37,930 new COVID-19 infections, its highest single-day case tally since the start of the
pandemic. In Western Europe cases were also on the rise, despite higher rates of vaccine uptake than in the
continent's east.

In Asia, northern China are reimposing lockdowns and other emergency measures to curb the spread of coronavirus,
with health officials warning of a worsening outbreak after the country recorded more than 100 cases across 11
provinces during the last week of October.

Impact on Jet Fuel demand:

Though with various checks in place the travel restrictions have been eased and number of passengers travelling is
on the rise leading to pick up in Jet/Kero demand. However, with recent incidence of surge in covid cases mainly in
Europe, Russia and some parts of China travel restrictions can again be imposed to curb the spread, thus impacting
the aviation fuel demand. As per IATA, Asia Pacific and Europe accounts for 35% and 23.7% of the world’s scheduled
passenger and cargo traffic. The spread of new variants and associated mobility restrictions will be the primary risk
for recovery in aviation sector for the remaining part of the year.

West of Suez Jet/Kero Market

Americas

Before diving headfirst into a

discussion of the Americas jet fuel World Jet Fuel Demand (kbpd)
markets, we believe it is pertinent to 8,000 50%
illustrate why we have chosen to focus
our analysis in the manner in which it 7,000 45%
is presented. 40%
6,000
Pre-pandemic global jet fuel demand 35%
growth outstripped jet fuel demand 5,000 30%
growth in the Americas. Given the
4,000 25%
economic rise of Asian countries,
specifically China, over the last 20 3,000 20%
years this phenomenon is 15%
unsurprising. The growth, however, is 2,000
10%
less prominent than, the growth seen
1,000 5%
in gasoil/diesel demand, and is not as
influenced by population growth as 0 0%
are the other two marquis refined 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
products. We expect this to continue –
Americas % of World (RH) World Americas
more jet fuel demand growth will occur
outside of the Americas, even if Latin Source(s): EIA, Refinitiv
American countries get a handle on
the headwinds that are keeping their economic trajectories relatively subdued.
Nevertheless, current state (the state that has been the global jet fuel market since the Great Recession) shows that
the Americas accounts for a third of the global jet fuel demand of which the United States accounts for the bulk of it
(~1.7million bpd in 2019).

Although the potential for South American countries, particularly Brazil, to experience meaningful growth in jet fuel
demand are present, from the perspective of a global jet fuel market recovery – the US reigns supreme.

Date of issue: 03/11/2021

 Jet Set Go! 9

2,500
Americas Jet Fuel Demand (kbpd) US Jet Fuel Demand (kbpd)
2,000
1,800
2,000 1,600
1,400
1,500 1,200
1,000
1,000 800
600
400
500
200
0
0

1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
US Central & South America Canada Mexico Recession kbd Period High
Source(s): EIA, Refinitiv Source(s): EIA, NBER, Refinitiv

US jet fuel demand is usually the most affected by recessions amongst transportation fuels and has a habit of
recovering more slowly than others after the recession. US jet fuel demand reached a historical peak of over 1.8
million bpd in the years prior to the early-2002’s recession that accompanied the burst of the Dot-Com bubble. Post
2002 recession demand recovery reached the high of ~1.7 million bpd in 2005-06. However, the next recession in
2008-09 witnessed the demand levels dropping to 1.3 million bpd in 2009. Following this the demand slowly
recovered to the historical high of 1.8 million bpd in 2018 and 2019 before the pandemic brought the entire aviation
sector to a standstill with demand dropping to historical low of ~600 kbpd in May 2020.
A number of factors kept demand low post-recession and prevented it from reaching any higher levels than history.
First, the national psyche shaped by recession memory suppressed recreational travel, and to some extent, business
travel as well. But once travel began picking-up, the second factor – efficiency – began to take a greater toll on US
jet fuel demand growth. A detailed discussion of jet efficiency technology is out of the scope of this report but going
forward the assumption is that:
(1) much of the available technology to improve jet fuel efficiency has been implemented; and
(2) though there will continue to be jet fleet turnover, coming out of the COVID-recession will see limited swapping
of inefficient planes for newer, more efficient models.

US Jet Fuel Demand (kbpd) US Demand Indexed to 2018/2019

2,000
Averages
1,800
120
1,600
100
1,400
80
1,200
60
%

1,000
40
800
20
600
0
400
Jun '20

Dec '20

Jun '21
Feb '20

Feb '21
Apr '20

Apr '21
Oct '20

Oct '21
Aug '20

Aug '21

200
0
Axis Title
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021 2020 2015-2019 Avg.
Jet Diesel Gasoline
Source(s): EIA, Refinitiv Source(s): EIA, Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 10

Airplane efficiency aside, we are unlikely to see pre-COVID 2018/2019 US jet fuel demand levels achieved for a
number of years. As was mentioned above, jet fuel demand is generally the fuel most affected by recessions, and
the pandemic-driven recession has once again proved this to be the case. Gasoline and diesel demand have
recovered to pre-pandemic levels, but jet fuel demand still lags.
And where seasonality is often a factor we must consider when considering demand and a return to its highs, which
may very well be the case for other global regions, the US experiences only a slight increase on average during the
summer months. For 2021, the seasonal trend has been seen to touch the lower end of the pre-Covid spectrum since
July, albeit at a lower level than we would expect.
Also, US jet fuel demand is very concentrated in only a % of US Jet Fuel Demand by State
few states. Again, unlike gasoline (and to some extent
California
diesel) where the demand is centred around higher
population areas, jet fuel demand differs a bit in this
Texas
regard. For the present, and for forecasting purposes,
coastal states that service international flights see the
Florida
most jet fuel demand.
Therefore, as was discussed in the Global Summary New York
section of this report, the manner and timing in which
governments either relax or harden policies around Illinois
international travel will have the greatest effect on
coastal jet fuel demand. But, at least in the US, the Georgia
national psyche has likely changed at least for the
foreseeable future around air travel. New Jersey
Source(s): EIA, Refinitiv
First, vaccination rates and policy decisions aside,
more are eschewing air travel in favour of either staying
put or travel via personal vehicle. This is still somewhat
due to state-by-state policy differences, but also due to
TSA Passenger Throughput
3,000,000
the desire to limit exposure to COVID-19 in the
confined spaces of an aircraft. Second, businesses 2,500,000
operating in the US found that, in many cases,
productivity of remote workers was acceptable, and 2,000,000
that business travel and conferences could be
replaced in many cases through less costly 1,500,000
technological solutions. The latter required investment
that will not be immediately pushed-aside in all cases, 1,000,000
and the nature of work in the US has likely experienced
a structural change that will weigh-on the recovery in 500,000
air travel, and by extension jet fuel demand. Again,
taking 2019 data compared with present in the light that 0
2019 was a good year for jet fuel demand, we have Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
seen a recovery in passenger throughput, but still at 2019 2020 2021
only about 75-80% of 2019 average levels in 2021. Source(s): US TSA, Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 11

“This time is different” is a phrase cautiously

uttered when speaking about the markets, but
Baltic Exchange Air Freight Index (BAI)
4,500
appropriate for the current jet market recovery. It
4,000
is so, because with global supply chains strained,
3,500
the jet cargo markets have experienced a boon in
demand which can be shown by several 3,000
measures, but sufficiently exemplified in recent 2,500
months’ air freight indexes. We expect for this 2,000
phenomenon to persist in the near-term, at least 1,500
through the 2021 holiday season while other 1,000
modes of trade are under pressure. That said, the 500
air freight industry is not immune to the issues
0
faced by the shipping and trucking industries Aug '21 Sep '21 Oct '21
(capacity limitations, labour shortages, etc.) and
Source(s): Baltic Exchange, Refinitiv
air freight will always, inherently, be the more
expensive shipping option when it is available.
Coupled with the rise in freight rates, and even
US Regional Jet Fuel Swaps (outrights,
250
with less than historical domestic demand, we cpg)
have seen US jet fuel prices continue in a
considerably sloped upward trend this year. US jet 200
fuel pricing is regional, and often influenced
heavily by dislocations in demand (East and West
150
Coast) and supply (US Gulf Coast). We have not
really seen this play-out in 2021 other than in
August when demand and logistical constraints to 100
supplying airports with fuel pushed West Coast
Mar '21
Jan '21

May '21

Aug '21
Apr '21

Jul '21

Oct '21
Jun '21
Feb '21

Sep '21
prices significantly higher than other regions.
However, this rise in prices has less to do with jet San Francisco Los Angeles US Gulf Goast NY Harbor
fuel demand, and even less to do with a lack of Source(s): Refinitiv
supply, and more to do with the year’s rise in crude
oil prices and in distillates demand and pricing in
general. Starting in July, when prices began to
Historical Swaps Pricing
strengthen, the US Gulf Coast (USGC) jet fuel 3 20
crack began to widen, but even as this widening
occurred, the jet fuel differential (diff) to NYMEX
2 15
ULSD remained relatively flat. As economic
activity continues to strengthen in the US and
diesel demand continues at historical averages 1 10
and higher, we expect for jet fuel demand to hold-
up as well. The jet diff will likely continue at around
0 5
(0.25)/cpg, but the crack may fall as more crude oil
hits the market with US production coming back
online and OPEC+ relaxing its member’s -1 0
production cuts. Jan Feb Mar Apr May Jun Jul '21 Aug Sep Oct
'21 '21 '21 '21 '21 '21 '21 '21 '21

USGC Outright ($/gal)

Jet Diff ($/gal)
USGC Jet vs. NYMEX WTI (RH; $/bbl)
Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 12

Speaking of diffs and cracks, though the US makes

up about 25 percent of world jet fuel demand, the jet 300
US Jet Fuel Trade (kbd)
fuel need is largely satisfied from domestic
refineries. There is trade, but up until the COVID-19
pandemic, jet fuel movements were largely balanced 100
with the US generally in the position of being a slight
next exporter. A significant driver of foreign supply is 100
due to costs borne by the dislocation of supply from
demand (i.e., USGC refined products production and
PADD 5 demand) and the expense of moving the 300
product to demand centres versus exporting product

Jun '16

Jun '17

Jun '18

Jun '19

Jun '20

Jun '21
Feb '16

Oct '16
Feb '17

Oct '17
Feb '18

Oct '18
Feb '19

Oct '19
Feb '20

Oct '20
Feb '21

Oct '21
to, for example, Latin America. This expense is
largely due to the Jones Act, which often makes it Imports Exports Net Imports Averages
more competitive for Asian refiners to supply PADD Source(s): EIA, Refinitiv
5 markets than it does for PADD 5 to be supplied by
the USGC.
100
US Refining Utilization (%)
With the onset of the pandemic, exports pulled back
to nearly zero. This due to the fact that approximately 95
50% of US jet fuel exports make their way to either 90
Canada or Mexico, and where y-o-y the US saw a
38% drop in jet fuel demand, Mexico, for example, 85
saw a full 78% loss. 80
Imports, on the other hand, continued apace and 75
kept with historical volumes. This being so due to 70
absence of a complete falloff in jet fuel use coupled
65
with a significant reduction in refining utilization. A
counter-seasonal drop where we 60
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021 2020 2015-2019 Avg.
Source(s): EIA, Refinitiv

US Jet Fuel Production US Refining (kbd)

2,500 12 20,000 100

2,000 10
18,000 90
8
1,500
6 16,000 80
bpd

1,000
4 14,000 70
500 2
12,000 60
0 0
Feb '15
Aug '15
Feb '16
Aug '16
Feb '17
Aug '17
Feb '18
Aug '18
Feb '19
Aug '19
Feb '20
Aug '20
Feb '21
Aug '21

10,000 50
Dec '16

Jun '19
Feb '16
Jul '16

May '17

Mar '18

Sep '20
Feb '21
Jul '21
Apr '20
Oct '17

Jan '19
Aug '18

Nov '19

Jet Fuel Production

Jet Production as a % of Gross Inputs (RH) Available Capacity Gross Inputs Utilization (%; RH)
Source(s): EIA, Refinitiv Source(s): EIA, Refinitiv

would expect for utilization to be ramping-up for the summer driving season.
Despite US refining utilization returning to more normal levels, jet fuel production has remained subdued. For the
uninitiated, refineries have the ability to partially swing production to capture the most margin, and where utilization

Date of issue: 03/11/2021

 Jet Set Go! 13

is lower, that ability is slightly greater. So, during the COVID-recession, US refiners as a group were able to swing
jet fuel production to a low of 500,000 bpd (only 3.8% of gross inputs).
Now, with diesel demand being at 5-year high levels, refiners have continued operating in a way to capture as much
of the diesel margin as possible, at the expense of jet fuel. So long as the jet fuel/diesel diff remains in the negative
and refineries continue to run at less than “all-out,” we can expect for this lower-than-normal jet fuel production state
of being to persist.
As a final point, this section has covered petroleum jet fuel. US Refining (kbpd)
As more pressure is applied to the oil and gas industry,
including refiners, we will continue to see refining capacity 20,000 100
shuttered or retrofitted for other purposes (e.g., renewable 19,000 95
diesel). The chart to the left shows only crude distillation
18,000 90
unit (CDU) capacity and utilization, but over time, in the US,
we will see available capacity diminish as unprofitable units 17,000 85
are shuttered. 16,000 80
For jet fuel specifically, the Biden administration has 15,000 75
prioritized reducing aviation emissions by 20% by the year
14,000 70
2030. The plan includes a renewable fuel tax credit and
outlines federal plans to provide funding for sustainable 13,000 65
fuel projects and to increase research and development
12,000 60
into renewable jet fuel. Couple that with Delta Airlines’ and
JetBlue’s partnering with renewable fuels companies to 11,000 55
supply sustainable jet fuel to their respective fleets, and we 10,000 50
start to see risks in continued petroleum jet fuel demand
Feb '16
Aug '16
Feb '17
Aug '17
Feb '18
Aug '18
Feb '19
Aug '19
Feb '20
Aug '20
Feb '21
Aug '21
growth in the US. As exemplified in the latest strength in
coal markets due to lack of supply of other fuels in the face
of strong demand, we know the path will not be a straight Available Capacity Gross Inputs Utilization (%; RH)
one, but will nonetheless lead to a lessening of petroleum
jet fuel use in the US in the future. Source(s): EIA, Refinitiv

European Saga

Trade flows
Jet fuel tracked by Refinitiv arriving into Europe has picked
up pace over the summer months, buoyed by the European Jet Fuel Imports
implementation of the EU Digital COVID Certificate
(EUDCC) in July which allowed vaccinated citizens to 2500
travel within Europe without quarantining. Refinitiv tracked
a doubling of seaborne imports compared to July 2020, the 2000
majority of the 1.2 million MT of arrivals originated from the
Middle East. Despite the sharp pick up in flows, imports 1500
'000 MT

over the summer months remain around a third below their

seasonal average - in line with lower flight demand. 1000
In its Oil Market Report published in October, the
International Energy Agency (IEA) estimates jet kerosene 500
demand in OECD Europe increased by 175,000 bpd in July
and a further 150,000 bpd in August to 1.08 million bpd. Its 0
forward estimation is for a 345,000 bpd increase in
Jul-19

Jul-20

Jul-21
May-19

Nov-19

May-20

Nov-20

May-21
Jan-19

Jan-20

Jan-21
Mar-19

Mar-20

Mar-21
Sep-19

Sep-20

Sep-21

quarterly demand during Q3 to average 1 million bpd,

around 730,000 bpd below pre-Covid levels. The Paris-
based agency had forecast a small increase in demand
Asia Middle East Other
Source: Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 14

over the remainder of the year although the sustained

imports and changes to US travel restrictions points to
European Air Passenger Traffic
stronger demand recovery over Q4.
Refinitiv has tracked imports rising to 1.5 million MT
during October, spurred by volatile demand in Asia
which has displaced barrels from the West as well as
opening of more long-haul routes including the US,
with the country poised to accept vaccinated
passengers from Europe during November.
European Airport Passenger Traffic
Data from Airports Council International (ACI)
indicates that following a steady climb in airport
passenger traffic over the summer, traffic appears to
have levelled out and has consistently fallen short of
pre-pandemic levels by more than a third based on
its latest published data from October. Source: Airports Council International (ACI)

ARA Jet Inventory

Inventories: Jet Kerosene ARA Stocks 1.4
1.2

Data from Insights Global on jet kerosene inventory 1

levels in the Amsterdam-Rotterdam-Antwerp (ARA) 0.8
MT

refining and storage hub is also reflective of the 0.6

tightening supply/demand balance in Northwest
0.4
Europe. Stocks have contracted over the summer
months having reached record highs at the start of the 0.2
year and have now slipped below 1 million MT, moving 0
into the 5-year average. Week 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
5Y Range 2020 2021

Source: Insights Global

Prices
The pickup in summer flying demand in Europe served
to provide some much-needed price support to jet in $120 Pricing $20
Europe, which had been struggling to find traction over $100 $15
Jet Swaps ($/bbl)

Jet Crack ($/bbl)

the beginning of 2021 amid quickly changing
$80 $10
quarantine and testing for arriving air passengers. The
roll out of the EUDCC appears to have increased $60 $5
confidence in flight booking although prices did not see $40 $0
a notable rise until August
$20 -$5
However, while swap prices have recovered and in
fact surpassed pre-pandemic levels on strong prompt $0 -$10
demand, margins continue to fall short of seasonal
norms as resurgent crude prices present an ongoing
challenge to a rebalancing of margins. CIF NWE Jet Cargo M1

Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 15

East of Suez Jet/Kero Market

Asia-Pacific:

Trade Flows

Asia-Pacific Jet Fuel Exports :Destination

32,510 32,884
35,000 30,772
30,000
22,752
25,000
18,240
20,000
MT

15,000
10,000
5,000
-
2017 2018 2019 2020 2021 till Sep

Africa Americas Asia Pacific Europe

Source(s): Refinitiv Middle East Others Total

Asia Pacific (APAC) is the top exporter of Jet/Kero in the world with yearly volumes averaging around 32.7 million
MT between 2017-19. In terms of global share in export, APAC contributes roughly 40% of the total volumes. Year
2020 caused havoc for Jet/Kero as Covid-19 pandemic brought the aviation industry, especially the passenger
segment to standstill. Jet/Kero exports in year 2020 was just ~70% of previous three years average export volumes.

Monthly exports from APAC were normal till

March 2020, however with raging covid cases Asia-Pacific Jet/Kero Export Seasonality
and grounding of flights across region led to (since 2017)
severe demand destruction for the aviation fuel.
4,000
However, before the end of April, some support
came from the contango market structure 3,500
leading to increased storage volumes. 3,000
2,500
MT

2,000
Middle Distillate inventories in Singapore 1,500
started to build up since middle of April as Jet 1,000
demand started to falter and remained weak 500
with contango market structure prompting the -
volumes to head to storage. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
High Low Year 2020 Current Year
Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 16

ASIA-PACIFIC MONTHLY JETFUEL EXPORT

3,678
2019 2020 2021
3,196

3,152

3,065
3,011

3,010

2,956
2,951
2,931

2,918
2,732
2,667

2,631

2,617
2,475

2,474
2,448
2,268
2,080

1,918

1,863

1,754
1,692
1,679

1,584
1,537
1,528

1,405
1,385
1,356
1,192

1,147

1,087
MT

JAN FEB MAR APR MAY JUN JUL AUG SEP OC T NOV DEC
Source(s): Refinitiv

Even as refiners started to reduce runs and Jet Fuel Singapore Intermonth spread
Jet/Kero production, lower demand coupled 1
with steep contango led to volumes ending up 0.5
in storage in not only in Asia but also in west 0
of Suez. Market structure was so steep that it -0.5
-1
encouraged market participants from East of
-1.5
$/bbl

Suez to ship Jet/Kero to Europe for storage, -2

such was the economics. Apart from inland -2.5
inventory, floating storage had increased as -3
well given the lower demand environment -3.5
and inland inventories reaching capacity. -4
However, once the storage economics -4.5
started to recede, export volumes fell as
refiners started to shift yield to minimize
Source(s): Refinitiv
Jet/Kero production.

Singapore Middle Distillate Inventory(million bbl)

20

15

10

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Oct Nov

Source(s): Refinitiv Min (2017-19) Max (2017-19) 2020 2021

Date of issue: 03/11/2021

 Jet Set Go! 17

Major Exporters:
South Korea, India, China, Japan, and Singapore are generally the major exporters in the region with combined
outflows accounting for more than 90% of the regional exports.

Major Exporter Share of top 5 Exporters

97%
12,000 40,000 98%
35,000 96%
10,000 30,000
25,000 94%
8,000 91% 91%

MT
20,000 92%
MT

6,000 15,000 90%

10,000
4,000 5,000 88%
2,000 - 86%
Year 2019 Year 2020 Year 2021 till
- Sep
South India China Japan Singapore
Korea

Year 2019 Year 2020 Year 2021 till Sep Total Top5* %Share

Source(s): Refinitiv

However, in 2021, until the end of September, Malaysia

exported more than Japan with Malaysia outflows Jet Exports 2021 :Quarterly
registered at 1.1 million MT against Japan export 8,000 7,097
volume of 760 KT. One of the reasons for this increase 7,000
of volume is the increase in loading of new build VLCC 6,000
from the region, which typically loads Gasoil and
5,000
Jet/Kero and heads to either Lome in Africa or further in
3,290
MT

Europe taking advantage of lower freight for new build 4,000 3,050
VLCC and relative demand pick up in west as compared 3,000
1,454
to Asia-pacific. 2,000
759
1,000
Chinese exports of jet fuel rose to 1.6 million MT in the
third quarter (Q3) of this year, their highest since second -
quarter (Q2) of 2020. In August and September, exports China South India Japan Singapore
Korea
have increased in contrast to Gasoil. Pickup in exports
was a result of weak domestic demand after an outbreak Q-1 Q-2 Q-3 Total
of the Covid-19 Delta variant which prompted series of Source(s): Refinitiv
flight cancellations. China Jet/Kero outflows generally
ends up within the region, however in Q3 of this year, an
estimated 450 KT of cargoes have left China for Europe
South Korea Exports: Quarterly
and the Americas. However, China's product export 4,000
limitations, and improving domestic demand will restrict
arbitrage flows to the west of Suez. 3,000

Exports from South Korea has also picked up in Q3 and

3,634
MT

2,000
3,396

3,060

3,052

has almost reached 2019 levels of export for the same

2,701
2,621

2,622

2,449
2,404

quarter. Major reason for the pickup in exports is the

1,649
1,641

1,000
demand from US.
-
The air travel in Asia weakened in third quarter of this
Q-1 Q-2 Q-3 Q-4
year as a result of Covid resurgence impacting the travel
demand. This contrasted with improvement in travel Source(s): Refinitiv 2019 2020 2021
demand in the west of Suez and coupled with supportive

Date of issue: 03/11/2021

 Jet Set Go! 18

arbitrage, volumes headed to the US and

Europe. In Q3, exports to the US accounted Japan Kerosene Stocks,KL
for 45% of total South Korean volumes.
3500000
However, with easing of coronavirus induced
travel restrictions, demand for Jet/Kero from 3000000
the travel sector is expected to increase and
reduced exports from Japan and South 2500000
Korea during the winter season will further
lower the export. According to inventory data 2000000
reported by PAJ, Japanese refiners appear
to be building Kerosene stocks in preparation
1500000
for winter as Kero stocks generally starts to
recede from the end of October as winter
progresses. 1000000

In India, as the demand started to pick up, 500000

exports of Jet fuel fell in Q3 as compared to
Q2. Since October 18, the Ministry of Civil 0
Aviation has allowed airlines to operate at Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
100 per cent of their scheduled capacity,
thereby removing a key restriction imposed Min (2017-20) Max(2017-20) 2021
Source(s): PAJ,Refinitiv
when domestic flight operations resumed in
May 2020 after a two-month lockdown.

Top Destination:
United States of America remain the top
destination for APAC jet fuel exports
accounting for around 25% of the total
regional export volumes followed by China
(including Hong Kong). Another country
within the region that imports a significant
amount of Jet/Kero from Asia is Australia.
However, with the onset of Covid-19, the
import into Australia fell to almost half of what
the country used to take prior to the
pandemic on an annual basis. In Europe,
which is a net importer of Jet/Kero - United
Kingdom, France and Netherlands are the
major importer of APAC Jet/Kero cargoes
and are also among the top ten destinations
for the regional outflow. These three
countries are some of the major markets in
Europe where Jet fuel is imported. The top
ten destinations for Asia Pacific Jet/Kero
account for more than 75% of the total
regional outflows.

Date of issue: 03/11/2021

 Jet Set Go! 19

Asia-Pacific Fundamentals

Refinitiv Oil Research expects the upcoming winter demand season to be a relatively muted one for the aviation fuel.
The bullish factors such as – a cold snap in Northeast Asia and the consistent demand for kerosene in the diesel
blending pool that led the Singapore cash market to a two-year high of plus 45 cents/bbl in January 2020 is
conspicuously missing this year. Instead, the Asian spot market must contend with the likelihood of a tame winter in
Japan – the single largest regional consumer of kerosene as a heating oil and a recent crash in China’s domestic
blending market.

Japanese winter

Source(s): Japan Meteorological Agency

The Japan Meteorological Agency released its winter seasonal forecast on September 24, a closely watched indicator
of the country’s potential demand for seasonal fuels. It forecasts that large parts of the country – Honshu, Okinawa,
Shikoku, and Kyushu – will see a 40% chance of experiencing cooler-than-expected weather. These parts of the
country have since mostly transitioned to thermostat and LNG heating.

Hokkaido – the northernmost island cluster where temperatures average minus 2-4 degrees Celsius throughout the
winter bucks this trend and faces a 40% probability of experiencing mild to warmer weather from December-February.
Kerosene based heaters are more widely used here, as thermostat based heaters are less effective in colder
temperatures.

Date of issue: 03/11/2021

 Jet Set Go! 20

The last two winters were characterized by anomalies such as frosty relations with South Korea – its largest kerosene
supplier in 2019, and a cold snap in 2020. There are no such bullish factors this year, and the JMA has announced
its forecast that there was a 70% chance that there would be no La Niña formation in the run up to winter in December.

Slowdown in Chinese blending activity

Beijing announcement in May that it would impose a consumption tax on light cycle oil (LCO) which is typically
blended with kerosene to produce 500 ppm sulphur diesel and has had a knock-on effect on the aviation fuel. Chinese
refiners had been exploiting a tax loophole around the intermediate product from the second half of 2020. The
product was then taxed as a feedstock and exempted from duties on finished grade fuels while blending it with jet
fuel to produce diesel, or even using it directly in place of gasoil.
This backdoor gave Chinese refiners a way to recover their refining margins following the start of the pandemic and
gave beleaguered South Korean refiners a regular outlet for their distillate cargoes. Refinitiv Oil Research flows data
shows that Chinese refiners began importing light cycle oil in June 2020, averaging at 982,417 MT/month of imports
from South Korea for a year until the loophole was closed.
The government has also increased scrutiny over refiners in various forms: policing illegal oil quota trading amongst
refiners, and stringent environmental inspections as China seeks to meet its ambitious climate goals. Independent
refiners and regular users of kerosene in the diesel pool in Shandong have felt the brunt of the increased regulation.
Throughput capacity is expected to drop to just 90 million MT/year by 2025 through consolidation and shutdowns,
from some 130 million MT/year before the pandemic. The widespread practice of blending kerosene and light cycle
oil is over.
Travel prospects
The Asian aviation market is showing burgeoning signs of recovery ahead of the year-end festive season. Malaysia,
India, and Vietnam have all resumed domestic flights as of October, while key travel hubs are opening quarantine-
free travel to vaccinated travellers from select countries. Flag carrier Singapore Airlines will expand its vaccinated
travel lane network to 14 cities, including Amsterdam, Barcelona, Copenhagen, London, Los Angeles, Milan, New
York, Paris, and Rome from 19 October, while flights to Seoul will start on 16 November. This follows the success of
an early pilot initiative with Brunei and Germany that began September 8.
Thailand also announced on October 21 that it will let visitors from 46 countries forgo quarantine starting November.
Australia is expected to follow suit in the weeks to come, with the federal government announcing that it will reopen
its borders in November.
We note that Asia’s vaccination rates have finally begun to outpace the global average, with 54% of the population
having received at least one dose of the vaccine. Still, this is a far cry from the sharp surge in travel demand during
the summer in Europe and the US. This recent news will help sentiment but is unlikely to provide a meaningful boost
to the fundamentals.
Still, we have some concerns given the recent outbreak of the coronavirus in China, prompting flights in Xi’an and
Lanzhou to be cancelled, while ramping up mass testing and closing schools. The latest outbreak was linked to an
elderly couple that travelled to Gansu and Inner Mongolia from Shanghai. Some regions have even gone further,
with Lanzhou going into a soft lockdown and telling residents not to leave unless necessary.

Pricing, Arbitrage
We expect the Asian spot market to see a seasonal bump in cash differentials starting by end October amid a surge
in stockpiling activities. The Asian jet fuel/kerosene spot market continues to hold in premium territory, with Singapore
cash differentials at a one-week high of plus 17 cents/bbl. Other fundamental indicators like the regrade spread and
market structure are also rebounding, which is encouraging ahead of the peak winter heating demand season. The
crack spread is currently at $12.84/bbl, more than three times the average of $4.22/bbl throughout August.

Date of issue: 03/11/2021

 Jet Set Go! 21

Historically, Japanese refiners begin building kerosene stocks this month in Hokkaido, store kerosene in leased
storage tanks in South Korea for future shipping to the northern island during the winter or begin outright imports in
November via 10,000 MT Small Range vessels. Some of these flows have already begun, and Japan’s imports have
more than doubled from 33,000 mt in September to 83,000 MT, with half of these volumes headed to Tomakomai in
Hokkaido, where kerosene is widely used for heating.

Source(s): Refinitiv

Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 22

Singapore JetFuel Swap Forward Curve

95

90

85
$/bbl

80

75

70
Jul/22

Jul/23

Jul/24

Jul/25
Nov/21

Nov/22

Nov/23

Nov/24

Nov/25
Mar/22

Mar/23

Mar/24

Mar/25
Sep/22

Sep/23

Sep/24

Sep/25
May/22

May/23

May/24

May/25
Jan/22

Jan/23

Jan/24

Jan/25
The Singapore swaps market is skewing on
the bullish side, with the prompt timespreads Arbitrage flows
at a pandemic-era high of plus 29 cents/bbl,
1,000,000
while the entire curve has flipped into
backwardation. The market structure is 900,000
particularly steep along the January/February 800,000
spread, when kerosene demand is expected 700,000
to be at its strongest. We believe this
MT/month

indicates that not only are traders and end- 600,000

users confident about demand in the prompt 500,000
before winter, but also indicates that airlines 400,000
have been actively taking positions in the 300,000
forward market and locking in their hedges.
200,000
An anticipated surge in US demand ahead of
100,000
the Thanksgiving and Christmas holidays is
also expected to draw barrels from South 0
Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jul-21
Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21
Korea, lending more support to cash
differentials. Similarly, pent-up travel demand
from Europe is expected to draw barrels from South Korea-Americas India-Europe
India and the Middle East. Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 23

Middle East

Trade Flows:

Middle East Jet/Kero Exports 2018-Sep '21 Middle Eastern country's share of Jet/Kero
exports
30,000
24,164
22,574
120%
18,062
20,000 100%
10% 12% 11% 10%
2%
8% 4% 2% 4%
4% 5%
MT

11,296 80% 7%
33% 31% 25% 23%
10,000 60%
40% 27% 26%
27% 30%
- 20% 30%
20% 19% 26%
2018 2019 2020 2021 (till Sep) 0%
2018 2019 2020 2021
Iran Iraq
Bahrain Oman Kuwait United Arab Emirates
Qatar Saudi Arabia Saudi Arabia Qatar
United Arab Emirates Kuwait Oman Bahrain
*Iraq and Iran share are negligible and hence not included in this chart

Source(s): Refinitiv
In the Middle East - Saudi Arabia, UAE and Kuwait are the top three exporters of Jet/Kero. Saudi Arabia is the largest
jet fuel producer followed by the UAE and Kuwait. These three countries together account for more than 75% of the
total regional outflows.
The regional share of Saudi Arabia has dropped since the pandemic kicked in, while Kuwait’s share has increased
during the same period. Kuwait has recently completed the Clean Fuel Project operations as a result of which
Jet/Kero exports are expected to rise as seen in October.

Saudi Arabia: Jet/Kero Production and Yield

300 12%
250 10%
200 8%
kb/d

150 6%
100 4%
50 2%
0 0%
Mar-19

May-19

Mar-20

May-20
Feb-19

Jul-19

Sep-19
Oct-19

Feb-20

Jul-20

Sep-20
Oct-20

Mar-21

May-21
Feb-21

Jul-21
Apr-19

Nov-19

Apr-20

Nov-20

Apr-21
Jan-19

Aug-19

Jan-20

Aug-20

Jan-21

Aug-21
Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Source(s): Jodi,Refinitiv Jet/Kero Production (kb/d) Jet/Kero Yield (RHS)

As Europe is net short of Jet/Kero, volumes are imported from east of Suez with close to half of the requirement
being fulfilled by the Middle East.

Date of issue: 03/11/2021

 Jet Set Go! 24

Middle East Jet/Kero Exports: Middle East Monthly JetFuel

Destination Export
30,000 24,164 22,574
2,500
18,062
20,000 2,000
11,296
MT

10,000 1,500

MT
1,000
-
2018 2019 2020 2021 till Sep 500
Africa Axis TitleAmericas -
Asia Pacific Europe Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Middle East Others
Total 2019 2020 2021
Source(s): Refinitiv Source(s): Refinitiv

Even before, the pandemic really started to have a global impact, middle east jet/kero exports were lower in the first
quarter of 2020. IIR Refinery turnaround data shows heavy planned turnaround in Saudi’s Al-Jubail, Yanbu, Riyadh
and Rabigh refinery and UAE’s Ruwais Refinery 1 & 2. Overlaying the past four years of turnaround data, it is quite
evident that 2020 has been a pivotal year in terms of the capacity taken offline in the region. The first quarter of 2020
saw offline capacity crossing 1.2 million bpd. Although this had little to do with the loss of Jet fuel demand, overall
OPEC production cuts and a global demand destruction with oil benchmarks falling to multi-year lows were all other
factors contributing to the heightened offline capacity, With Jet fuel being a straight run product, the CDU downtime
has a direct impact on the production volumes. The spikes seen in Q2 and Q3 correspond to the global waves of the
pandemic taking a toll on demand due to the lockdowns and travel restrictions. The spike seen in the last quarter of
2019 is majorly due the attack in Saudi Arabia’s Abqaiq in Sep, where oil processing plant and oilfield was affected.
But as refineries in the region started returning from maintenance, Jet/Kero exports started to improve. Soon, in the
absence of real demand of Jet fuel, the imported volumes into Europe ended up in storage which in turn swelled up
both the floating as well as inland storage and outflows again started to slow down before picking up again in Q3 of
2020, as air travel gradually started. Ease in travel restriction in the weeks after the drastic Jet fuel price drop in both
European and Asian countries and putting in place travel bubbles helped to nudge up the number of flights, thus
supporting the Jet/Kero demand and also the winter demand for Kerosene contributed to improved exports.

Middle East Offline CDU Capacity,bpd

1600000
1400000
Middle East Jet/Kero Export
1200000 Seasonality (since 2017)
1000000 3,000
2,500
800000
2,000
600000 1,500
400000 1,000
500
200000
-
0 Jan Feb Mar Apr Jun Jul Aug Sep Oct Nov Dec
Jan Jan Mar Apr May May Jun Jul Aug MaySep Oct Nov Dec

Source(s): IIR,Refinitiv 2018 2019 2020 2021

High Low Current Year
Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 25

Top destination for Middle East Jet fuel:

2019 2020 2021
Top 10
1 United Kingdom United Kingdom United Arab Emirates
2 United Arab Emirates United Arab Emirates United Kingdom
3 France France France
4 Netherlands Netherlands Kenya
5 Spain Oman United States of America
6 Djibouti United States of America South Africa
7 Denmark Togo Spain
8 Turkey Spain Togo
9 Egypt Qatar Virgin Islands
10 Qatar Djibouti Saudi Arabia

United Kingdom, France and Netherlands were

among the top five destination for middle eastern Kenya Jet Consumption
Jet/Kero exports, but in 2021 the UAE, Kenya
and South Africa gained share in the top 10 70
destinations. 60
Jet fuel demand in Kenya rose to 28.89 KT in the 50
first half of this year, up by 14% compared to 40
KT

same period in 2020, but still 30% below pre- 30

pandemic levels in January-June 2019, 20
according to data from Kenya's National Bureau 10
of Statistics (KNBS).
0
UAE is also in the top of the list as majority of the
flows in the country arrives at Jebel Ali port.
Around 80% of volume coming to the country
Source(s): KNBS/Refinitiv 2020 2021
from within the region ends up in Jebel Ali port.
Jebel Ali is the storage terminal for jet fuel as it
supplies the Dubai International airport through
pipeline. UAE port as Destination
Flows to south Africa has increased as a result of 900
a series of refinery shutdowns as a result of the 800
fire incident since end of 2020 and still continues 167
to remain in-operational. South Africa's Engen 700 153 163
will be converting the refinery into a terminal. The 600
refinery has been shut since a fire and explosion
on Dec 4 last year. While according to South 500
MT

Africa's Astron Energy, the Cape Town refinery is

400
expecting to restart "at some point" in 2022, the
refinery has been halted since an incident in July 300 649 631 622
2020 involving a fire. Typically, South Africa
200
imports a medium size parcel with Jet/DPK
accounting for about 25% of the onboard 100
volumes and the remaining being Gasoil. Middle
East remains the major supplier for the nation, -
with Oman, Saudi Arabia and the UAE being the Q-1 Q-2 Q-3
major exporters. Jebel Ali Others
Source(s): Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 26

Middle East Jet/Kero demand Fundamentals:

Middle East Jet/Kero consumption is expected to improve in coming quarters as more and more travel restrictions
are lifted. Middle Eastern airlines’ dependence on connecting international flights and the lack of large domestic
markets delays the recovery in the region. As per IATA, Middle Eastern airlines are expected to accumulate losses
of $6.8 billion and $4.6 billion in 2021 and 2022, respectively.
The UAE is the Middle East’s biggest jet fuel market, accounting for roughly 30% of regional demand, followed by
Saudi Arabia and Qatar.
In UAE, Dubai is the major aviation hub and the world’s busiest airport for international passengers. However, due
to the pandemic in 2020 the volumes crashed 70% and in 2021, DXB airport handled 10.6 million pax in H1, down
40.9% as the airport served 68% of its pre-pandemic destinations. Dubai Airports is expecting the growth for the
second half of the year as restrictions were further eased and events such as the Dubai Expo 2020 and Dubai
Airshow 2021 are lined up for the months ahead. Since the start of the Expo (Oct 01, 2021), there is pick up in
passengers’ footfall at the airport and as per the report, authorities believe that the airport is expected to receive
between 15 to 20 million visitors during the next six months.

Passengers' Movement at Dubai Airport (DXB),million

100
90
80
70
60
50
89 86
40
30
20
10 26
10 12
0
2018 **2019 ***2020 2021 H1 ****2021 H2
Source(s): Dubai Airport, Refinitiv
**Total Reduced in 2019 because of the runway closure from 16th Apr until 30th May

*** Impact of Covid-19 Pandemic

**** Estimated traffic

Saudi Arabia Jet/Kero Demand (kb/d)

140
120
100
80
60
40
20
0
Jul-19

Nov-19

Jul-20

Nov-20

Jul-21
Jun-19

Jun-20

Jun-21
Mar-19
Apr-19
May-19

Mar-20
Apr-20
May-20
Jan-19

Oct-19

Jan-20

Oct-20

Mar-21
Apr-21
May-21
Jan-21
Dec-19

Dec-20
Feb-19

Aug-19
Sep-19

Feb-20

Aug-20
Sep-20

Feb-21

Aug-21

Jet/KeroDemand (kb/d)
Source(s): Jodi, Refinitiv

Date of issue: 03/11/2021

 Jet Set Go! 27

Saudi Arabia had banned International air travel for around six-months as a result of Covid-19. However, since mid-
September international travels were restarted gradually but only for specific categories. The restrictions had a heavy
impact on jet fuel demand in Saudi Arabia.
After the suspension of travel jet fuel demand in the kingdom fell to 22,000 b/d in the second quarter of 2020, down
78% YoY as per the Joint Organizations Data Initiative (Jodi) data.
Restrictions were again put in place in January this year as precautionary measure to control the spread of new
variants. However, international travel was once again allowed from 17 May with some conditions. The reopening
was initially planned for 31 March but was delayed to mid-May.
Resumption of travel supported Saudi Arabia's jet fuel demand, which rose by 28% MoM to 46,000 b/d in May, as
the government resumed international travel as per JODI data.
Airports in Saudi Arabia are now able to operate at full capacity since 17th Oct, five months after the restrictions were
lifted in May’21. Vaccinated passengers are allowed entry however, at least 10 countries, including Brazil, Lebanon,
Pakistan and India remain in their banned list.
With pickup in vaccination and ease in travel restriction in recent weeks, the demand in Kingdom is expected to rise
in coming quarters.

Qatar Jet Fuel Sales-Quarterly

1600
1400
Volume, Million Litres

1200
1000
800
600
400
200
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2019 2019 2019 2020 2020 2020 2020
Jet Fuel 1261 1272 1398 1310 1180 646 782 893
Source(s): Qatar Fuel Company, Refinitiv

In Qatar, Jet Fuel sales decreased by 33% in 2020 as compared to the same period in 2019. However, by the end
of 2020, demand for Jet fuel started to improve as various airlines could fly under bilateral agreements of air
bubble. This is evident in the data if drilled down to quarterly time frame as Jet Fuel sales increased by 14% in Q4
2020 compared to the previous quarter.
As more flight take off to skies, Jet fuel sale is further going to improve and with recent normalization of ties between
Qatar, Saudi Arabia, Bahrain, Egypt and the UAE, Jet fuel sales at airport is expected to receive the much-needed
boost.
Qatar Airways, which operates some 250 aircrafts follows the model of other Gulf carriers by providing a link between
East and West from its location on the Arabian Peninsula.
As vaccinations against the coronavirus accelerate across the world. From a low of 33 destinations at the peak of
the pandemic, the airline now flies to over 140 and has expanded to new markets from Seattle, Washington in the
United States to Brisbane in Australia.
Recently Qatar has also signed a Comprehensive Air Transport Agreement with the European Union (EU), marking
a major step in the field of air transportation between Qatar and EU countries. However, EU airports in Belgium, Italy,
France, Germany and the Netherlands will be subject to a gradual build-up of capacity until 2024.

Date of issue: 03/11/2021

 Jet Set Go! 28

The agreement stipulates that companies from all involved parties will be able to enjoy an easy and free access to
markets with less restrictions.
Qatar’s national carrier will be allowed to enter European markets easily and expand its network in EU countries
without limits to payloads or number of flights, which in turn will have positive impact on Jet demand. This also augurs
well with the upcoming FIFA world cup in Qatar.
Recent positive developments in the major consuming nations in the region is certainly expected to result in an
increased Jet demand in the coming quarter given no new Covid wave impacts the regions’ sentiment.

Conclusion:
Global economy is bouncing back gradually but the pace of recovery has been slow and one of the major reasons
for this is the vaccination divide between advanced economies and developing countries. As reported by Reuters
citing IMF chief, advanced economies will return to pre-pandemic levels of economic output by 2022 but most
emerging and developing countries will need "many more years" to recover. Despite this, Jet demand has started to
pick up, thanks to increase in aviation activity on the back of countries easing travel restrictions and vaccinations.
However, Jet demand pick up has been uneven across the globe as new waves of Covid infection kept battering one
region or the other and this imbalance in aviation activity between the various regions has caused delayed demand
recovery.

Refinitiv Oil research expect the Jet consumption to increase in coming quarters albeit the pickup will be slower than
earlier anticipated. Region such as Middle East is all set to witness the growth as event like Expo 2020 and FIFA
world cup will continue to buttress the demand, while in Asia the growth will be lower as winter in Japan is predicted
to be milder and new tax regulation in China has curtailed the JetFuel consumption, which otherwise was blended
with LCO to produce gasoil.

Demand in the USA is also expected to improve with resumption of flights to Europe, however, EIA has cut its 2022
outlook for US jet fuel demand by 80,000 bpd to 1.6 million bpd, reflecting a lower GDP forecast and a slower-than-
expected recovery in air travel. As far as Europe is concerned, demand growth is expected to be muted in immediate
timeframe as winter approaches and also the increase in new cases in UK and Germany, which are the major aviation
markets in Europe may have a negative impact.

Date of issue: 03/11/2021

 Jet Set Go! 29

Refinitiv Oil Research

Middle East:

Oil_Research_MENA@refinitiv.com

Ranjith Raja – Oil Research Manager

Ranjith.Raja@refinitiv.com

Abhishek Kumar – Senior Analyst

Abhishekkumar8@refinitiv.com

Asia-Pacific:

Oil_research_apac@refinitiv.com

Yan Chong Yaw- Oil Research Manager

yanchong.yaw@refinitiv.com

Zameer Yusof- Senior oil Analyst

Zameer.Yusof@refinitiv.com

Americas:

Oil_research_na@refinitiv.com

Jim Mitchell - Oil Research Manager

j.mitchell@refinitiv.com

Corey Stewart- Senior Analyst

corey.stewart@refinitiv.com

Europe:

Oil_Research_Europe@refinitiv.com

Alex Pearce - Lead Analyst

Alex.Pearce@refinitiv.com

Date of issue: 03/11/2021