Jet fuel demand is picking up, according to a senior refining executive, which could give refiners some hope after the global pandemic boosted distillate inventories and sank margins, as reported by Reuters.
Refiners have been mixing jet fuel into diesel inventories for the last several months, since they have been unable to sell the product due to the sharp decline in air travel.
“Jet fuel demand numbers are starting to improve and show signs of life, allowing refiners to drop less jet into diesel which will eventually provide well-needed relief on distillate stock,” said Joe Israel, chief executive officer of Par Pacific, a West Coast refiner.
Last month, the Transportation Security Administration said it screened 1.36 million U.S. airport passengers, the highest number since March 15, 2020. That is still 38% lower than pre-COVID-19 levels. With a growing number of Americans getting vaccinated, demand and advanced bookings have started to rise in recent weeks.
“Combined with healthy diesel demand, this trend will likely drive global distillate crack spreads up,” Israel said.
Distillate margins are averaging $5.17 a barrel in the first quarter of 2021, approximately half the levels of the prior-year quarter, according to energy consultancy Tudor, Pickering and Holt.
Jet fuel recovery has lagged gasoline demand, which is already touching pre-pandemic levels, according to data from the Energy Information Administration.
In the first quarter of 2021, world refiners’ utilized capacity was 10% to 15% lower than pre-pandemic levels, but refiners expect it to increase in coming months.
“Considering the recovery assumptions, expectations are for world refineries to close that gap to approximately 5% through the summer,” Israel said.
Reporting by Laura Sanicola; Editing by Dan Grebler
