Asian refiners anticipate a boost in demand for jet fuel in 2024 from travel to China and Southeast Asia.

Asian refiners are betting that air travel from China and Southeast Asia will continue to rebound in 2024, with supply movements being led by output from a wave of new Middle East capacity, according to dealers and analysts. In the third quarter of 2023, the number of domestic flights in China exceeded that of 2019; nevertheless, the increase in foreign traffic has been slower to occur but is still increasing.Demand levels will also be determined by a wobbly post-pandemic rebound in southeast Asia, where traffic hasn't yet returned to 2019 levels owing in part to poor flows from China. According to data from consultancy FGE, the total demand for jet fuel in Asia is expected to increase by 20% yearly in the first half, reaching 2.36 million barrels per day (bpd).Average jet fuel/kerosene margins, or "cracks," are expected to contract in Asia by 2024, with rising oil prices possibly as a result of tensions in the Middle East. Shenglan Niu of Rystad predicts cracks to average $16.70 per barrel, while Priti Choudhary of Wood Mackenzie predicts $20.60. The estimated 2023 margins for LSEG were $24.60 per barrel. Observe the following variables in 2024:China's Comeback The third quarter saw a sluggish but steady recovery in China's foreign air travel following the lifting of pandemic restrictions, thanks in part to more flights on longer-haul routes to destinations like Australia and the US. Shenglan Niu, senior oil analyst at Rystad Energy, projects that in the first half of 2024, China would account for half of the growth in jet fuel consumption in Asia year over year, or about 263,000 barrels per day. According to Jefferies analysts, China's foreign flight numbers are expected to reach at least 71% of 2019 levels for the first quarter. According to FGE experts, that percentage will probably increase from an average of 50% to as high as 85% by year's end.shaky southeast According to flight data from OAG, however, capacity for both domestic and international flights in Southeast Asia still trails behind 2019 levels, despite a 34% increase in international seat capacity in January. International tourism has been particularly sluggish to return to Thailand, Vietnam, and Singapore, while the demand for business travel has been reduced by the growing use of videoconferencing, according to FGE experts. As a result, the demand for jet fuel in Asia is expected to reach 2019 levels only in the fourth quarter. "Since the beginning of 2023, foreign tourist arrivals in Thailand have remained stable at 65-70% of 2019 levels due to a gradual resurgence of Chinese tourists," according to FGE. Thailand, Indonesia, and Singapore are expected to lead the region's expansion; Singapore alone accounts for around 46,200 bpd of the region's annual first-half demand rise.

ADDITIONAL SUPPLIES DEPEND ON REGRADE, MID-EST According to Wood Mackenzie's Choudhary, global jet fuel supply is predicted to roughly match the growth in demand for 500,000 barrels per day in 2024, outpacing that of diesel and gasoline. This will encourage refiners in Asia and the Middle East to shift yields towards jet fuel. Regrade spreads, or the premiums on gasoil paper swaps compared to jet fuel, reached five-year highs in November of last year, which forced sellers to give jet fuel production priority. Refineries in Bahrain, Duqm, and Al Zour are expected to increase their output, which will contribute to an incremental increase in supplies, according to Choudhary. Kpler data indicated that Al Zour can generate up to 106,000 bpd of jet fuel or kerosene at full capacity. In 2023, about 46,000 barrels per day of fuel were exported. The Duqm of Oman