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Jet fuel cracks inch up as aviation demand struggles

Asian refining margins for jet fuel edged higher this week, but traders remained concerned the market for aviation fuel would stay depressed for the remainder of the year due to lesser number of scheduled flights operating in the region.

Refining margins or cracks for jet fuel in Singapore were at a discount of 41 cents per barrel to Dubai crude during Asian trade on Tuesday, compared with minus 88 cents per barrel a day earlier. The jet fuel cracks, which also determines the profitability of closely-related kerosene, might find some support once winter heating demand for kerosene picks up, trade sources said.

"Asian jet (fuel) markets will continue to struggle until the uptick in Northeast Asian kerosene heating demand kicks in later in the fourth quarter of 2020, as the rest of the region lags behind China," consultancy Energy Aspects said in a monthly note. "Chinese domestic flight numbers are higher year-on-year in September, meaning the country can provide little further support as regional supplies rise from present levels."

Scheduled flights in China were down by 2.3% year-on-year in the week to Monday, compared with a 4.2% drop in the preceding week, data from aviation data firm OAG data showed. Cash discounts for jet fuel <JET-SIN-DIF> were at $1.17 a barrel to Singapore quotes on Tuesday, 4 cents lower from Monday. The regrade, which is the price spread between jet and gasoil, for October stood at a discount of $2.62 a barrel on Tuesday, prompting refiners to continue blending jet fuel into the diesel pool.


(Reporting by Koustav Samanta; Editing by Shailesh Kuber)

 


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