By Koustav Samanta
SINGAPORE (Reuters) - Asian jet fuel buyers are paying the highest premiums for this time of year in 10 years as new and expanded airports in the region push its consumption to new highs.
The premium for jet fuel cargoes in the Asian trading hub of Singapore was $1.01 a barrel above benchmark quotes on Friday, the highest for this time of year since 2008, according to data on Thomson Reuters Eikon. (Chart: https://bit.ly/2I1SpM6)
The booming aviation market has also pushed up the profit margins, known as cracks, refiners make from producing jet fuel to their highest since early 2015.
Demand for jet fuel, which is composed of the middle distillate fuel kerosene that is also used for heating, was expected to ease after the winter heating season, but consumption has stayed strong on a jump in orders from the aviation industry. The demand earlier this winter drove the jet fuel/kerosene premium to $2.28 a barrel Feb. 27, the most since May 2008.
"A rise in air-passenger traffic coming from increasing consumer affluence and improving infrastructure supports the strength in Asian jet fuel demand growth," said Sri Paravaikkarasu of energy consultancy FGE.
The Asia Pacific region makes up over one-third of the global air passenger market, gaining on average a bit over 1 percent in global market share per year.
"Asia will remain the corner-stone for global jet fuel demand expansion in the coming decades," Paravaikkarasu said.
In March alone, Asia's passenger traffic rose by 12 percent compared to last year, according to data from the International Air Transport Association (IATA) released last week.
"The strong first quarter provides healthy momentum heading into the peak travel period in the northern hemisphere. Benign economic conditions are supporting — and being supported by —good demand for air travel," Alexandre de Juniac, IATA's chief executive said last week.
TIGHTER SUPPLY
The current run of seasonal oil refinery maintenance in Asia has added to the pricing pressure by curtailing the supply of jet fuel available to the market.
There is 2.46 million barrels per day (bpd) of Asian oil refining capacity planned to undergo maintenance in May, according to data from consultants Energy Aspects. That is nearly equal to the crude oil demand of South Korea.
This supply tightness is occurring as travel demand in country's like China and India spur more jet consumption.
China's domestic air traffic alone climbed 15 percent in March from a year ago, the strongest pace in five months, IATA data showed.