SINGAPORE РRefiners may curtail jet fuel output by partially reducing processing as the fuelӼs value versus diesel plunged after the United States said it would ban European travellers to prevent the spread of the coronavirus.
The regrade, which is the price difference between jet fuel and diesel with a sulphur content of 10 parts-per-million (ppm), fell to a discount of $3.86 a barrel, the lowest since Aug. 13, 2015, according to data from S&P Global Platts.
US President Donald Trump on Wednesday banned travel from 26 European countries for 30 days. On the same day, India said it will suspend the granting of visas to travel to the country.
As a result of the US ban, jet fuel demand may drop by between 200,000 and 250,000 barrels per day, split between the US and European markets over the 30-day ban, said Mark Williams, principal analyst, refining, at Wood Mackenzie.
«Refiners are also likely to lower jet yields and blend more jet fuel into the distillate pool to accommodate lower jet demand, adding further pressure to already weak distillate cracks,» he said.
Refiners may deal with the lower jet fuel value by cutting their processing runs to make less of the fuel, which is typically produced during the initial distillation of crude into products.
Some US-based traders expect the countryӼs refiners to try to blend jet fuel into the diesel pool to try to make up for weaker jet demand.
«I am sure that they are already doing as much as they can to reduce jet production,» a US-based market participant said.
US Gulf Coast jet fuel cash prices fell to 20.25 cents a gallon below heating oil futures on the New York Mercantile Exchange this week, traders said. That is the lowest for this time of year since at least 2004, the earliest data available, Refinitiv Eikon data showed.
Companies have already been cutting rates to deal with surplus aviation fuel because airline travel has declined as countries ban travel to halt the coronavirus spread
«This (the US travel ban) is the end of jet (fuel) market and there will likely have to be run cuts from Europe,» said a source from a South Korean refinery.
«This will have a spillover effect into Asian markets and refiners will likely have to consider run cuts,» he added.
Jet fuel typically cannot be stored for long periods as its quality could degrade, increasing the incentive for refiners to produce less of the fuel.
Jet fuel in Singapore was at $40.97 a barrel, down 49 percent this year, while 10ppm diesel was at $44.82, down 45 percent, according to Refinitiv data.
The crack margin for jet fuel versus Dubai crude oil fell 31 percent to $7.09 a barrel on Thursday, the biggest single-day percentage loss since Refinitiv began publishing the data. — Reuters
