Jet Kerosene Prices Dip in US, Edge Up Slightly in South Korea Amid Festive Travel Surge

The market situation for Jet Kerosene remained marginally bearish in the United States, while the South Korean market witnessed a marginally bullish situation. The prime reasons for the depreciation of the prices of Jet Kerosene were largely attributed to festive demand, which currently has not materialized as festive holidays had not commenced, and the low run rates of refineries as the demand for diesel remained subdued in November. While prices of Jet Kerosene remained subdued across the US market, the South Korean market witnessed a bullish situation because of the expansion of the national airlines and increased run rates of the refineries, despite prices of feedstock Crude Oil largely witnessing a depreciation.

Prices of Jet Kerosene have depreciated by almost 3.5% in the month of November in the US market, according to the FRED, which was complemented by the bearish market situation of feedstock Crude Oil, whose prices recorded a decline of more than 8% in November 2023. The prime reason for the declining prices of Crude Oil was attributed to relief on sanctions on Venezuelan Crude Oil and increased production rates in Nigeria and Angola, despite key OPEC+ members, particularly Russia and Saudi Arabia, voluntarily extending production cuts by another 1.5 million barrels per day and 500,000 barrels per day totaling to 2 million barrels per day till January 2024 at the headquarters in Vienna on November 30, 2023. Travel demand across the United States remains subdued as the festive holidays have not commenced, which consequently did not pressure the prices of Jet Kerosene, and airline ticket prices have continued declining since May as consumers were not willing to pay for inflated tickets. Furthermore, the softer demand for Jet Kerosene is also attributed to the development of airplane engines by Boeing, which possesses the ability to use 100% SAF (Sustainable Airline Fuel), derived from animal/plant material, municipal waste, and agricultural residues as drop-in fuel, instead of Crude Oil. This was indicated by the fact that Virgin Atlantic, a major airline carrier in the US, commences its first flight from New York to London on November 28, 2023, using 100% SAF.

While the US market witnessed a bearish situation of Jet Kerosene, the South Korean market witnessed a marginally bullish market situation, with South Korean refinery firm SK Innovation expecting Jet Kerosene to outperform other types of fuel, even though traders and fuel marketers maintaining somewhat cautious sentiment. The demand for Jet Kerosene in the South Korean market is anticipated to increase as service sectors across the East Asian markets, namely Singapore, Seoul, and Tokyo, are anticipated to witness a resurgence as travel demand increases, further pressurizing the demand for Jet Kerosene. Additionally, the national airline of South Korea, Korean Air, plans to expand its operations further to China, Japan, North America, and Australia to meet the resurging travel demand. The presence of demand for Jet Kerosene is further evidenced by increased run rates of SK innovation refineries at Ulsan and Incheon complexes by almost 4% and 6% and not intentions of shutting down its Crude Oil Distillation Unit at the Ulsan complex in the fourth quarter of 2023. Furthermore, SK Innovation commenced the production of Crude Oil at China's Block 17-03, which would pump up to 29500 b/d to produce enough inventories of Jet Fuel.

Overall, the market situation for Jet Kerosene is expected to witness a bullish situation in the North American and East Asian markets due to a resurgence in travel demand owing to the festive holidays and increments in the prices of tickets as reported by major US and South Korean airlines. However, the prices of Jet Kerosene across the US also depend on the number of airlines that would have the ability to transition to SAF instead of using conventional Jet Kerosene, as engine manufacturers such as Rolls Royce and Boeing are reported to be at the end of developing phase of the SAF fuels.