February 27, 2023

Global jet demand continues to recover, but not all regions are equal

Global jet fuel demand continues its post-pandemic recovery, but predictably, the regions that began to open up first have seen the most robust improvements. The US and Europe will drive the net balance into deficit in the second half of the year, while Asia lags behind.

While the world is seeing demand recovery for most refined products, there are a couple of parts of the barrel that currently lag the rest, and one of them is jet fuel.

Kpler calculations show that global jet fuel demand was 110 kbd lower in January 2023 than the average for that month over the last five years, but it is as much as 900 kbd higher than in January 2022. Throughout 2022, there was a gradual demand recovery toward the 5-year average, but it did not manage to surpass it consistently, and it is important to consider that average includes the worst-affected years of 2020 and 2021, when aviation activity was severely curtailed. When viewed in comparison with pre-pandemic levels, it is still some way behind. In January 2019, demand was 8.2 Mbd, this year it was 16% lower at 6.9 Mbd. For reference, in January 2021, it was 5.3 Mbd.

This situation is reflected in jet fuel exports. In Jan-Sept 2022, the global average jet fuel export volume was 1.58 Mbd, but it climbed to an average of 1.85 Mbd in 4Q2022, so there has been a visible uptick over the course of the year. In 2019, the last full pre-pandemic year, however, the average was 1.92 Mbd across the whole year, and in 4Q that year, it was 2.00 Mbd, meaning 2022 was 8% below the average volume of those months in 2020.

Between demand data and export volumes, it is clear that while there has been a recovery over the past 12 months, global jet fuel consumption has not yet returned to pre-pandemic levels, although a large swing in the global balance is expected during 2H2023 (see chart), driven by North America and Europe. The cumulative effect of demand recovery will come into play.

It is too simplistic to look at the data on a global scale, however. There are variations in rates of demand recovery across different regions which largely correlate with the speed of “opening-up” post-pandemic, as well as wider macroeconomic factors.

Demand in North America, arguably the first continent to begin to normalize activity, has been above the 5-year average since March 2022, and we expect it to climb above pre-pandemic levels in 2H2023. European demand, too, has followed a similar pattern that we expect to continue. These regions look to have significantly tighter balances in 2023, which will be exacerbated if refiners are incentivized to focus on maximizing the gasoil side of the middle distillates pool at the expense of jet fuel output.

In Asia, though, demand is still below the 5-year average, and we do not expect it to surpass it until 3Q. Pre-pandemic demand levels will not be reached in the short-to-medium term.

These regional variations are also reflected in the jet-gasoil regrades. In the US, the regrade has been in and out of positive territory, sometimes to extremes on both sides, since the middle of 2021. In Europe, it turned positive in November of the same year but has also been volatile (as in the US, this was as much due to the strength and volatility of gasoil as due to its own relative strength). In Asia, and since September 2019, the regrade had not been positive until last month. With ongoing demand headwinds in Asia, a sustained foray into positive territory looks less likely than it does in the US and Europe.

Global jet/kero net balance (kbd)

Source: Kpler-derived data

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