Will Q4 jet/fuel demand demand outstretch supply?

Global jet/kero loadings started faltering in September, represented by a 6% fall m-o-m, with the downward trajectory continuing in October (-20% m-o-m for data Oct 1-15). 

Jet/kero premiums and refined product forward cracks continue to see relative strength despite rising inventories in key regions. As of data from October 15, jet/kero inventories in ARA rose +25% above the four year seasonal average (Insights Global via Argus) while PADD 1 jet/kero stocks increased 6% w-o-w (EIA).

Global jet/kero loadings (bd)

The rise in jet/kero ARA stocks look to have contributed to the slowdown in arbitrage opportunities from the East to West and has redirected the somewhat limited jet/kero flows towards the Pacific Basin.

Jet/kero flows have been somewhat restricted since August due to turnarounds in the top four jet/kero producing regions which have minimised jet/kero seaborne exports dramatically so far in October (a 19% fall y-o-y). The turnarounds appear to be concentrated in India East Coast and the Middle East Gulf, are due to peak in November, and would draw out into the first half of December (Argus Media). 

Global seaborne jet/kero exports by selected origin regions (mbd) vs (rest of world)

Meanwhile, the demand upside persists alongside the extreme concentration of supply outages. The jet/kero import port indicator, which shows ports where at least 90% of the overall flows are imports (excluding trading hubs like Rotterdam and Singapore), reflects the strength with a counterseasonal climb for October compared to last year. 

Using the indicators data, we can see that inflows into the demand centers in Asia have jumped 37% m-o-m for data Oct 1-15. Meanwhile Northwest Europe and the Med are showing signs of slowing down.

Looking forward, given strong Asia demand amid ongoing supply restrictions (Rizhao port restrictions, lack of clean product export quotas in China) it is likely we can continue to see a pull from this region until the end of the year.