Jet/kero supplies are unusually concentrated in a few countries

Seaborne jet/kero supplies are unusually concentrated. Only 4 countries – the top exporters based on the last 12 months’ average – account for 54% of all exports. South Korea and Kuwait typically provide between 250-300kbd, albeit supplies from the latter tend to be more volatile. India and China generally supply between 150-200kbd on a monthly basis. Since hitting a low in April 2020, the four countries have more than doubled their exports, increasing from 500kbd to nearly 900kbd recently, based on a 12-month moving average. The rest of the world has increased exports by just 85kbd since the Covid-related low point, further showing the marked concentration of the jet/kero export market.

These substantial extra-supplies from the Top-4 exporters – including an additional 250kbd over the last two years – have played a key role in keeping jet/kero prices in check so far. Neither cracks, the regrade (premium over diesel), nor the market structure are suggesting that jet/kero is particularly tight compared to other motor fuels. Even the seasonal pickup in the Singapore regrade is relatively lacklustre so far this winter (kerosene is used for heating in Northeast Asia). However, jet/kero pricing dynamics could easily shift in 2025, as production potential is limited by technical constraints and frequently operates near maximum capacity.

Future export growth potential is limited by a host of factors

Among the Top-4 exporters, all but South Korea are operating close to their historical maximum export levels. It appears unlikely that they can supply much more based on a mix of growing domestic consumption, the absence of further refining capacity additions, and official export limitations in the case of China. Specifically, Chinese exports could actually fall from recent highs, given the de-facto introduction of export taxes (4% reduction in export tax rebate) and strongly growing domestic consumption. Furthermore, jet/kero has already touched 50% of China’s overall motor fuel exports, which in combination with the export restrictions underpins the limited upside in this market.

As for the rest of the world (chart below), one further meaningful export market is the Wider Arabian Sea (excluding Kuwait and India’s West Coast), primarily driven by exports from Saudi Arabia and the UAE. With no new major refining projects coming onstream, and domestic demand picking up strongly amid competition to serve global passengers as a transit hub, jet/kero export volumes may not have much room to go up. Consequently, the 2019 export spike may well be out of range. Qatar, for instance, has almost entirely stopped exporting the product due to strong domestic demand. Even if the 2019 export spike out of the Wider Arabian Sea were reached again, it would just add 130kbd of supplies to the global market.

Most of the other regions are only marginal exporters, with volumes largely trending lower. Mature markets, such as Northeast Asia (excl. China and South Korea), Southeast Asia, Europe or the US generally exhibit strong domestic demand, with dynamics that largely diverge from those of road fuels. On the supply side, production is often operating at maximum yield, while frequent refinery shutdowns have affected the overall supply volume. Japan, for example, has already seen issues with jet fuel supplies over the course of this year.

Additional refinery shutdowns and strong demand growth are set to tighten jet fuel market

For 2025, we have already lined up close to 1.2mbd of additional shutdowns, primarily in Europe and the US, likely pushing jet/kero import requirements in these markets even higher, without even factoring in higher demand. South Korea, the Middle East and Dangote (Nigeria) appear to have the best potential for additional supplies, but the market could still tighten significantly. A rising jet premium over diesel and stronger backwardation are likely results, incentivising the necessary supply shifts. Accordingly, it may be a good thing for refiners to explore whether they have any remaining options to shift yields in favour of jet fuel.