China is expected to ship out the most jet fuel in more than three years in July as refiners capitalise on higher margins overseas while demand from international flights remains below pre-pandemic levels, traders and analysts said.

Exports of the aviation fuel are expected to stay elevated well into August, which could soon cap Asian refining margins for the fuel.

China’s July jet fuel exports are forecast to more than triple from the same month a year ago to between 1.7 million and 1.77 million metric tons in July, estimates from consultancies Longzhong, Refinitiv Oil Research and two China-based trading analysts showed. That would be the highest volume since April 2020.

“Improved export margins for Chinese refiners supported the incremental outflow, in addition to increased jet-kero production volumes from higher refinery throughput rates especially at new refineries such as PetroChina Guangdong Petrochemical,” said Refinitiv senior analyst Amanda Zhao.

Asian jet fuel margins jumped more than 48% this month, encouraging regular exporters like Dalian’s WEPEC to export more and also drew shipments from Zhejiang Petroleum Corp, two refinery sources said.

Chinese refiners have already started selling cargoes for August, including one to Taiwan’s CPC Corp, two Singapore-based traders said. Refiner Zhejiang Petroleum and Chemical Co, which rarely exports jet fuel, is likely to export at least two cargoes in August as well, one Chinese trader said.

State-owned refineries have been increasing output, with the average operating rates at 78-82% in July, up 2-3 percentage points from June, leading to higher supply, data from consultancy Zhuochuang showed.

However, FGE analyst Mia Geng expect jet fuel exports to fall in September when maintenance season starts and as seasonal diesel demand picks up.

While aviation fuel demand for planes on domestic routes has recovered to pre-pandemic levels, international flight capacity remained at between 45% and 55% for July, compared with pre-pandemic levels, data from analytics firms OAG and DAST showed.

Aviation fuel supplied to planes on international routes is expected to account for 30% to 40% of overall jet fuel exports in July and August, one of the analysts said.
Source: Reuters (Reporting by Trixie Yap; Graphics by Matthew Chye and Muyu Xu; Editing by Florence Tan and Sharon Singleton)