A rebound in China’s airline traffic this year has boosted jet fuel demand in the only bright spot in transportation fuel consumption in the world’s top crude oil importer.
Chinese refiners, which have seen depressed refining margins for producing gasoline and diesel amid weak demand, are now cranking up jet fuel output to seize the higher margins in this segment as demand jumps by double digits.
Airline passenger and flight numbers are soaring this year compared to 2023 after nearly three years of Covid-related lockdowns were removed early last year.
As a result jet fuel demand is rebounding. But as a share of China’s total fuel consumption, jet fuel is much smaller than the shares of gasoline and diesel.
Rising jet fuel could offset some of the weakness in road transportation fuels, but not single-handedly lift Chinese oil consumption out of its currently tepid-demand period.
“Double-digit growth in jet fuel consumption this year may be able to narrow the plunge in gasoline and diesel,” Amy Sun, a consultant at GL Consulting, a think-tank under data provider Mysteel, told Bloomberg.
“But given its small market share, it can hardly reverse the bearishness in overall margins as fuel displacement accelerates amid a softer economy.”
Faltering overall oil demand and lower crude imports in China result from weaker economic growth and lackluster fuel demand below expectations.
The property crisis and weaker-than-expected fuel demand have weighed on refining margins in recent months, prompting independent Chinese refiners to reduce crude throughput.
China imported 9.97 million barrels of oil daily on average last month, which was 12% lower than the June figure and 3% lower than the daily import average for July 2023.
The apparent weaker demand and the slowing imports in China have been the biggest drags on oil prices in recent months, often overshadowing tensions in the Middle East and a recent drop in commercial crude inventories in the United States.
By Tsvetana Paraskova for Oilprice.com
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