SINGAPORE The Asian jet fuel margin dived to its lowest level in nearly nine months as the supply of the aviation fuel outpaced demand in the region, multiple trade sources said on Tuesday.
Record exports from China and India are pressuring the margins downwards despite firm demand for air travel, the sources said.
The Singapore jet fuel margin fell to $9.83 a barrel to Dubai crude on Tuesday, the lowest since Aug. 9 when it was at $9.81 a barrel, Reuters data showed.
"Good (refining) margins, higher run rates and a strong (east-west price spread) are the main reasons for jet fuel being weak," a Singapore-based trade source said. "I do not think demand is poor."
Refiners typically raise their output from their crude distillation units when overall refining margins rise, resulting in a higher percentage of jet fuel production. Overall refining margins in Asia rebounded to $7.29 a barrel on April 21 after plummeting to $4.49 on March 2.
China's March jet fuel exports jumped 21 percent from the same period last year, after shipping out record high volumes in December, customs data showed.
The world's second-largest oil consumer stepped up exports of middle distillates, which include jet fuel, due to lower domestic demand and higher refinery run rates, the traders said.
India exported the highest monthly volumes of jet fuel in March since 2011, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.
India's domestic kerosene demand has fallen as more people switch to liquefied petroleum gas for cooking, which has driven up exports of jet fuel, which is a similar oil product, the traders said.
State-owned Indian Oil Corp has also started to export jet fuel regularly from its new Paradip refinery, they added.
It has also been largely unprofitable for traders to ship the fuel from Asia and Middle East to Europe, which has been the traditional route, which has kept supply elevated, they said.
"The arbitrage hasn't been working well this year, so I think that's the reason why (margins) are down," an India-based trader said.
Jet fuel cargoes have even been shipped from the Middle East to Singapore in an unusual move, also weighing on margins, said a second Singapore-based middle distillates trader.
Global demand for air travel rose 4.8 percent in February, thanks to lower fares and improving economies, the International Air Transport Association (IATA) has said.
(Reporting by Jessica Jaganathan; Editing by Christian Schmollinger)