US diesel, jet fuel demand diverge

  • Market: Oil products
  • 12/01/23

Demand for US diesel and jet fuel have diverged heading into December amid rising airline travel and slowing agricultural activity.

Last week's US diesel consumption, as measured by products supplied, was the lowest for any November week since 1998 at 3.014mn b/d, Energy Information Administration (EIA) estimates show. Still, US refiners hiked diesel output to the highest since early September that week as the colder, winter months loom, boosting diesel inventories to multi-week highs across the country.

Agricultural activity — a driver of diesel demand during spring planting and fall harvest — is likely to slow in the coming weeks as the harvest ends. The US corn harvest was 96pc complete during the week ended 26 November, ticking up by three percentage points from the prior seven-day period, according to the US Department of Agriculture.

A large portion of US agricultural activity occurs in the midcontinent, where diesel stocks rose by 4pc to 25.9mn bl last week, a three-week high and up slightly from a year earlier. Group Three diesel prices at the southern midcontinent averaged a 31¢/USG discount to Nymex diesel futures in the first four session of this week, marking the deepest weekly discount since the week ended 30 December of last year. In Chicago, West Shore/Badger pipeline diesel prices similarly averaged a 40.47¢/USG discount to the Nymex this week, a seven-week low.

Airline demand climbs

Meanwhile, US airline travel continues to climb from the lows of the Covid-19 pandemic, tightening national jet fuel supply.

US jet fuel products supplied last month through 24 November rose to 1.699mn b/d, on pace for a three-month high. While this lags demand in November 2019, prior to the pandemic, by 4.2pc, the demand gap from pre-pandemic levels has narrowed from 12pc in October and 6.8pc in June-September. In turn, US jet fuel stocks last week were the lowest since the second week of February at 36.6mn bl, easing by 1.7pc from the prior week but up by 1pc from a year earlier.

During last week's Thanksgiving holiday, US airlines screened 2.907mn passengers on 26 November, the most for any day since at least the beginning of 2019, outpacing 2019's highest day of 2.882mn screenings.

Rising airline travel has buoyed jet fuel prices in most US regions. Los Angeles jet fuel at the US west coast fetched a 90¢/USG premium to Nymex diesel futures on 22 November, notching the widest such premium since Argus began recording Los Angeles jet prices in April 2003. Subsequently, Los Angeles jet fuel prices outpaced CARB diesel prices, averaging 67.794¢/USG premium to diesel in the final five sessions of November, an inversion from the first 11 trading days of the month when Los Angeles jet fuel averaged a 20.21¢/USG discount to CARB diesel.

Chicago West Shore/Badger jet similarly held a 27.25¢/USG premium to regional diesel prices in the last five sessions of November, well above a modest 2.65¢/USG premium in the same period last year.


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