Looming jet fuel shortages in Europe have led some aviation associations to call for allowing the use of Jet A from the US to supplement supplies of Jet A1, but hurdles regarding logistics, safety and pricing would need to be overcome, experts and market participants warn.
Europe — like most of the world — uses A1-specification jet fuel, whereas the US uses Jet A. The two specifications are almost identical, but Jet A1 importantly has a freeze point of -47°C, which is 7°C lower than Jet A.
Jet fuel supply to Europe has come under significant pressure since Iran's closure of the strait of Hormuz, through which 40pc of Europe's jet fuel imports transit. Europe is replenishing only half of its lost supply at the most and shortages are forecast to emerge in May-June.
The US has become Europe's largest jet fuel supplier since the loss of Mideast Gulf flows, with arrivals set to surpass 500,000t in April, double the previous monthly record, Kpler vessel tracking data show. But not all US refiners are capable of producing Jet A1, and A1 cargoes require certification before export, a European trader at a US firm said.
Aviation associations have called on the European Commission to allow the use of Jet A in Europe to help mitigate the supply crisis. "There has been talk about that for weeks" in the market, a European broker said. The European Commission could soon explore the matter, its transport minister said.
The ruling could boost US jet fuel supply to Europe. US jet fuel stocks totalled 43.7mn bl as of 17 April, more than 10pc higher on the year. Opening the European market to Jet A would create an additional outlet for these barrels, potentially supporting US prices. "It would make my fuel more expensive here," a US fuel procurer said.
It would also remove the need for US refiners to segregate Jet A and A1, granting them greater flexibility in placing jet fuel into either domestic or export channels. US market participants caution, however, that sustained export demand would depend on arbitrage economics and logistical capacity, not only regulatory change.
Arbitrage economics to ship jet fuel from the US to Europe appear viable, market participants say. European jet fuel was trading around parity with US equivalents prior to the 28 February start of the US-Iran war. European prices have surged sharply because of the conflict, averaging more than $26/bl higher than US Gulf coast jet fuel since that date, Argus assessments show. A recent softening of transatlantic freight rates could further support arbitrage.
Pie in the sky?
But many consider the allowance of Jet A in Europe unlikely. Airlines could use the US grade for short-haul, lower-altitude flights in warmer areas because of its higher freeze point, although this would be extremely difficult from a logistical perspective. Fuel suppliers may need to dedicate specific storage tanks to Jet A, complicating refuelling operations, as it is unclear whether the two grades could be blended in one tank. "I wouldn't want to be on long-haul to Russia with [Jet A's] higher freezing point", a trader said.
It is unfeasible for Europe to use Jet A, according to a senior fuel inspector. Not only are the specifications different, but Jet A1 requires strict traceability from crude sourcing to final blending, including refining components and approved additives. This is to meet Defstan 91-091, the standard specification for Jet A1 set by the UK Ministry of Defence. Jet A has no traceability requirements, the inspector added.
The market impact of allowing Jet A in Europe is also unclear. It would increase the US' role as a swing supplier to Europe and heighten the sensitivity of the US to European price movements, as is already the case for diesel.
In Europe, the use of Jet A and A1 could create a two-tier market, leaving certain producers at a disadvantage if there are significant margins between the two grades. From 2 March through 24 April, prices for Jet A1 have commanded a $2.10/bl premium over Jet A prices at the US Gulf coast, compared with prices that were near parity in the first two months of the year.
Some market participants suggested that Europe could relax or waive the Defstan traceability requirements for Jet A1, supporting US exports without completely altering European specifications or US refining practices.
