US refiners repurpose jet fuel

US Atlantic coast jet fuel production fell to negative levels for the first time in 20 years last week as refiners converted unwanted output to higher margin products, most likely diesel.

A growing glut of jet fuel has depressed prices and refining margins for the past few months, prompting refiners to reuse the finished fuel that itself has the least number of blending options and strict specifications.

This is evident in the -5,000 b/d of jet fuel production on the US east coast reported during the week ended 24 April, the first negative level since the US Energy Information Administration (EIA) began tracking the data in 1990.

Negative production means finished jet fuel was repurposed as feedstock or blendstock. Options include hydrotreating jet fuel and blending it with diesel, the highest margin product.

Since mid-March, east coast refiners have been losing an average of 26.7¢/USG producing jet fuel over diesel. This spread is inclusive of the cost of environmental compliance, as measured by Argus-calculated Renewable Volume Obligations (RVO), which is applicable to diesel but not jet fuel. Before the Covid-19 pandemic decimated jet fuel demand, east coast jet fuel was consistently a higher margin fuel than diesel.

Delta Airlines, which bought the 185,000 b/d refinery in Trainer, Pennsylvania, in 2012 in order to supply its own jet fuel, began maximizing diesel in March, as many US refineries began to tilt yield toward diesel. By late April Trainer's throughput had fallen by half, and all of its jet fuel production was being blended into diesel.

Reprocessing jet fuel is happening on a small scale, as most refiners are focusing on cutting overall runs to avoid losses. For most refiners, it is easier to adjust at the feedstock level to cut the jet fuel stream in favor of naphtha, the product that shares an overlapping cut with jet fuel.

US jet fuel demand reached 800,000 b/d during the week ended 24 April, a three-week high but less than half of year-ago volumes, EIA data show.

By Chunzi Xu