Commodities
Europe Averts Jet Fuel Crunch After Hormuz Disruption, Kpler Says
Europe's jet fuel market has so far weathered the loss of Middle East supplies more smoothly than initially expected, with a combination of higher transatlantic flows, refinery optimization, and new capacity in Africa offsetting most of the disruption, Kpler strategists said in a note Thursday.Europe relies on imports of about 700,000 barrels per day of jet fuel to meet aviation demand, with about 400,000 b/d previously sourced from the Middle East during the May-September peak season."The escalation of the conflict and the effective closure of the Strait of Hormuz abruptly disrupted this key trade corridor, initially raising concerns over a severe supply deficit," said Nikhil Dubey, senior research analyst, Refining and Modeling at Kpler.However, Kpler data indicate that the shortfall has largely been absorbed through rapid rerouting of global supply chains rather than by demand destruction alone.The most significant offset has come from the US, which has redirected about 140,000 b/d of jet fuel toward Europe, supported by wider refining margins and stronger export economics following the disruption, which pushed up regional crack spreads.European policy flexibility, allowing temporary acceptance of Jet A alongside Jet A-1, has also broadened import options, though operational constraints at some airports are expected to limit the full impact.Simultaneously, European refiners have lifted jet fuel yields, optimizing operations toward so-called "jet-max" mode. Kpler said yields have risen to around 11% from about 9%, equivalent to an estimated 160,000 b/d of additional supply at current throughput levels.The analytics firm said that with refinery runs expected to increase further into the summer driving season, that uplift could reach about 210,000 b/d.New supply from Nigeria's Dangote refinery has added about 40,000 b/d year-over-year after the resolution of operational issues at its residue fluid catalytic cracking unit, with most of the incremental volumes also flowing to European buyers.Together, these adjustments have effectively replaced most of the lost Middle Eastern barrels, leaving the European market still short by an estimated 150-200,000 b/d heading into the peak summer season.Trade flows from Asia have also tightened. India, which previously supplied about 100-130,000 b/d of jet fuel to Europe, has seen reduced shipments amid restrictions on products linked to Russian crude processing.Kpler said some relief could come from recent UK policy changes allowing imports regardless of crude origin, potentially restoring up to 50,000 b/d of flows, though this remains uncertain.Higher jet fuel prices have already begun to weigh on demand, with Kpler estimating consumption losses of about 50,000 b/d over the May-September period as airlines trim marginal routes and adjust capacity.However, despite the adjustments, inventories remain under pressure and continue to draw below seasonal norms during a period when stocks would typically be building ahead of winter.The resilience of the market now depends on sustained US export economics, stable European refinery performance and continued output from new capacity, particularly in Nigeria.