Rising jet fuel stocks weigh on U.S. West Coast refiner margins
Refiner margins on jet fuel averaged $0.05/gallon (gal) at the Los Angeles trading hub last month, the lowest in at least five years, as low demand and high supplies pushed inventories to a record high, the U.S. Energy Information Administration (EIA) said on Wednesday.
Why it matters. Fuel producers' margins have weakened substantially this year as soft economic activity has dampened the post-pandemic travel boom and global supply has increased due to the opening of new refineries and expansions of existing plants.
Weaker-than-expected jet fuel consumption has been among the biggest disappointments for refiners, as the product was expected to be a pillar of oil demand growth this year.
Context. Jet fuel demand on the U.S. West Coast was at the highest in four years during the first half of the year, but still below its pre-pandemic levels, the EIA said on Wednesday.
West Coast air travel has recovered more slowly from pandemic-era lockdowns and aircrafts have become more efficient, weighing on fuel consumption, the EIA said. International travel to Asia has also recovered slower than other regions, the agency noted.
By the numbers. West Coast jet fuel stocks hit an all-time high of 12.2 MMbbl in the week ended Sept. 06, EIA data showed. Weekly inventories have averaged nearly 11 MMbbl this year so far, compared to just over 9 MMbbl in 2023.
Jet fuel demand in the region averaged over 500,000 bpd in the first six months this year, about 5% below the first half of 2019.
The EIA this month cut its U.S. jet fuel demand forecast 1.69 MMbpd in 2024, up 2% from last year. Its previous forecast saw growth of 3.3%.
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