Global aviation fuel markets experienced a significant rebalancing in July, as Asian exporters, primarily from South Korea and China, dramatically increased shipments to Europe. This surge, reaching multi-year highs, was driven by compelling arbitrage opportunities and robust demand dynamics in the European aviation sector, effectively alleviating regional supply pressures in Asia while addressing Western inventory drawdowns.
- Asian jet fuel exports to Europe, largely from South Korea and China, surged to 600,000–775,000 metric tons in July, marking a multi-year high.
- Favorable arbitrage, with European jet fuel prices averaging $65 per ton higher than in Asia, was a primary driver.
- Shipping costs for LR2 tankers decreased significantly to $3.75 million in July, further boosting trade viability.
- European daily flight numbers in July rose 4% year-on-year, leading to a tightening supply with ARA inventories at a five-month low.
- China remains a key exporter, projected to ship over 2.3 million tons of aviation fuel in August, though narrowing arbitrage margins may temper future volumes.
Market Dynamics and Price Arbitrage
The primary driver behind this increased trade was favorable arbitrage economics that persisted until mid-July. Physical jet fuel prices in Northwest Europe averaged $65 per ton higher than in Asia during July, an increase from a $50 per ton differential in June, according to LSEG data. This widening price gap made the East-West route highly profitable for Asian suppliers. Concurrently, the cost to ship 90,000 tons of jet fuel on LR2 tankers significantly decreased to an average of $3.75 million in July, down from $4.4 million in June, as reported by shipbroker SSY, following the resolution of the Iran-Israel conflict. This reduction in shipping costs further enhanced the viability of the East-West trade route, making it economically attractive for large-scale shipments.
European Demand and Inventory Levels
On the demand side, Europe exhibited robust consumption, underscoring the necessity for increased imports. Eurocontrol data shows that the average number of daily flights in Europe for July increased by 4% year-on-year and was 3% higher than 2019 levels, underscoring strong and sustained aviation activity across the continent. This elevated demand has notably impacted European stockpiles. Independent inventories of aviation fuel within the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub stood at 745,000 tons last week, marking the lowest level since February of this year. This figure falls below both the year-to-date average of 846,000 tons and the 2024 weekly average of 881,000 tons, highlighting a tightening supply situation in the region and necessitating the influx of Asian volumes to maintain equilibrium.
China’s Pivotal Role in Exports
China, a key global refiner and a significant contributor to the global supply chain, has played a crucial role in sustaining these elevated export levels. Industry estimates project that China will ship out over 2.3 million tons of aviation fuel in August, a volume similar to July’s strong performance. Analysts from consultancy FGE note that China’s overall jet fuel and kerosene exports are expected to remain elevated in the coming months, reflecting a strategic pivot in its refined product output. This trend is further supported by major refiners like Sinopec increasing output, while domestic flight demand within China has begun to plateau after a period of rapid recovery. For Chinese refiners, jet fuel exports continue to be the most profitable product compared to other refined petroleum derivatives, incentivizing sustained outbound shipments. However, experts like Vortexa’s head of APAC analysis Ivan Mathews anticipate a potential easing of exports in August as arbitrage margins have begun to narrow, potentially reducing the profitability of such long-haul voyages.
Emily Carter has over eight years of experience covering global business trends. She specializes in technology startups, market innovations, and corporate strategy, turning complex developments into clear, actionable stories for our readers.