en.Wedoany.com Reported - Despite falling crude oil prices, the refined fuel market, including jet fuel, remains tight.
On June 9, Brent crude oil futures fell 1.2% to $93.11 per barrel, while U.S. West Texas Intermediate crude fell 1.4% to $90.00 per barrel. Diplomatic efforts have eased short-term concerns about supply disruptions in the Middle East. Both benchmark crude prices rose about 5% in the previous trading session.
While crude oil prices declined, jet fuel prices remained high. The average price of jet fuel on the U.S. Gulf Coast from March to May was $3.91 per gallon, showing little fluctuation with benchmark crude prices. Refining margins and jet fuel costs depend more on the supply-demand dynamics of jet fuel itself rather than crude price movements alone. Higher refining output, if absorbed by export demand, does not guarantee lower fuel prices.
Record U.S. petroleum product output is being absorbed by overseas demand. According to the U.S. Energy Information Administration (EIA), as of May 1, U.S. daily jet fuel output exceeded 2 million barrels, a historic high. Higher production pushed inventories to about 45 million barrels as of May 29, roughly 7% above the five-year average.
Record U.S. output has not depressed jet fuel prices. Buyers in Europe and Asia continue to import U.S. refined products, absorbing most of the additional supply. Higher overseas demand has increased imports of U.S. products, limiting domestic inventory growth and supporting high jet fuel prices despite record output.
Refining margins depend primarily on the profitability of refined products, not just crude oil prices. As long as jet fuel prices remain high, refiners can maintain their profit levels even if Brent crude prices fall. When jet fuel prices stay elevated, airlines face profit pressure regardless of crude price changes.
Falling crude oil prices do not immediately reduce fuel costs for airlines. An Air Canada spokesperson told Reuters on June 8 that the company relies on a "very strong balance sheet" to withstand fuel price volatility, indicating that higher fuel costs may impact earnings for several quarters. Factors such as fuel contracts, hedging plans, and route planning may delay the cost advantages from falling crude prices.
Compared to crude oil prices, refined fuel prices have a more direct impact on airlines, transportation companies, and refiners. When fuel costs rise faster than ticket prices or freight rates, airlines, logistics operators, and transport companies face pressure on profit margins. Conversely, when fuel prices remain high relative to crude costs, refiners can increase profits.
Companies with lower debt, stronger liquidity, and diversified revenue can withstand higher fuel costs for longer. It is reported that the Canadian government has provided up to 150 million Canadian dollars in repayable aviation industry support, while U.S. officials have rejected a broad industry aid package.
If export demand continues to absorb growth in U.S. jet fuel inventories, refining margins may remain strong. The current inventory surplus of about 45 million barrels has not depressed jet fuel prices, as overseas buyers continue to absorb U.S. supply.
If export demand weakens or jet fuel prices fall, refining margins will face downward pressure. Brent crude prices below $90 per barrel alone will not undermine refining profits.
The U.S. Energy Information Administration's (EIA) Weekly Petroleum Status Report provides key data for tracking jet fuel supply trends. The market needs to closely monitor changes in jet fuel output relative to the recent benchmark of 2 million barrels per day, inventory movements relative to 45 million barrels, and export volumes. Rising inventories and weakening exports would increase the risk of lower jet fuel prices and declining refining margins.
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