Viewpoint: US west coast jet import to rise in 2024

Market: Freight, Oil products
27/12/23

US west coast jet fuel imports may extend gains in 2024 on rebounding travel demand, following a likely first quarter dip as South Korean refiners shift to winter kerosene.

US west coast jet fuel imports were up by 0.4pc in 2023 over 2022 levels, at an estimated 107,600 b/d, according to oil analytics company Vortexa, yet were still 4.7pc below pre-pandemic 2019 total volumes.

South Korea dominated US west coast jet fuel imports in 2023, accounting for 73pc of all volumes, according to Vortexa, with smaller percentages arriving from Japan, China and Singapore. Final volumes may change if current vessels scheduled in the final week of December are rerouted or reclassified as a different product.

US west coast imports peaked in June at 137,100 b/d during summer travel demand season, while west coast jet fuel production also peaked in June at 468,000 b/d. The week ended 23 June marked the highest regional output for a single week in 2023at 496,000 b/d, according to Energy Information Administration (EIA) data.

US passenger air travel demand in 2024 is expected to surpass pre-pandemic levels, with the Airports Council International (ACI) predicting 2.1bn domestic airline passengers, a 3.8pc increase from 2023 and a 3.6pc increase over 2019.

Yet it is not simply the number of passengers flying but also the number of flights that contribute to jet fuel demand. Airlines have promised more scheduled flights from the US west coast in the upcoming year.

The number of flights between Maui, Hawaii, and the US mainland is expected to slowly recover to the level prior to August, when devastating fires in Maui led to hundreds of flight cancellations.

Hawaiian Airlines had to reduce flights from Los Angeles and San Francisco in 2023 when its Airbus A321 jets were grounded by widespread engine issues. Hawaiian Airlines predicts that by 2024, all A321 jets will be back in operation.

Alaska Airlines has added nine new routes for 2024 from the west coast to Mexico, Central America, the Caribbean and seasonal flights between Palm Springs, California, and New York City. Starting in June 2024, Southwest Airlines will expand its services from Burbank, California, to Boise, Idaho; New Orleans, Louisiana; San Antonio, Texas; and St Louis, Missouri. United Airlines will begin a seasonal route from San Francisco to Rome, Italy, and additional flights from San Francisco to Manila, Philippines, and Beijing, China.

The growing number of flights and travelers on the US west coast will likely call on more west coast jet fuel production.

California jet fuel production averaged 287,000 b/d year to date through 15 December, according to the California Energy Commission (CEC) a 10pc increase from 2022 and 0.7pc above 2019 levels.

US west coast imports of jet fuel from China have been increasing in recent years, accounting for 5.7pc of regional imports in 2023. Imports from China this year rose by 21pc over 2022 levels and by 24pc over 2019, prior to the pandemic. Chinese jet fuel production is expected to climb in 2024 as more refineries expand capacity even though Chinese travel demand has not returned to pre-pandemic levels.

China increased its export quotas in 2023 to balance demand and supply, and those may be increased again in 2024.

A possible bullish sign for 2024 west coast jet demand is that December did not see the typical drop in imports expected when Korean refiners shift toward winter heating season kerosene output. December jet fuel imports from Korea were at 129,700 b/d, an increase of 90pc over December 2022 volumes, according to Vortexa, as the arbitrage between South Korea and US west coast remained open during the end of November. The widening arbitrage was a result of seasonally higher US travel demand for the Thanksgiving holidays and tighter supplies as PBF Energy's 166,000 b/d Torrance refinery and its 156,400 b/d Martinez refinery, both in California, were undergoing turnarounds.

By Carrie Carter

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