Japan's Golden Week jet fuel demand to mark year-on-year recovery

Tokyo — Japan's domestic jet fuel demand is set to mark a year-on-year recovery during the Golden Week national holidays despite the country's latest COVID-19 priority measures on populous and tourist popular prefectures but will remain below the pre-pandemic level in 2019.

Japan on April 12 introduced the priority measures in Tokyo until May 11 and in Kyoto and Okinawa until May 5 after having already applied April 5 to Osaka, Hyogo and Miyagi prefectures until May 5 following a rise in new COVID-19 infection cases.

The latest measures came just weeks after Japan lifted the state of emergency measures to curb the spread of the coronavirus pandemic on March 21. Roughly 27% of Japan's total population is under the latest priority measures. The priority measures could be extended to other prefectures in coming days amid rising COVID-19 and its variant cases in the country.

"The introduction of quasi-emergency measures is likely to dampen jet fuel demand in the near term," JY Lim, oil markets adviser at S&P Global Platts Analytics, said.

Bottoming out

Japanese refiner, market sources surveyed by Platts said that the country's domestic jet fuel demand will rebound during the Golden Week national holidays, one of the country's peak travel seasons, over late April to early May after a sharp drop during the COVID-19 state of emergency measures last year.

"If we compare this year's Golden Week against last year, we will definitely see better flight demand as it was the peak of the pandemic season during the Golden Week in 2020," said a source with a Japanese refiner. "I would say [jet fuel demand] would be more than 50% better than last year, but overall still 50% of pre-COVID-19 levels."

Japan's largest airline All Nippon Airways sees its Golden Week domestic passenger flights reservations over April 28-May 5 at 40% of the demand level during the pre-pandemic Golden Week holidays in 2019, a company official said.

Japan's jet fuel demand has been on a gradual recovery trend after hitting the bottom of 20,434 b/d in May, the lowest for the month since 1971, according to the Ministry of Economy, Trade and Industry.

Japan's jet fuel demand for domestic flights, which was hit hard by the coronavirus pandemic in fiscal year 2020-21 (April-March), is forecast to surge 44.5% year on year to 4.255 million kiloliter, or 73,324 b/d, in the fiscal 2021-22 after having plunged 42.8% from the year ago to 2.944 million kiloliter in fiscal 2020-21, according to a petroleum demand outlook approved April 6 by METI.

The country's jet fuel demand for international flights, however, remains sluggish because it has maintained its banned entry from 11 countries/regions under business/residential track schemes as well as its suspension of new entry into Japan from all countries and regions.

Japan's jet fuel exports averaged at 59,754 b/d in February, down 63.1% on the year, and down 5.7% from January, according to METI data. This reflects reduction in international flights having affected Japan's jet fuel exports because roughly 80%-90% of the shipments are bonded sales.

Approaching Olympics

Japan marked April 14 100 days to the start of the Tokyo Olympics on July 23 after having been postponed from 2020 due to the coronavirus pandemic. The relevant parties decided March 20 not to allow entry into Japan for overseas spectators for the Tokyo Olympic and Paralympic Games due to the prevailing worldwide pandemic.

"I don't think that the Olympics will be of much help in terms of jet fuel demand and usage since international fans are not allowed to enter [into Japan], and this will most likely weigh on sentiment," a Japanese trader said. "This is a very bearish time for jet [fuel]."