Middle East jet fuel availability tightens amid jump in flights for World Cup

Middle Eastern jet fuel supplies have tightened in H1 November amid a spike in regional consumption ahead of the FIFA World Cup 2022 tournament in Qatar, market sources Nov. 9, anchoring prices in the region.

More than 1.2 million people were expected to travel to Qatar for the tournament over Nov. 20-Dec. 18, according to media reports.

"Jet fuel demand in the Middle East region will likely take the lead among major oil products to increase by a little over 100,000 b/d or 32% year on year in Q4," said Wang Dong, Analyst at S&P Global Commodity Insights.

"[This is] primarily due to the normalization of the aviation sector and further reduced travel restrictions compared with one year ago, and secondly due to the boost from the Qatar 2022 FIFA World Cup," Wang said.

Net exports of jet fuel from the Middle East are forecast to fall 12% year on year in Q4 to accommodate the increased demand in the region, he added.

Mirroring the strength in the complex, the Platts cash differential for Persian Gulf jet fuel/kerosene spot cargoes averaged plus $8.21/b to the Mean of Platts Arab Gulf jet fuel/kerosene assessment in October, up more than 25% from plus $6.55/b in September, S&P Global data showed.

Supply to Europe tightens

The leaner availability of Middle East jet fuel for export in Q4 was poised to hit European importers preparing for the year-end holiday travel season, winter heating demand and the looming imposition of sanctions on Russian refined oil products in February, market sources said.

"Demand has been very strong for [Persian Gulf] jet fuel even before the World Cup," a trading source said. "The arbitrage to the West has been wide open."

The arbitrage to send Persian Gulf jet fuel/kerosene cargoes to Northwest Europe was open between August and October at an incentive of between plus 56 cents/b to $3.73/b, based on S&P Global calculations.

"I do not see a heavy November import program [from East of Suez]," a market participant said Nov. 8, noting smaller exports from a couple of Middle East refiners. "I am seeing less supply and backwardation is flattening out, so premia are going up," the source added.

Kpler shipping data showed jet fuel flows from the Middle East to Europe falling to 4.26 million barrels in October from 6.91 million barrels in September. Loadings for November to date stood at 542,300 barrels.

"I think with this very weak regrade, any refiner will minimize jet fuel production... demand is increasing, so overall it should make for a tighter market," an Abu Dhabi-based trading source said, noting European importers might look further East to fulfil their requirements.

"[It] will all depend on Korean and Chinese flows. There seems to be a fair bit going to Europe, probably enough to compensate for the World Cup demand," the source added.

The Singapore physical regrade -- the spread jet fuel commands over co-distillate gasoil -- averaged minus $13.88/b in October, widening from minus $8.27/b in September, S&P Global data showed.

Dubai-Doha flight surge

World Cup attendees were likely to stay outside Qatar due to the high cost and low availability of accommodation, with nearby Dubai expected to be the base of choice for supporters of the 32 participating nations, given the UAE city's connectivity as a regional aviation hub.

While major sporting events typically have a limited impact on regional airline capacity, the combination of low accommodation and the inaccessibility of Qatar has spurred a spillover into regional aviation demand, aviation data company OAG Chief Analyst John Grant said.

"It's a unique event... [Qatar's position] is extremely odd, because it's a small country, essentially an island... [as such] air service became an increasingly important part of the event." Grant said. "I can't think of any other event of this scale that would require this level of logistical complexity."

The UAE and Saudi Arabia have additional flight capacity to Doha from Nov. 14, Grant said. "The high frequency shuttle from the UAE to Doha will result in a threefold increase in capacity to 95,000 seats a week in each direction," he added.

Daily flights between Dubai and Doha, serviced by Qatar Airways and low-cost carrier Flydubai, are slated to rise to up to 48 for the tournament from the usual six. Qatar has reopened the Doha International Airport to handle the increase in traffic.