Jet fuel deficit sends Europe hunting for Korean cargoes

Europe faces a 510,000 bpd jet fuel deficit in the fourth quarter, pulling cargoes from South Korea as Middle East supply risks persist.

The shortfall has widened Europe’s search for replacement barrels from suppliers including Nigeria, the United States and Canada, according to analysts and shipping data. Those flows have increased since the Iran war began more than six months ago, when Middle East disruption cut off around half of Europe’s jet fuel imports.

Korean barrels move west

South Korea has become a larger source of European jet fuel supply in September, with shipments running at 129,000 bpd so far this month, commodities intelligence firm Kpler said. That is the highest monthly pace since October 2022, while market-data provider LSEG showed similar volumes.

James Noel-Beswick, head of commodities at Sparta Commodities, said Europe’s need for imports is expected to continue while the region remains short. He attributed the incentive for Asian cargoes to a wider spread between Asian and European middle distillate benchmarks, which has made westbound exports more profitable.

ARA stocks test seven-year low

The timing is tighter because independent jet fuel stocks in the Amsterdam-Rotterdam-Antwerp oil refining and storage hub fell to their lowest level in seven years in the week to September 10. The ARA hub is a key storage and pricing point for northwest Europe, making its inventories a useful gauge of regional cover.

Jet fuel sits within the middle distillates complex, alongside diesel and gas oil, so pressure in one market can spill into the others through refinery output choices and trading economics. European diesel reached a record high this week and traded firmer than Asian diesel markets, according to market data cited by traders.

Energy Aspects sees deficit

Consultancy Energy Aspects forecasts Europe will run a 510,000 bpd jet fuel deficit in the fourth quarter. Its projection contrasts with an 18,000 bpd surplus in the United States and a 419,000 bpd surplus in Asia-Pacific, leaving Europe as the main deficit region among the three markets.

The consultancy sees a similar pattern in the third quarter, suggesting the imbalance is not limited to a single month of shipping disruption. For airlines and fuel buyers, that keeps attention on cargo availability, freight costs and whether imports arrive fast enough to rebuild inventories before seasonal demand shifts.

Korean refinery runs rise

South Korea’s domestic supply has given traders more barrels to place into export markets. Government data showed July jet fuel output at almost 13.89 million barrels, a seven-year high, while exports reached their strongest level in three and a half years.

Higher refinery crude processing rates helped lift Korean production. Provisional government data put July refinery runs at 2.7 million bpd, up 16% from June, and traders expect August runs to be firmer than July.

Those additional barrels matter because Europe is paying enough to attract cargoes over long distances. The same long-haul trade also leaves buyers exposed to freight rates, voyage delays and any renewed disruption on routes connecting Asian refineries with European storage hubs.

Fourth-quarter supply paths

If Middle East flows hold steady and Asian refinery runs remain high, Europe can keep drawing cargoes from South Korea and other distant suppliers. That path would limit pressure on global fuel inflation, ease procurement stress for European airlines and keep refiners and traders focused on the Asia-to-Europe arbitrage.

If tensions interrupt more Middle East supply or freight routes tighten, the deficit would place more pressure on aviation fuel costs. That route would complicate travel-linked inflation, test airline margins unless fares or hedges absorb the increase, and intensify competition across the middle distillates market, including diesel.

The main open questions are whether ARA inventories rebuild after the September low, whether the European premium continues to cover freight from Asia, and whether Middle East supply risk eases before fourth-quarter demand is fully priced. Those variables will determine how much of Europe’s jet fuel gap is covered by imports and how much passes through to airlines and fuel users.