Expect increased global flight cancellations due to jet fuel shortages: Energy Aspects’ Amrita Sen

Summary

Amrita Sen of Energy Aspects discusses a severe jet fuel shortage in Europe, warning of potential flight cancellations within weeks due to Middle East supply disruptions and a global lack of refining capacity. She explains that product markets are much tighter than crude, with slow demand destruction from airlines, and highlights that the US is relatively insulated due to domestic production. The structural shortage in refining could persist for years, delaying a return to balanced markets.

• Europe could run out of jet fuel in about six weeks due to Middle East supply disruptions.
• Jet fuel is the most exposed product because Europe heavily relies on Middle Eastern imports and lacks inventory buffers.
• Flight cancellations are already occurring in China and Africa, with Europe likely next.
• Refining capacity has been reduced since pre-COVID, and building new refineries takes 5-7 years.
• The United States is the most insulated due to its domestic crude and product production.
• Product markets are tighter than crude because they had less buffer inventory.
• Airlines are slow to reduce demand because they pre-sell tickets, exacerbating the shortage.
• Even if refineries run at maximum, it could take until 2030 to recover lost product volumes.