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What Could Be the Blowback of Rising Jet Fuel Imports?

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Kerosene-type jet fuel inventories

In its weekly Petroleum Status Report released on January 21, 2016, the EIA (US Energy Information Administration) stated that jet fuel inventories rose from 40.7 MMbbls (million barrels) for the week ending January 8 to 42.2 MMbbls for the week ending January 15. Notably, jet fuel inventories in the week ending January 15 were 5.4 MMbbls, or 14.9%, higher than inventories were in the corresponding period of the of 2015.

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Kerosene-type jet fuel prices

The spot prices of US Gulf Coast kerosene-type jet fuel were $0.84 per gallon on January 19, which is $0.02 per gallon lower than prices were in the week ending January 15. The current jet fuel prices are around 42% lower than prices were during the same period last year.

Kerosene-type jet fuel supplies and imports

The EIA’s weekly petroleum status report stated that jet fuel imports and production were at 266,000 barrel per day and at about 1,454,000 barrels per day for the week ending January 15, 2016. This indicates that jet fuel production fell by 34,000 barrels per day and that jet fuel imports hit 203,000 barrels per day.

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Analyzing inventories and prices of jet fuel

Jet fuel inventories were around 15% higher than the same period last year, and prices were around 40% less than prices were during the same period in 2015. These lower jet fuel prices are due to the long-term supply glut in the crude oil markets, which has made crude prices hit the floor, further impacting the prices of refined products like gasoline, diesel, in addition to jet fuels.

Jet fuel accounts for more than 12% of world transport fuel, and minute changes in the price of jet fuel directly impact prices of airfares. In turn, changes in inventories and prices also drive crude oil demand, and so jet fuels are important to watch for energy investments.

Falling prices will likely impact the revenues of refineries around the world, while rising imports in the US will likely influence the revenues of domestic producers such as Valero Energy Corporation (VLO), Marathon Petroleum Corporation (MPC), Western Refining (WNR), Chevron Corporation (CVX), Phillips 66 (PSX), and HollyFrontier (HFC). Notably, Chevron (CVX) makes up 13.67% of Energy Select SPDR (XLE).

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