Jet fuel is now so cheap it’s being blended for use by ships

The fuel that powers passenger planes is normally among the most expensive oil products, but in a sign of the times the coronavirus has turned it into a blending component for typically cheaper shipping fuel. Straight-run kerosene, usually processed into jet fuel, is now being used to make very low-sulfur fuel oil for the maritime industry amid a plunge in consumption by airlines. Higher than normal amounts of diesel and vacuum gasoil are also finding their way into shipping fuel. The shift, almost unthinkable just a year ago, reflects the obliteration of demand the aviation industry has suffered in the wake of the Covid-19 pandemic. And with the IATA not expecting air travel to get back to pre-virus levels until 2024, it may be a feature of the market for some time to come. Jet fuel components were used for blending in April and May in Singapore before it became uneconomic as prices moved back to a premium to VLSFO, said Eugene Lindell, senior analyst at consultant JBC Energy GmbH. The switching is picking up again after aviation fuel flipped back to a discount, he said. “Only in a situation where the economy is in complete tatters, do we see usually more expensive components heading straight into VLSFO,” Lindell said. Jet fuel prices in Singapore plunged from above $70 a barrel in January to close to $20 in early May before recovering to trade around $41, according to Bloomberg Fair Value data. VLSFO bunker prices in the Asian oil hub, meanwhile, are now 54% lower than they were at the end of last year.<br/>