Soaring demand for travel this winter is boosting refiners’ margins for making jet fuel in Asia, providing a bright spot for the oil market even as the outlook for other transport fuels weakens.

The post-pandemic recovery of air travel is gaining pace in China and India, while the US is expecting to see record travel demand during the holiday season. The boom in travel also coincides with increased demand for kerosene-type fuels, including jet fuel, in the winter.

That’s pushing up prices of the aviation oil, making the fuel the most profitable for Asian refiners to produce.

The bullishness for jet fuel comes after years of efforts by airlines to restore flight capacity to pre-Covid levels and marks some relief for the oil market, even as traders weigh bearish calls on demand ahead. The International Energy Agency recently cut nearly 400,000 barrels a day from its assessments of consumption growth for the final quarter of the year amid weaker macroeconomic conditions.

China’s jet fuel demand is poised to rise to around 860,000 barrels a day by the end of January 2024, according to estimates by BloombergNEF. That’s the highest level since 2020 and a gain of nearly 27% from the same time in 2023, according to the data. The country’s aviation recovery has quickened amid the year-end holiday season, while travel restrictions were further eased last month for some foreign nationals.

In India, flying during the festive season as well as rising business travel also helped lift the country’s jet fuel demand past pre-pandemic levels in November, said industry consultant FGE in a report. 

The Singapore regrade swap — a key indicator of the profitability of producing jet fuel over gasoil — reached the highest levels since 2018 in November, according to data by PVM Oil. It’s currently more than 50% above five-year seasonal averages, according to Bloomberg calculations. 

Jet fuel demand in Asia excluding China will grow by 150,000 barrels a day in 2024 and reach near 2019 levels in the period, FGE said, adding that it has also boosted its forecast for the regrade swap during the first half of next year.

Despite a recovery in aviation, the potential of warmer-than-average temperatures this year could weigh on the use of kerosene, which is used for heating in winter. JP Morgan analysts estimate that a milder winter could cut seasonal kerosene use across the US, Europe and Japan by 500,000 to 700,000 barrels a day, thereby eroding some bullishness for middle distillates.