US jet fuel prices fall to 11-year lows

HOUSTON (ICIS)–US jet fuel prices have hit 11-year lows as heating oil futures are plunging amid unseasonably warm weather.

US Gulf (USG) jet fuel spot prices on Monday fell to 99.25-99.50 cents/gal. Last time spot prices fell to a level that low was in April of 2004.

The year-plus long softening of crude oil prices contributed to the low prices long-term, but an extra seasonal factor this year is falling heating oil futures.

Heating oil, which goes into distillate products like jet fuel and diesel, typically sees much higher demand in winter months because it is also used substantially for home heating. This year’s mild winter has caused demand for heating oil to plummet, pushing prices down.

This leads to higher inventories, which also affects the futures market and pushes prices down further. US distillate fuel oil stocks for the week ended 4 December were at 149.4m bbl, 23% higher than the same time in 2014, according to the Energy Information Administration (EIA).

Also contributing to the long supply of distillates in the US was record-high refinery runs over the summer. Refinery utilisation rose as high as 96.1%.  

Heating oil futures on Friday fell to $1.1456/gal, which rivalled price records from 2009. That fall pushed jet fuel spot prices to the 11-year low.

Futures fell even further on Monday and broke through the 2009 floor, settling at $1.1277/gal. That is the lowest futures have been since August of 2004.

Patrick DeHaan with GasBuddy.com last week offered perspective on the unusual low prices. “This would be similar to gasoline prices being lower during the summer,” he said. Historically, retail gasoline prices are at their highest yearly point during summer when demand is highest.

“Diesel and heating oil may continue to drop so long as the mild weather prevails, negating the demand that’s usually seen as cold weather sets in,” DeHaan said. “In fact, there’s a distinct possibility that like gasoline prices, diesel ultimately could see an average that’s south of $2 per gallon…”

The lower fuel prices have positively affected the airline industry. The International Air Transport Association (IATA) last week revised its industry outlook for 2015 from $29bn in June up to $33bn.

Heading into the holidays, a 3% increase in passengers on US airlines is expected by Airlines for America (A4A). This will equate to 73,000 more passengers per day during 18 December through 3 January, which is what the organization defines as the holiday travel window.

Focus article by Annalise Little

(Inset image: Frederic Sierakowski/REX Shutterstock)