European Jet Fuel Market Navigates Supply Glut Amid Shifting Dynamics in Late June

The European jet fuel market concluded June 2026 facing a significant supply surplus, a stark contrast to earlier periods of constrained availability. This shift, observed during the final weeks of the month, resulted from a substantial increase in regional refinery production combined with elevated import volumes, according to an analysis by Alkagesta. Despite healthy seasonal demand, the influx of supply dampened market sentiment, alleviating previous concerns about potential shortages.

Regional refinery production of jet fuel saw a considerable boost in early Q2, with overall output rising by 32%. Specific nations reported even more dramatic increases between February and April, including Denmark with a 218% surge, Hungary at 120%, and Portugal at 95%. However, this aggressive production strategy faced a turning point as the economic incentive for jet fuel diminished. By late June, the physical jet-diesel regrade, which measures the price difference between jet fuel and diesel, turned negative, reaching minus $1.56 per barrel on June 26. This development is expected to prompt refiners to adjust their yields, prioritizing diesel and gasoline production over jet fuel for the remainder of the summer period.

Inventory levels in the Amsterdam-Rotterdam-Antwerp (ARA) hub, a key storage and trading center, also showed signs of recovery. After hitting a six-year low of 514,000 metric tons in early June, stocks rebounded to 554,000 metric tons by June 25. Despite this recent weekly increase of 1.28%, current levels remain approximately 40% below the previous year's figures. Aviation demand, while described as good, has not fully returned to pre-crisis patterns, with airlines implementing structural efficiency gains, including AI-driven route optimization and cost-reduction measures, which have moderated fuel consumption.

Price Volatility and Narrowing Margins

Prices for Northwest European (NWE) jet fuel cargoes experienced significant volatility during the latter half of June. CIF NWE cargo prices, which began at $992.25 per metric ton on June 15, fell sharply to a monthly low of $912.25 per metric ton by June 26. This marked the lowest price point since the regional conflict began in late February. The period concluded with a partial recovery, reaching $944.00 per metric ton by June 29. Mediterranean cargo assessments mirrored these declines, with CIF Med (Genova/Lavera) prices dropping from $990.75 per metric ton on June 15 to a low of $910.75 per metric ton on June 26, before a slight recovery to $942.50 per metric ton by June 29.

The physical jet CIF NWE cargo differential to the front-month ICE low-sulfur gasoil (LSGO) contract also saw a substantial contraction as the market moved into oversupply. The premium decreased from $58 per metric ton mid-month to a low of $30.25 per metric ton by June 25, its weakest point since early March, before a modest rebound to $37 per metric ton by June 29. The economic viability of producing jet fuel over other distillates diminished, with the physical jet-diesel regrade turning negative, reaching minus $0.67 per barrel on June 23 and further widening to minus $1.56 per barrel by June 26. This shift prompted refiners to prioritize diesel production. The Brent crack spread for Jet CIF NWE cargo also reflected the broader erosion of risk premiums and ample prompt supply, assessed at $46.24 per barrel on June 26, a 2.47% daily decline, indicating narrowing margins.

Shifting Trade Flows and Outlook

The Mediterranean jet fuel market witnessed a dramatic reconfiguration of trade flows in late June, transitioning into a prompt supply surplus. Total European imports for the month reached approximately 2 million metric tons, doubling the 1 million metric tons recorded for the entirety of May. France emerged as a significant destination within the Mediterranean basin, importing 242,000 metric tons of jet fuel and kerosene in June, a substantial increase from 40,000 metric tons in May. Italy maintained a steady import presence, receiving 166,000 metric tons, a slight decrease from its May total of 190,000 metric tons.

Non-European sources also played a crucial role in bolstering supply. Nigeria's Dangote refinery contributed 451,000 metric tons to the European pool in June, nearly doubling its May total of 232,000 metric tons, effectively positioning West Africa as a net exporter. Indian barrels also pivoted towards Europe, with 197,000 metric tons supplied in June, as the arbitrage became more attractive than traditional routes to Singapore. Egypt further contributed significantly to Mediterranean supply with 207,000 metric tons. Pipeline deliveries, including those by Alkagesta via the NATO Central Europe Pipeline System, also supported supply to major European airports like Brussels and Frankfurt. The market is anticipated to remain under pressure through July due to the ongoing supply surplus, with a gradual rebalancing expected by late August as the peak summer travel season winds down. Long-term structural shifts in aviation demand, driven by efficiency gains and cost-cutting, are expected to continue influencing consumption patterns, according to Alkagesta's analysis.

Further reading on Base Oil Trading

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