Europe’s aviation fuel “red alert” in the fourth quarter: Shortfall will reach 510,000 barrels/day, South Korea’s exports surge to a four-year high to urgently fill the gap

According to information from Zhihu Finance APP, Europe will face a supply gap in aviation fuel in the fourth quarter, even as it turns to distant suppliers including South Korea—analyst and shipping data show that South Korea’s aviation fuel exports to Europe will rise to a four-year high in September.

Since the outbreak of the Iran war more than half a year ago, which hit Middle East supplies and cut off about half of Europe's aviation fuel imports, Europe has been increasing its aviation fuel imports from countries like Nigeria, the United States, and Canada.

As tensions in the Middle East escalate, Europe remains highly exposed to the risk of further supply disruptions. Consultancy Energy Aspects predicts that Europe's aviation fuel shortfall will reach 510 thousand barrels per day in the fourth quarter, while the United States and Asia-Pacific will see surpluses of 18 thousand barrels per day and 419 thousand barrels per day respectively. The third quarter showed roughly the same trend.

Shipping data shows that South Korea became the latest major supplier of aviation fuel to Europe in September. Data from commodities intelligence firm Kpler shows that so far in September, European imports of aviation fuel from South Korea have reached 129 thousand barrels per day, the highest since October 2022. LSEG data indicates a similar scale.

James Noel-Beswick, head of commodities at market intelligence firm Sparta Commodities, said Europe’s imports will continue as it is expected to remain short of aviation fuel.

Aviation fuel is a so-called middle distillate, which also includes diesel and gasoil. European diesel hit a record high this week, outperforming the Asian diesel market.

Noel-Beswick added that the widening spread between Asian and European benchmarks is making exports to Europe more profitable.

European Aviation Fuel Stocks Decline

The surge in imports from South Korea comes as inventories remain low. As of the week ending September 10, independent stocks held at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell to a seven-year low.

Asia serves as a swing supplier of aviation fuel to Europe, with traders typically turning to Asia when arbitrage—the relative price differential between the two locations—is attractive. According to Kpler data, last year’s average monthly export volume was 1.5 million barrels.

Government data shows that South Korea’s aviation fuel output hit a seven-year high in July, reaching nearly 13.89 million barrels, while exports hit a three-and-a-half-year high.

Rising refinery crude throughput has driven production growth, and traders expect August crude throughput to be stronger than July. Provisional government data shows that July refinery throughput was 2.7 million barrels per day, an increase of 16% on June.