Chart of the day: Singapore’s jet fuel prices to trade at a discount as supply glut drags

It will sit at US$54.20/bbl by the end of 2016.

While there is a rebalancing in the crude market combined with strong global aviation demand, jet fuel prices are expected to elevate over the next five years. However, an Asian fuel supply glut will keep the Singapore Benchmark trading at a discount.

According to BMI Research, Singapore will have its prices reduced with a discount to its North American and European counterparts as a massive fuel supply glut will drag on the Asian benchmark, causing a divergence in prices.

"Our view that Singapore prices will trade at a discount to its regional peers played out over Q316. We expect this trend to continue with Singapore forecast to deepen its discount to New York as supply outstrips demand in the Asia region," the research firm noted.

Based on fuel price forecasts, for the whole of 2016, jet fuel price in the city-state will tread at US$54.20/bbl. It will be up to US$4.30/bbl in 2017.

BMI Research noted that Chinese exports of Jet Fuel are the primary driver of this glut, with the increased government fuel-export quotas compounding the oversupply.