ATF - Commodities Info

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Major Characteristics

• Aviation Turbine Fuel (ATF) or jet fuel is a specialized type of petroleum-based fuel used for powering jet and turbo-prop engined aircraft. ATF is clear to straw coloured blend of hydrocarbons and also contains additives such as antioxidants, metal deactivators, anit-static agensts, corrosion inhibitors etc.
• In crude oil refining, it is classified as a middle-distillate along with diesel and kerosene. Jet fuel is actually a highly refined grade of kerosene.
• Jet A-1 and Jet A are two main grades of turbine fuel used in civil commercial aviation. Both of them are kerosene type fuels and are produced to an internationally standardized set of specifications.
• Jet A, which is mainly used in the United States, must have a freeze point of -40ºC or below, while Jet A-1 used in almost all other countries must have a freeze point of -47ºC or below. The only other jet fuel, commonly used in civilian turbine engine-powered aviation is called Jet B, which is a fuel in the naphtha-kerosene region and is used for its enhanced cold-weather performance.
• The other aviation fuels include military jet fuels (predominantly JP-4, JP-5 and JP-8), which too are kerosene type fuels. Aviation gasoline is used in spark-ignition aviation engines.
• Aviation fuels are derived from crude oil and its price shows high correlation with crude oil prices (96% in 2008). Airline industry and crude oil refineries are two largest sectors facing huge price risk owing to the high volatility in prices.
• The global airline industry's fuel bill is estimated to total US$114 billion in 2009 (accounting for 25% of operating expenses at US$61.8/barrel Brent of oil).

Global Scenario

• The total global production of aviation fuels in 2007 is estimated to be 1765 million barrels in 2007, which is 6.3% of total global production of refinery products in 2007.
• It is estimated that in 2007, global consumption of jet fuel was around 5.1 million barrels a day. U.S. consumers are estimated to have utilized approximately 1.63 million barrels per day.
• However, Asia-Pacific region is showing the most growth currently. The International Air Transport Association (IATA) estimates that in 2009 Asia-Pacific travelers totaled 647 million against 638 million who travelled within North America (including domestic markets). By 2013 an additional 217 million travelers are expected to take to the skies within Asia-Pacific.
• US is the largest refiner of crude oil holding 20% of the total world refining capacity of 87,700 kilo barrels per calendar day, followed by China (8.9%), Former Soviet Union (8.8%), Japan (5.3%) and India (4.1%).

World Kerosene Markets

• Tokyo Commodity Exchange (TOCOM) and C-COM.

Global Scenario

• Oil accounts for 40 per cent of the world's total energy demand.
• The world consumes about 76 million bbl/day of oil.
• United States (20 million bbl/d), followed by China (5.6 million bbl/d) and Japan (5.4 million bbl/d) are the top oil consuming countries.
• Balance recoverable reserve was estimated at about 142.7 billion tones (in 2002), of which OPEC was 112 billion tones.

Indian Scenario

• The growth of the Indian economy, rising incomes of the country's middle class and entry of private players in India's aviation industry has lead to a sharp increase in domestic consumption of ATF in recent years. Despite the rising demand, the country is self-sufficient and even exports a significant quantity of ATF.
• India's production of all petroleum products has shown a sharp improvement in the previous two decades, aided by the setting up of new refineries and increased capacity utilization. The production of ATF in 2008-09 is estimated at 59.2 million barrels.
• India's consumption of ATF in 2008-09 is estimated to be 32.6 million barrels in 2008-09, which is sharply up by 58% from 2004-05 consumption of 20.6 million barrels.
• ATF exports from India have also been rising, with it increasing from 20.7 million barrels in 2005-06 to 25.6 million barrels in 2008-09.
• In India, kerosene is sold through three channels - public distribution system (PDS) for domestic use, industrial kerosene and as ATF. The prices of industrial kerosene and ATF are revised dynamically by domestic refiners in tandem with international prices. Thus, volatility in crude oil prices spills over to domestic ATF prices.

Market Influencing Factors

• Globally, ATF prices are highly correlated with crude oil prices as it is produced by distilling crude oil. Thus, all factors influencing crude oil prices have a profound influence on ATF prices too. These factors include, supply-demand, global economic scenario, natural disasters, currency fluctuations, geo-political tensions, interest rates, prices of other assets, commodities etc.
• The demand from the aviation industry is the next important influencing factor. Growth in air traffic - passengers / cargo, global economic scenario, global industrial production, international trade, improvement in aircraft fuel-burning efficiency and a variety of other variables influences the demand from aviation sector.
• Disruptions in production due to extreme weather or other unforeseen events can lead to prices picking up.

Measurements

• 1 US barrel = 42 US gallons.
• 1 US barrel = 158.98 litres.
• 1 MT = 7.33 barrels
• Note: barrels per tonne vary from origin to origin.

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