Jet Fuel Trading: Aviation Fuel Markets and Swiss Trading Operations
Jet fuel — primarily traded as Jet A-1 kerosene — is one of the highest-value refined petroleum products in global energy markets. With commercial aviation consuming approximately 300 billion litres annually, the jet fuel market is characterised by tight specifications, seasonal demand patterns, and a complex supply chain that links refineries to airport fuel farms across every continent. Swiss commodity trading houses play a significant role in the physical procurement and logistics of aviation fuel, managing supply for airlines, into-plane operators, and national fuel distributors.
Market Fundamentals
The global jet fuel market is valued at approximately USD 200-250 billion annually, making it one of the most commercially significant segments of the refined products trade. Demand is driven overwhelmingly by commercial aviation, which accounts for roughly 80% of consumption, with military aviation, business aviation, and general aviation comprising the remainder.
Jet fuel demand is highly correlated with air passenger traffic and global economic growth. The recovery of international travel following the disruptions of the early 2020s restored demand to pre-pandemic levels by late 2024, and subsequent growth has pushed consumption to record highs. The International Air Transport Association (IATA) projects continued demand growth of 2-3% per annum through the remainder of the decade, driven principally by expansion in Asia-Pacific and Middle Eastern aviation markets.
The product specification for Jet A-1 is governed by international standards, primarily ASTM D1655 and DEF STAN 91-091. These specifications are among the most stringent in the petroleum product market, reflecting the safety-critical nature of aviation fuel. Key parameters include flash point, freeze point, thermal stability, and sulphur content. The tight specifications limit the range of crude oils and refinery configurations that can economically produce on-specification jet fuel.
Pricing and Benchmarks
Jet fuel pricing is benchmarked regionally through assessments published by Platts and Argus:
Asia-Pacific: The Platts Singapore kerosene assessment (MOPS Jet/Kero) is the dominant benchmark for the world’s largest jet fuel consuming region. Singapore serves as the primary pricing hub, reflecting the region’s massive refinery capacity and strategic location along major shipping routes.
Europe: Jet fuel in Northwest Europe is priced against Platts CIF NWE Cargo and FOB Rotterdam Barge assessments. The Mediterranean market is assessed separately, reflecting different supply-demand balances and logistics costs.
North America: The US Gulf Coast (USGC) jet fuel assessment and the New York Harbour (NYH) assessment serve as the principal benchmarks, with pipeline-delivered pricing to inland airports assessed separately.
The crack spread — the differential between jet fuel prices and crude oil — is a key indicator of refining economics and market tightness. Jet fuel cracks tend to be among the highest in the refined products barrel, reflecting the product’s value and the capital-intensive processing required to produce it. Seasonality plays a role, with cracks typically strengthening during peak travel seasons (Northern Hemisphere summer and year-end holiday periods) and softening during shoulder seasons.
Swiss Trading Operations
Swiss commodity trading firms are deeply embedded in the global jet fuel supply chain. Geneva and Zug-based houses manage jet fuel trading desks that source product from refineries across the Middle East, Asia, Europe, and the Americas, routing cargoes to deficit regions through a network of chartering, storage, and blending operations.
The Swiss competitive advantage in jet fuel trading mirrors the broader strengths of the Swiss commodity trading model:
Scale and diversification: Major Swiss traders operate across the full spectrum of refined products, allowing jet fuel desks to leverage relationships with refineries that also supply diesel, gasoline, and bunker fuel. This breadth enables optimised procurement and logistics.
Logistics management: Jet fuel supply chains require precise coordination between refineries, storage terminals, tanker chartering, and airport fuel farms. Swiss trading operations excel at managing these multi-modal logistics, often controlling dedicated storage at key transit points.
Risk management: Airlines are among the most active hedgers in the commodity markets, and Swiss trading houses serve as both physical suppliers and derivatives counterparties. Providing integrated physical-plus-paper solutions to airline customers is a significant source of competitive advantage.
Several of the largest Swiss trading firms maintain dedicated aviation fuel desks. Vitol, through its aviation fuel subsidiary, is one of the world’s largest independent suppliers of jet fuel. Trafigura and Gunvor also maintain substantial aviation fuel operations, sourcing and distributing product across multiple continents.
Airline Hedging and Risk Management
Airlines face significant exposure to jet fuel price volatility, which can represent 20-30% of total operating costs. This exposure drives active hedging programmes, typically managed through a combination of instruments:
Swaps: Airlines commonly enter into fixed-for-floating swap agreements, locking in a fixed price for a specified volume over a defined period. Jet fuel swaps are the most direct hedging instrument but may lack liquidity for longer tenors.
Options: Collars (simultaneous purchase of a call option and sale of a put option) are popular among airlines seeking to cap upside exposure whilst accepting some downside participation. Zero-cost collars — where the premium received from the put sale offsets the call premium — are widely used.
Crude oil hedges: Given the higher liquidity of crude oil futures (Brent and WTI), many airlines hedge using crude oil as a proxy, accepting the basis risk between crude and jet fuel prices. The crack spread between crude and jet can be hedged separately using crack spread swaps.
Cross-hedges: Some airlines use gasoil or heating oil futures as jet fuel proxies, given the strong historical correlation between middle distillate prices.
Swiss trading houses play a dual role in airline risk management: as physical suppliers under term contracts and as derivatives counterparties offering tailored hedging solutions. This integrated offering — physical supply combined with financial risk management — is a hallmark of Swiss commodity trading.
Supply Chain Infrastructure
The jet fuel supply chain comprises several distinct segments:
Refinery production: Jet fuel is produced through the distillation and hydrotreatment of crude oil, with yields typically ranging from 8-12% of the crude barrel depending on the crude slate and refinery configuration. Complex refineries with hydrocracking capacity can optimise jet fuel yields at the expense of other middle distillate products.
Primary transportation: Refined jet fuel moves from refineries to regional storage hubs via pipeline, tanker, or barge. Major inter-regional trade flows include Middle East to Asia-Pacific, US Gulf Coast to Latin America, and India to Europe.
Terminal storage: Jet fuel is stored at dedicated terminals, typically located near major airports or at coastal/pipeline-connected depots. Storage specifications for jet fuel are stringent, requiring dedicated tankage, filtration systems, and quality monitoring to prevent contamination.
Airport fuel farms: The final stage of the supply chain is the airport fuel farm, which receives jet fuel from pipelines or truck deliveries and distributes it to aircraft through hydrant systems or refuelling trucks. Fuel farm operations are typically managed by into-plane service providers, some of which are owned or partly owned by trading houses.
Quality assurance is paramount throughout the supply chain. Jet fuel must meet specification at every point of custody transfer, with independent inspection agencies (such as SGS, Intertek, and Bureau Veritas) providing quality certification. Contamination events — whether from water ingress, particulate matter, or incompatible product commingling — can result in significant commercial and safety consequences.
Sustainable Aviation Fuel
Sustainable aviation fuel (SAF) represents the most significant structural change in the jet fuel market since the development of modern jet turbines. SAF is produced from non-petroleum feedstocks — including used cooking oils, animal fats, agricultural residues, municipal solid waste, and synthetic processes using green hydrogen and captured carbon.
Current SAF production represents less than 1% of total jet fuel consumption, but mandates and voluntary commitments are driving rapid growth:
EU ReFuelEU Aviation: The European Union’s mandate requires SAF blending at EU airports, starting at 2% in 2025 and rising to 6% by 2030, 20% by 2035, and 70% by 2050.
UK SAF mandate: The United Kingdom has implemented its own blending mandate, starting at 2% in 2025 and targeting 10% by 2030.
US Inflation Reduction Act: Tax credits of USD 1.25-1.75 per gallon for SAF production have stimulated investment in US production capacity.
SAF pricing remains significantly above conventional jet fuel, with premiums of USD 1,000-3,000 per tonne depending on feedstock, production pathway, and certification scheme. This premium creates a new trading opportunity for Swiss commodity houses, several of which have established dedicated SAF trading desks.
The emergence of SAF also introduces new supply chain complexities around feedstock procurement, sustainability certification (under schemes such as ISCC and RSB), and book-and-claim trading mechanisms. These complexities favour experienced commodity traders with established logistics and compliance capabilities.
Geopolitical and Regulatory Considerations
Jet fuel trade flows are sensitive to geopolitical developments. Refinery closures in Europe and Australia have increased the region’s dependence on imported jet fuel, primarily from the Middle East and India. Sanctions regimes — particularly those affecting Russian petroleum exports — have reshaped trade flows, redirecting product from traditional routes and creating new arbitrage opportunities.
The inclusion of aviation in the EU Emissions Trading System (ETS) adds a carbon cost to intra-European flights, indirectly affecting jet fuel economics. Airlines operating within the EU must surrender emission allowances for their fuel consumption, effectively adding a carbon premium to the cost of jet fuel. For context on how emissions trading affects the broader energy market, see our dedicated analysis.
Airport slot constraints and air traffic management limitations also influence jet fuel demand patterns, as they determine the effective capacity of the global aviation network. Infrastructure bottlenecks at major airports can create localised fuel demand spikes that test supply chain resilience.
Market Outlook
The jet fuel market is poised for continued growth through the remainder of the decade, driven by expanding air travel demand and the structural shift towards SAF. For Swiss trading houses, the market offers attractive opportunities across physical supply, risk management, and the emerging SAF value chain.
Key risks include a potential economic slowdown dampening air travel demand, accelerated fleet efficiency improvements reducing per-flight fuel consumption, and the development of alternative propulsion technologies (electric and hydrogen) for short-haul aviation. However, these risks are medium-to-long-term in nature; conventional jet fuel will remain the dominant aviation energy source through 2040 and beyond.
For traders, the jet fuel market demands technical expertise, operational precision, and deep relationships across the aviation value chain. Swiss commodity trading houses, with their global networks and integrated service offerings, are well-positioned to capture value as the market evolves.
Donovan Vanderbilt is a contributing editor at ZUG OIL, covering global energy commodity markets and Swiss trading hub dynamics for The Vanderbilt Portfolio AG, Zurich.