MARKETS: Tight fuel supplies raise pressure on rocket propellant costs

(SpaceEnergy) ING and ABN AMRO bank research points to continued upward pressure on the SE Liquid Rocket Propellant Index (SELRPI), as constrained refining capacity and tight oil-product and gas markets support rocket-fuel input costs.

ABN AMRO said in a research note today that shortages are more pronounced in refined products than in crude oil, with jet-fuel prices having surged to their highest since its data began in 2008 before strengthening again from late June. The bank attributed the rise to reduced crude availability, insufficient refinery capacity and firm product demand.

The bank expects product prices to remain elevated even under its base case of an agreement reopening the Strait of Hormuz by the end of the third quarter. Damage to Russian and Middle Eastern refineries, low inventories and limited spare capacity mean refinery throughput is unlikely to return to pre-conflict levels before the end of 2026, potentially keeping rocket-grade kerosene costs firm even if crude prices retreat.

ING bank similarly said the oil market remains tight but refined products are “even tighter”, with diesel and gasoil cracks at record levels and little spare refining capacity available to provide relief. The bank raised its fourth-quarter Brent forecast to $80/bbl from $74/bbl, while its more severe supply-disruption scenario would put the quarterly average at $104/bbl.

Tighter jet-fuel supplies and stronger refining margins therefore provide a firmer underlying market for rocket-grade kerosene and the SE Kerolox Index (SEKI), even where movements in headline crude benchmarks moderate.

Methane costs face a parallel supply squeeze. ING said European benchmark TTF gas futures had moved above €70/MWh as reduced Persian Gulf LNG supply, lower European imports and slower storage injections tightened the market. EU storage stood at around 65% at the end of August, compared with a five-year average of 82%.

With Europe needing further injections before winter, continued LNG constraints could maintain upward pressure on the SE Methalox Index (SEMI). Elevated gas and electricity prices could also feed into hydrogen production costs, providing support for the SE Hydrogen Index (SEHI).

The SELRPI fell 1.63% in the week ending 28 August to 104.31 points as all three propellant sub-indices weakened.