Odd Lots · Friday, October 2, 2026
The jet fuel market is often too thin for effective hedging, leading airlines to use more liquid benchmarks like Brent crude as a proxy, according to David Kang. While this provides some protection, it can create a mismatch between the hedged price and the actual jet fuel cost, as seen when Singapore jet fuel prices rose significantly more than Brent crude.
“But you have to look at the price really and start to think about it. And what's your probability when oil goes at triple digit? Because you use Brent as your proxy because the jet fuel market is too thin. Or the American carriers use heating oil as their proxy, not jet. Because like I said, the jet market is too thin.”
“So that's the reason why most people don't trust these agencies, with their jet forecasts. So they move either something they understand better and it's more liquid, like gas, London gas oil, heating oil in the United States.”
“Brent crude rose 50%. Singapore jet fuel rose over 100% or more than doubled during that time. I could imagine just start there, like at least for that period from, say, March to the middle of May, you could have been a well-hedged carrier hedging Brent and still bleeding a lot if what you're buying is Singapore jet fuel.”