Prices for Jet Fuel Record 12-year highs for Jet Fuel
In a note sent by Zeenith the previous day, the energy and environmental geo-analytics firm Kayrros said that the price of jet fuel has been at 12-year highs compared to the diesel market, “helped by the reopening of China”. “Since China’s opening on January 8 following over 1,000 days under Covid restrictions, the demand for jet fuel has been increasing,” Kayrros said in the statement. He added that “as the Chinese flew into the sky to celebrate their freedom as well as the Lunar New Year, the national demand for jet fuel increased by a third within one week”. Kayrros said that the airport’s reopening has helped the aviation industry worldwide and is still recovering from Covid. The year-on-year growth of demand for jet fuel was 20% last month, according to data from Kayrros. They cited analyses of ADS-B-related data – signals generated by aircraft transponders. In the report, Kayrros stated that data from air cargo suggest that the global economy might not grow with the rise in costs for jet fuel. Demand for passenger travel currently exceeds that of air cargo as per Kayrros’s analysis, which said that this could be a warning indication of the economic situation. “Air freight is regarded as a key economic indicator”, Kayrros’ President Antoine Rostand said in a statement from the company. “That’s why the decrease in demand for air cargo that our data suggests may be an alarming red alert to the economic outlook … At present, it’s much more or less offset by the rise in the number of passengers flying, especially with low-cost airlines. However, this is likely to raise costs, pushing down air cargo demand,” he added. “It is to be determined how the world economy reacts. We are certain that monitoring in real-time jet fuel information will be crucial in determining whether China’s opening will give the global economy the boost in the right direction it requires,” Rostand continued.
The Jet Fuel Price Forecast
In a document sent to the Zeenith on January 31, Fitch Solutions Country Risk & Industry Research announced that it had raised its annual global average price for jet fuel up to $140 per barrel in 2023.
The price was an improvement of 10.5 per cent in comparison to Fitch Solutions’ previous view of $127 per barrel, which the firm highlighted. Fitch Solutions outlined in the report that the price increase was due to “tighter global supplies and the resurgence of demand for flights across all regions, aided by the accelerated return of Chinese tourists to the Chinese market”.
“The prospects for prices of jet fuel in the near-term is skewed to the upside, but we are holding an uncertain view on the current spot prices,” the Fitch Solutions report, which based the spot average in the world as $166 per barrel, said.
“The excessive volatility on markets in the U.S. market is likely to decrease over the next few months and will give the market, in general, an upward trend for the near future. In Europe, prices are expected to increase in the near term because of the ban on gasoline imports from Russia that will take the market in February 2023.” the report said.
“In Singapore, we forecast that the average price for the year will be just below the prices of spot, given that more refinery runs and the exports from China will likely supply markets with a steady supply despite predictions for an increase in regional consumption, as China’s borders are reopened with a few limits,” the report continued.
Demand Growth
In its most recent oil market report released in January, International Energy Agency (IEA) predicted that the global oil demand would increase to 1.9 million barrels per day by 2023, bringing it to record 101.7 million barrels a day.
About half of the gains come from China due to the removal restrictions on its Covid conditions. The report said that jet fuel is the biggest driver of growth, bringing up 840,000 barrels a day.
“This year may witness oil demand rising to 1.9 million barrels daily, bringing it to 101.7 million barrels daily, the most ever high and tightening reserves as Russian supply slows down under sanctions to the fullest extent,” the IEA oil market report noted.
“China is expected to drive more than half the growth in global demand if the form and pace of its reopening remain unclear,” the report added.
The following oil report is scheduled to be published on February 15.
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