In a statement sent to Rigzone on Thursday, energy and environmental geoanalytics firm Kayrros noted that jet fuel prices have reached 12-year highs relative to diesel, “helped by the reopening of China “.
“Since China reopened on January 8, after more than 1,000 days of Covid restrictions, demand for jet fuel has been increasing,” Kayrros said in the statement, adding that “as that the Chinese took to the sky to celebrate their freedom and the Moon.” New Year, domestic demand for jet fuel doubled in one week.”
Kayrros noted that the reopening has boosted the global aviation sector, which he said is still recovering from Covid. Year-on-year growth in demand for jet fuel reached 20 percent last month, according to figures from Kayrros, which cited analysis of ADS-B data — signals from aircraft transponders.
In the statement, Kayrros stressed that air cargo data suggests the global economy may not grow with rising jet fuel prices. Growth in demand for passenger travel is now outpacing air travel, according to Kayrros, who said that could be a worrying sign for the economy.
“Air freight is considered a leading economic indicator,” Kayrros president Antoine Rostand said in a company statement.
“That’s why the drop in air cargo demand that our data shows could be a red flag for the economy… So far, this has been more than offset by increased passenger flights , especially on low-cost airlines. But this will continue to drive up prices, which will lower demand for air cargo,” he added.
“Therefore, it remains to be seen how the global economy will react. We can be sure that real-time tracking of jet fuel data will be key to understanding whether China’s reopening will give the global economy the shot it needs,” Rostand continued.
Jet fuel price forecast
In a report sent to Rigzone on January 31, Fitch Solutions Country Risk & Industry Research said the company had raised its global average annual jet fuel price forecast to $140 per barrel by 2023.
The figure marked a 10.5 percent increase from Fitch Solutions’ previous outlook for prices of $127 a barrel, the company noted. Fitch Solutions noted in the report that the increase reflects “tighter global supplies and a pick-up in air travel demand from all regions helped by the rapid return of the Chinese market.”
“The outlook for near-term jet fuel prices is tilted to the upside, but we have a mixed view of prices at current spot levels,” said the Fitch Solutions report, which pegged the global average at counted at $166 per barrel.
“The high volatility seen in the US market is likely to moderate in the coming months, giving the global market average a short-term bearish bias. While in Europe, prices are expected to rise in the short term with the ban on ‘fuel import from Russia to come into force in February 2023,’ the report added.
“In Singapore, we expect annual average prices to be just below current spot prices as increased refining and Chinese exports are likely to keep markets well-supplied despite expectations of increased consumption regional as China’s borders reopen with few restrictions.” the report continued.
Demand growth
In its latest oil market report, which was published in January, the International Energy Agency (IEA) projected that global oil demand will increase by 1.9 million barrels per day in 2023 to a record 101.7 million barrels per day.
Almost half of the gain will come from China after the lifting of Covid restrictions and jet fuel will be the main source of growth, rising by 840,000 barrels per day, the report said.
“This year oil demand could rise by 1.9 million bpd to a record high of 101.7 million bpd, balancing as Russian supply slows under full impact of sanctions,” the IEA oil market report stated.
“China will drive nearly half of this growth in global demand although the shape and speed of its reopening remain uncertain,” the report added.
The next IEA oil market report is scheduled for release on February 15.
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