Jet Fuel Prices Expected to Remain Neutral From Current Spot Prices

Jul. 6—Jet fuel prices are expected to remain neutral from current spot prices with oil prices expected to provide most of the upside pressure though refiner restraint will keep markets balanced, Trend reports with reference to Fitch Solutions.

"Demand for jet fuel remains well below pre-pandemic levels in all markets. Although we have seen a rise in domestic air travel in key markets including the US, China and Europe passenger numbers and flights have failed to fully account for the lost consumption seen in wider regional and international travel. There appears to be evidence for a pending jump in air travel as restrictions ease for fully vaccinated travellers on pent-up demand and excess savings built up during pandemic for more affluent households. There is uncertainty however, on whether the increase in travel expected will be short-lived given the lack of vaccinations in emerging market destinations and various travel restrictions. We expected refiners to moderate their output of jet fuel to avoid excess supply in line with their response throughout the pandemic so far which will broadly keep margins improving be well below pre-Covid-19 averages," reads a report released by Fitch Solutions.

As Brent prices track higher, the company has revised its global average for Jet Fuel to USD77.7/bbl for 2021 and USD76.7/bbl in 2022 despite the expectations for subdued air travel over the next several years.

"The revisions are an increase over our previous forecasts for jet fuel to average to USD77.7/bbl for 2021 and USD70.7/bbl in 2022. Passenger numbers are increasing in markets with higher vaccination rates though most will not exceed pre-pandemic levels of jet fuel consumption until international travel routes open fully and airlines reduce utilisation. We view the market staying broadly in balance as refiners push production streams towards other middle distillates like diesel fuel whose demand is recovering faster. The US, Europe and China are likely to lead the rebound and then growth in jet fuel demand across the forecast period though other key emerging markets including India will likely return to high growth in the back half of our forecast to 2030. Given the steady outlook for growth and refiners keen eye for supply restraint we expect jet fuel prices to broadly track Brent prices and historical spreads to return." — Follow the author on Twitter: @Lyaman_Zeyn

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