Jet fuel demand to plunge by 39% in 2020 as outlook worsens: IEA

Highlights

Demand to average 4.8 mil b/d this year

Slow recovery on fears of second coronavirus wave

London —
Jet fuel demand will plunge by 39% or 3.1 million b/d this year as the recovery has been “weaker than anticipated with flight schedules still well below normal levels,” the International Energy Agency said Aug. 13.

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In its latest monthly report, the IEA once again downgraded its 2020 oil demand forecast, stressing that “jet fuel demand remains the major source of weakness.”

Oil demand in 2020 is now expected to fall by 8.1 million b/d as the coronavirus pandemic casts a long shadow over oil demand.

With “few signs that the picture will improve significantly soon,” the IEA expects jet fuel/kerosene demand to average 4.8 million b/d and 5.8 million b/d in 2020 and 2021 respectively. Last year, jet demand averaged 7.9 million b/d, around 8% of total oil consumption.

The outlook for jet fuel demand has turned more bearish in recent weeks, the report said, as countries have largely kept their borders closed and reinforced health protocols for incoming air passengers.

The IEA said number of aviation kilometers travelled in April was nearly 80% lower on the year and in July the deficit was still 67%.

Domestic travel in China and the US, and the number of flights between European countries has increased but non-essential travel remains very limited, keeping air traffic well below normal.

“Business travel will remain severely curtailed globally until a vaccine is found, while leisure travel will mainly be limited to domestic trips and short-haul flights,” the IEA said.

Slow recovery

The jet market collapsed dramatically earlier this year because of demand destruction as the coronavirus spread fast globally.

Jet fuel prices are, however, convalescing as more and more countries emerge from lockdowns.

Northwest European jet fuel prices have risen by over a third since they plunged to a low of $119.00/mt on April 28. However, this is still much below 2019 levels, when NWE jet fuel averaged $630/mt.

The demand rebound has been slow despite a ramp-up in scheduled flight capacity because of high passenger cancellations due to fears of a second wave of the coronavirus in some European countries.

Sources said the short-term outlook for the jet fuel market in Europe remained very bearish.

“You are also seeing the pressure of new arrivals from the East and a narrowing of the jet contango to break-even with floating storage and this is all putting pressure on the jet market,” said a Europe-based jet trader. “People are now looking to September where traditionally demand falls off anyway.”

European jet stocks, both inland and floating, along with imports, remain high relative to the weak demand environment, acting to cap any price rebound.