Fresh drop in commercial flights adds to jet fuel glut concerns
With Autumn arriving, the world's oil refineries struggle with a glut of jet fuel that's crushing profitability, reports London's Air Cargo News
With Autumn arriving, the world's oil refineries struggle with a glut of jet fuel that's crushing profitability, reports London's Air Cargo News.
Jet fuel outlook is crucial for wide oil marker since refiners are met with two-speed recovery in demand for the Covid slump. Although petrol consumption has gradually risen, demand remains low for diesel and jet fuel.
Drop in flights are hurting Saudi Arabia and Russia, both of which are leaders of the OPEC+ alliance who will need to assess whether oil demand has recovered enough to relax their production cuts within two months.
Daily worldwide commercial flights are at a three month low, with seven-day averages showing a drop as well. The statistics show a low-point that hasn't been seen since the middle of August.
Meanwhile, air traffic is slow improving, but once vacations come to an end, there's concern what can happen in the upcoming months.
There are hopes for a recovery in traffic, but most hopes are fading as the rising cases of Covid across the world is allowing the reinstatement of travel restrictions to continue, causing airlines to scrap flights.
'Airlines are reporting very low forward booking rates until end of 2020 compared to normal,' said an air traffic management agency.
Ryanair Holdings, Europe's biggest discount airline, has announced further flight cuts for October and is expecting further cuts to be made from November to March.
'The outlook has got darker, something I wouldn't have believed possible just a month ago,' said IATA chief executive Alexandre de Juniac.
Oil refiners have been battling with the lack of jet-fuel demand by trading off as much of the fuel into diesel. Still, diesel demand remains well below normal levels, meaning the extra output has added to a massive glut of the petroleum product.
If jet fuel demand continues to fall during the fourth quarter, it could inflate the diesel glut even more, piling even more pressure on refineries to scale back operations, or even close.
As a result, it would reduce demand for crude, complicating the efforts of Saudi Arabia and Russia to rebalance the global oil market.
'Diesel is the biggest problem in the oil market, by a long shot,' said co-founder of oil trading house Mercuria Energy Group Marco Dunand.