BAKU, Azerbaijan, May 9
By Leman Zeynalova - Trend:
Jet fuel demand, which has fallen as a result of flight bans amid COVID-19, is expected to take several years to recover, Trend reports citing Wood Mackenzie.
“For as long as the numbers of infections remain at these levels, the risk of a new surge in cases and a need for renewed lockdowns will persist. Even South Korea, one of the clear success stories in terms of controlling the virus through extensive testing and contact tracing, reported a small rise in new cases this week. It has advised nightclubs to close for a month, and may delay the reopening of schools, scheduled for next week,” said the company.
Wood Mackenzie believes that the implications for energy demand are that the recovery will be gradual, and faces downside risks.
“Jet fuel looks like a particular weak spot. As road transport has rebounded in China, the recovery in air travel has been much more tentative. In this, as in other aspects of the recovery, China is showing the path that the rest of the world may follow. Wood Mackenzie analysts are forecasting a “multi-year” recovery in jet fuel demand, arguing that the global spread of Covid-19 has further eroded jet fuel demand in the near-term and is expected to provide a lower ceiling for 2020 and 2021 amid fears of a ‘second wave’ in the absence of a vaccine,” reads the report released by Wood Mackenzie.
The production cuts agreed by the OPEC+ countries formally took effect from May 1, after a supply surge in April.
“Although there are indications that compliance with the agreed 9.7 million barrel a day reduction is less than 100 percent, it still makes a big difference to the balance of supply and demand. Meanwhile, other companies and countries around the world are also cutting output. In the US alone, announced production shut-ins will take about 866,000 b/d off the market,” said the company.
Worldwide inventories of oil have been rising sharply since March, but could reach a peak in the next couple of months. In the second half of the year inventories will start to decline, Wood Mackenzie’s Macro Oils analysts expect.
“As the worst of the global imbalance between oil supply and demand recedes in the rear view mirror, crude prices have been picking up. WTI, which fell close to $10 a barrel last week, ended this week at about $24 a barrel. Brent was $30.”
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