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Jet fuel consumption to return to 2019 demand levels in 2025

Oil&Gas Materials 21 October 2020 11:14 (UTC +04:00)
Jet fuel consumption to return to 2019 demand levels in 2025

BAKU, Azerbaijan, Oct.21

By Leman Zeynalova – Trend:

Jet fuel price is expected to average USD47/bbl in 2020 and USD54/bbl in 2021 as the impacts from the pandemic continue to heavily impact the aviation industry, Trend reports citing Fitch Solutions.

Although the recovery in jet fuel demand is building momentum, a fragile economic recovery and increasing infection rates have limited a more rapid expansion of air travel, reads the report released by Fitch Solutions.

“The uptick in average jet fuel prices in 2021 is heavily influenced by oil price increases and a greater return to air travel as the roll-out of a safe and effective vaccine is likely by H2 2021, unlocking pent-up demand and increasing jet fuel consumption. However, a full return to 2019 consumption levels is not forecast until 2025 weighing on the long-term price upside. Key drivers for jet fuel prices will remain the expectations for a return to normal air travel patterns and fluctuations in the price of oil. A rationalisation of refining capacity may also boost jet fuel prices if supplies are cut substantially though this risks impacting road fuels which have fared better in the recovery.”

“Our forecast for jet fuel parallels our trajectory for crude oil prices in the coming years once air travel returns and refinery capacity re-aligns from the current out of balance mix. Our Brent forecast for 2021 has an increase to USD51/ bbl from our current view of USD44/bbl annual average for 2020. Beyond that Brent prices will post small incremental gains on rising oil demand. Jet fuel will follow a similar path as we forecast incremental price gains on improving fundamentals.

“Our view for a viable vaccine by H2 2021 and the subsequent rollout globally should see traveller confidence return and the pent-up demand for travel should send jet fuel demand higher. The current refinery imbalances, as gasoline demand returns relatively closer to pre-Covid-19 levels creating an excess of middle distillates (with jet fuel and diesel demand yet to recovery as fully), has seen jet fuel stockpiles rise. However, recent efforts to curb jet fuel output by pushing down middle distillate output in favour of gasoline and adding jet fuel to the diesel mix has seen the growth in stocks stabilise and early signs of retreat in jet fuel stocks are firming. Working off this excess in jet fuel inventories should support higher prices once demand picks up by the close of 2021. Our current forecast has jet fuel consumption returning to 2019 demand levels in 2025 signalling a long road to recovery for the aviation industry,” reads the report.

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Follow the author on Twitter: @Lyaman_Zeyn

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