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Jet fuel prices to decline in 2022 from current spot levels

Oil&Gas Materials 11 January 2022 11:05 (UTC +04:00)

BAKU, Azerbaijan, Jan.11

By Leman Zeynalova – Trend:

Jet fuel prices are expected to decline from current spot levels in line with the forecast for Brent prices to decline in 2022 on oil market oversupply building through the year, Trend reports with reference to Fitch Solutions.

“The emergence of the Omicron variant in late November saw jet fuel prices and airline passenger numbers fall sharply. However, the emerging data points to less severe illness despite the significantly higher transmissibility of the new variant. Prices have responded to the positive news and have since recovered most of the losses. It appears that due to the highly transmissive nature of the Omicron variant, a wide array of travel restrictions and testing requirements are proving ineffective at limiting the spread of new infections,” the company said in its latest report.

The company notes that as a result, the UK has relaxed testing requirements from passengers returning from abroad, triggering a surge in future bookings for travel.

“Should the Omicron wave prove to be short-lived, due to the high number and rapid peaking of infections, we would expect air travel to return to a recovery trend established during the start of Q3 2021 relatively quickly. In line with the emergence of Omicron, both the number of global commercial flights and US passenger check-ins plateaued or declined across the month of December as travel restrictions were tightened to combat the spread of
infections. Despite these measures, Omicron can now be found globally with infection numbers breaching all-time highs in countries that were exposed earlier in December,” reads the report.

The company notes that the silver-lining with the rapid spread is that infection rates should begin decreasing sooner than with past variant waves, allowing travel restrictions to and most importantly consumer sentiment towards air travel, to improve should the variant continue to prove less severe and vaccines continue to provide protection against hospitalization and death.

“However, the countries that continue to enact Zero Covid-19 policies, most notably China, will struggle to contain Omicron effectively and will likely impose stricter travel restrictions for longer. In comparison to western developed economies, this will likely lead to reduced uptake in air travel in both the domestic and international travel segments for this key market and related regional travel hubs,” said Fitch Solutions.

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Follow the author on Twitter: @Lyaman_Zeyn

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