BAKU, Azerbaijan, Sept.2. As the last major industry to fully recover from Covid-19, aviation (like other industries) is experiencing significant disruptions as pent-up demand surpasses the industry’s ability to cope, Trend reports with reference to Fitch Solutions.
“Staffing shortages and less flight availability along with elevated jet fuel prices poses risks to the long-term recovery. Although, these are not likely to derail the recovery, it may delay the full recovery in jet fuel consumption beyond our 2024 timeframe. Strong demand for distillate fuel oil (diesel) is likely to continue to depress refiner’s output of jet fuel. Elevated jet fuel margins continue to offer strong incentive for refiners to maximise jet fuel over other middle distillates but conditions have eased from all-time highs set in Q2 2022,” reads the latest report from Fitch Solutions.
The company analysts believe that a tight market across the middle distillate range will persist given the levels of consumption growth forecast against global refining capacity gains.
“Should global economic activity slow substantially, middle distillate market fundamentals should ease, allowing stocks to rebuild driving jet fuel prices lower. In our current view of these conditions, jet fuel prices should ease in the coming years. We have held our Brent price forecast steady for this month at USD105/bbl for 2022 and USD100/bbl for 2023, we expected the strong recovery in energy consumption to give way to lower growth and return to recent trend growth in most markets. We hold in our view that Brent prices will gradually ease in the coming years, as increased prices lead to more production and an end to OPEC+ production cuts give way to higher supply,” the report reads.
According to Fitch Solutions’ view, the very tight market for
middle distillates pared with low stocks across the board is
supportive of a bullish outlook
although mounting economic headwinds and new refining capacity
should help to ease the undersupply conditions over the years
ahead.
“As uncertainty around the war in Ukraine and global economic activity adds to oil price volatility we expect jet fuel prices to experience similar volatility in the medium term, exacerbated by the low stock levels seen across the middle distillates until these stocks rebuild substantially higher from current levels.”
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