Friday 01 Mar 2024
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KUALA LUMPUR (Sept 9): Jet fuel prices will struggle to gain ground as oil price upside moderates and refiners continue to reduce output to match a weakened outlook for consumption on Delta variant impacts, but markets will remain fundamentally balanced, said Fitch Solutions Country Risk and Industry Research.

In its outlook for jet fuel prices report today, Fitch Solutions said it anticipates Brent prices to trade mostly sideways at the current levels with limited upside risk.

The research house revised its global average for jet fuel lower to US$75.0/bbl for 2021 from US$77.7/bbl last quarter.

It said lower oil prices in 2022 will see jet fuel prices decline to US$73.5/bbl with expectations remaining subdued for a rapid rebound in air travel and a core view for recovery to take place over the next several years.

Fitch Solutions said the rise of the Delta variant is reducing demand for air travel and the resulting delays will further prolong the recovery in jet fuel demand to 2025.

“Passenger numbers in key markets have declined slightly in July and August 2021 as Covid-19 infections see the reintroduction of travel restrictions and increased passenger hesitancy.

“We look to the Asia market for clear signs of a full recovery given the region’s outsized growth expectations and zero tolerance policies to Covid-19 infections for signs of unimpeded international travel,” it said.

On its short-term outlook (3-6 months), Fitch Solutions said it expects jet fuel prices to decline from current spot prices as the impacts from the Delta variant reduces air travel demand after a steady increase in flights and passengers since the start of the year.

It said the re-imposition of lockdown measures in Asia on rising infections has significantly curbed regional travel and will likely further delay a full return of international travel.

Despite the increase in regional routes reopening in Europe and North America, passenger enthusiasm has plateaued or retreated in Q3 2021 with increasing infections curbing passenger numbers, it said.

Meanwhile, on the long-term outlook, the research house said lower oil prices in 2022 will see jet fuel prices decline to US$73.5/bbl with expectations remaining subdued for a rapid rebound air travel and a core view for recovery to take place over the next several years.

“We expect Covid-19 restrictions to ease in affected markets although passenger reluctance to travel could see a slower return in aviation.

“In addition, the prospects of renewed lockdowns in Asia could see curbs re-imposed given the region’s 'zero tolerance' approach to managing community infections.

“As vaccination rates rise, we could see this strategy shift to one employed in the US and Europe were restrictions were eased in full at the expense of increased infections,” it said.

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