Coming any minute now to a sky near you: a plane packed with people going on holiday, leaving wispy white contrails in its wake and memories of Covid-19 that seem like a bad dream.
The world is flying again. In the third quarter, 10.5 million flights are scheduled to crisscross the skies, according to industry data compiled by BloombergNEF. The International Air Transport Association (Iata) is anticipating record passenger numbers this year, and planes that will be about as full as they were before the virus using record amounts of fuel.
For environmentalists, the trend will be met with dismay as it drives an accompanying surge in carbon emissions and another watermark in a resurgence of tourism. For the oil industry, the revival is a welcome boost, though. This is a world in which Opec and its allies have been forced — since the early days of the virus — to keep the supply of petroleum artificially constrained. Jet fuel consumption suffered a far bigger and more enduring hit than any other mainstream petroleum product.
“As a human race, we are starting to travel more again,” said Eugene Lindell, head of refined products at industry consultant FGE. We are “shaking off the pandemic years”.
It is international travel that’s set to see the biggest surge. That’ll grow by 9.7% this year with huge increases in Asia, Europe and North America. International flights from Asia should climb by 23% but there are substantial gains almost everywhere.
In Singapore, another waypoint between Asia and the West, passenger numbers at Changi Airport in the first three months of 2024 — at 16.5 million people — have exceeded 2019 levels. Pent-up demand saw China as the airport’s top destination for the quarter, after the introduction of a 30-day visa-exemption arrangement between the two nations.
It’s translating into record passenger numbers for key long-haul hubs in Asia and the Middle East. Dubai International, for example, recorded its busiest-ever quarter for passenger numbers in the first three months of the year with 23 million visitors. The airport’s chief executive expects 91 million through 2024, a record.
Shorter distances
Nevertheless, it’s shorter distance that’s really been driving the rebound, according to Simon Warren, an analyst at Vitol Group, the world’s biggest independent oil trader. He anticipates jet fuel demand will advance by 650 000 barrels a day this year.
“Global jet demand is now back at pre-Covid levels, for the first time since 2020,” he said. “The recovery has been predominantly led by the short-haul sector. Jet is a primary driver of overall oil demand growth.”
Oil traders evaluating jet prices often look at how much it costs compared to diesel, a relatively similar fuel-type that has a much larger share of the global petroleum market. In Europe, the measure shows jet fuel has strengthened since March, with a similar picture in Asia and the US, according to fair value data compiled by Bloomberg.
“We see nice increases based on booking data for jet fuel demands globally, especially in Asia, in places like China,” said Daan Struyven, head of oil research at Goldman Sachs Group. “Last year, the number of international flights for instance was still very, very low, and we’re going to continue to see positive year-over-year demand growth because of a recovery there.”
Iata is forecasting fuel consumption of 375 billion litres this year by the global airline industry, a 3% jump from 2019. However, increased efficiency is holding back fuel consumption.
Both the International Energy Agency and FGE do not expect demand for jet fuel — including kerosene that goes into heating — to surpass 2019’s level this year.
“Air travel is basically back to pre-pandemic levels,” said Jeffrey Barron, an analyst at the US Energy Information Administration. However, “they’ve also tried to increase their efficiency in terms of fitting more people on aeroplanes, such that they are consuming slightly less jet fuel than they were pre-pandemic”. — Jack Wittels, Jordan Fitzgerald, Yongchang Chin and Archie Hunter, with Serene Cheong, (c) 2024 Bloomberg LP
