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The demand for jet fuel won’t fully recover until 2023, and only then if effective vaccines are distributed to more than seven billion people worldwide, according to the latest analysis.
A rebound is at least likely to happen by the third quarter of 2021, as air traffic will take some time to return to pre-coronavirus levels and will remain restricted until at least the end of the year, Bank of America (BofA) said in a new research note.
“We believe jet fuel specifically and middle distillates more broadly will lag the recovery in oil prices… The only way out for jet seems a cure or a vaccine for COVID-19 but creating and distributing six billion vaccines for 7.8 billion people in the world could take years,” the bank said.
Demand for jet fuel plummeted as the health crisis decimated passenger travel and forced airlines to ground their fleets. Airlines around the world have only just started re-deploying their aircraft in an attempt to restart a severely battered industry.
Freight and domestic passenger travel have been on a recovery path, with domestic and regional passenger traffic picking up in China, Europe and the United States, but overall, consumer confidence remains subdued.
“Recent COVID-19 trends suggest that traffic between or within developed and emerging markets will likely remain restricted until the end of the year,” BofA said.
The bank noted that it is still unclear when passengers will take to the skies again, especially since coronavirus continues to rage worldwide, forcing some countries and states to extend lockdowns or go back in quarantine.
“With state governments like New York, New Jersey and Connecticut [in the US] continuing to expand quarantine requirements, and recent COVID-19 outbreaks in Beijing and Northern Spain, it is hard to see how air traffic could return to normal soon,” the bank said.
“If anything, the incipient recovery in US and Europe domestic air travel could be at risk. With jet cracks at the most depressed levels ever, refiners have sharply adjusted down their jet output. But even if timespreads have recovered from the lows, stocks of middle distillates and jet remain very high in most locations,” the bank noted.
Middle East jet fuel demand was earlier forecast to tumble by a record amount this year, with consumption in April and May considered to be the lowest point, according to S&P.
“Jet fuel and oil prices have nosedived due to the coronavirus epidemic and ensuing travel restrictions,” the ratings agency said in late March 2020.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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