It’s been a good year for oil around the world in most sectors, all except one: aviation, according to a new report by a U.K.-based data analytics organization.
The depressed demand for aviation-sector kerosene, a primary ingredient in jet fuel, is all that stands in the way of a full recovery for oil products in the third quarter in 2021, GlobalData said.
“Demand for kerosene, which is mostly used for jet fuel, has hovered at around two thirds of pre-COVID-19 levels throughout this year,” GlobalData said Thursday. “Therefore, when this is included in the analysis of product flows, total oil product demand is pulled 3 percent below pre-COVID levels for Q3.”
The demand in one country, however, has been pivotal in 2021.
“China has been the driver for the global demand recovery, led by gasoline in the transport sector and continued growth in naphtha and LPG as the country expands its petrochemicals sector,” said Will Scargill, managing energy analyst at GlobalData, in a statement. “Other major economies are still yet to see demand fully recover to pre-COVID-19 levels, but the strength of China’s growth plugs the gap.”
Aviation demand continues to be shaped by COVID policies and restrictions, another analyst said.
“Continued restrictions will have a negative impact on demand for air travel,” Nick Wyatt, head of research for travel and tourism at GlobalData, said in a statement. “The conundrum facing airlines is deciding how much capacity to keep online in the short term.”
Many airlines cannot easily absorb flights that lead to financial losses owing to low load factors, he said.
“Consequently, there is a risk that they will err on the side of caution and ground some of their fleets to reduce running costs if they see demand softening,” Wyatt said.
While demand in aviation has yet to fully return to pre-COVID levels, things aren’t exactly slow at tarmac pumps.
“Business aviation is seeing a strong demand for fuel in response to the pandemic as many rediscover the value of private aviation as an essential mode of transportation and a key business tool,” National Air Transportation Association senior vice president Ryan Waguespack told FLYING.
In November, business aviation flight activity was up 45.1 percent year over year in North America, and was 20.9 percent higher than activity reported in November 2019, according to the most recent Avfuel industry update.
Commercial traffic has seen a spike in the past year as well, with a 131.1 percent increase in U.S. revenue passenger kilometers (RPK) in comparison to October 2020. Despite the rise, domestic commercial travel, however, remained 10.5 percent short of matching levels reported in October 2019, the Avfuel report said.
While the aviation sector is seeing growth in domestic and international travel as COVID restrictions ease, the Omicron variant is beginning to have an effect, according to Muneeb Ahmed, director of trading and logistics for Avfuel.
“Generally, rising COVID-19 cases and hospitalizations are broadly inversely correlated with demand for air travel. However, it seems each successive wave of COVID-19 has so far had less of an impact on demand for air travel than the prior one,” he said.
“Overall, while demand of jet fuel globally is still lagging versus 2019, it has recovered sharply and is currently outpacing current production,” Ahmed said. “This isn’t expected to change in the near-term and thus we will continue to see disruptions in supply chain and new arbitrages opening up in the world of jet fuel, causing each gallon of jet fuel to travel a longer distance than it used to, to get to its destination.”