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It will Take some Time for Aviation Fuel Demand to Fully Recover
The recurrence of the COVID-19 pandemic has led to the continuation of international aviation restrictions, which has prevented the demand for aviation fuel from recovering as quickly as other petroleum products. Statistics show that at present, middle distillate products such as gasoline, diesel, marine gasoline and kerosene have all recovered to varying degrees, but the demand for aviation fuel is still far below expectations.As of August, aviation activities in Europe and the United States have become increasingly frequent, which has led to an increase in aviation fuel demand in these two regions, but the severe decline in demand in the Asia-Pacific region has offset this recovery. The industry expects that although aviation fuel demand in Asia is expected to grow by the end of the year, it will be difficult to lead global demand back to pre-epidemic levels.
"The repeated outbreaks have caused the aviation activities that have just recovered in Asia to collapse again." Simen Eliassen, an oil analyst at industry consulting firm R&D consulting firm, said, "The demand for aviation fuel in the region has almost returned to the low point of last year's epidemic."
Data from R&D consulting firm R&D consulting firm shows that Asia's aviation fuel demand is currently significantly lower than that in Europe, which is the first time since July 2010. As of mid-August, Europe's average daily demand for aviation fuel was about 1.04 million barrels, while Asia's was only 1 million barrels. Obviously, Europe has relaxed its quarantine and blockade measures after the epidemic improved, which has driven aviation demand in Europe and North America. In mid-August, the number of flights in Europe rose to 57% of the pre-epidemic level, while Asia fell to 45% of the pre-epidemic level.
In fact, in April, the number of flights in Asia had recovered to more than 80% of the pre-epidemic level, but due to the low COVID-19 vaccination rates in Japan, India and other countries, the record high number of new cases, and the greater challenges posed by the more infectious and faster-spreading variant virus, Asia had to return to the lockdown. Aviation data service provider OAG said that the anti-epidemic effect of most countries and regions in Asia, except China, was poor, which may take longer for the region to restart large-scale aviation activities.
However, if the variant epidemic can be suppressed and vaccination can be used to avoid large-scale outbreaks in the future, Asia is still expected to usher in a new round of growth in aviation fuel demand before the end of the year. It is worth noting that Australia's fuel demand in the first half of the year also fell to the lowest level in 30 years. According to data from the Australian Bureau of Petroleum Statistics, Australia's daily demand for aviation fuel reached a record high of 162,000 barrels before the epidemic, and fell to 58,000 barrels in the 2020-2021 fiscal year, the lowest level since the 1990-1991 fiscal year. Energy consulting firm Argus pointed out that the outbreak of the new coronavirus variant has caused a sharp drop in Australian aviation activity, with the average daily demand for domestic aviation fuel falling by more than 30% from pre-epidemic levels, while international aviation has fallen by more than 94%.
According to real-time monitoring data from R&D Energy, as of mid-August, Russia was the only region where aviation activity had fully recovered to the same period in 2019; in the first quarter of 2019, aviation activity in North America had recovered to more than 70% of pre-epidemic levels, and then fell back to just below 60%. Europe was the only region where aviation activity failed to exceed 50% of pre-epidemic levels before the start of this summer, but the number of flights rose to 57% of pre-epidemic levels in mid-August. R&D Energy said that at the beginning of last year, the average daily demand for aviation fuel in Europe hovered at 1.4 million barrels, far lower than the 2.2 million barrels in Asia during the same period. At present, the demand situation in the two regions has reversed.
Unbalanced aviation activities between different regions have led to the most serious regional supply and demand imbalance in the aviation fuel market in more than a decade. Unlike the sharp drop in demand in the Asia-Pacific region, there has been a supply shortage in the United States. CNN reported that since the end of July, many US airlines have faced a shortage of aviation fuel, and some airlines are saving fuel, including adjusting routes and adding "gas stations".
It is understood that the shortage of aviation fuel is mainly in small airports in the western United States. Because of the recent wildfires in the western United States, the demand for fuel for emergency aircraft participating in firefighting has increased sharply, consuming a large amount of aviation fuel inventory at the airport. The industry generally believes that the shortage of aviation fuel in the United States is only a short-term phenomenon. As long as the new crown pneumonia epidemic is not effectively controlled, US aviation activities will still tighten in the medium and long term, and the recovery of aviation fuel demand will still be under pressure.
Ruizide Energy predicts that this year, the global average daily demand for aviation fuel will be 2.7 million barrels less than in 2019, while gasoline and diesel will be 1.2 million barrels less. If vaccination is accelerated and the variant epidemic is suppressed, global gasoline and diesel demand is expected to fully recover by the end of the year, and the gap between the average daily demand for aviation fuel and the pre-epidemic level will be narrowed to 2 million barrels.
Despite plummeting demand, refiners still see jet fuel as their most profitable post-pandemic product. S&P Global Platts surveyed 11 major Asian refineries in August, and seven of them believed that demand for Asian petroleum products will return to pre-epidemic levels in February-March next year.
Major Asian refiners are generally optimistic that jet fuel sales will improve significantly in the first quarter of next year. They believe that once the epidemic is over, population movement will quickly drive the consumption of aviation fuel, and refineries in Northeast and Southeast Asia will be operating at full capacity.
It is understood that before the epidemic, aviation fuel accounted for 13%-17% of the total output of refineries in South Korea, Thailand and Malaysia. This year, the proportion has dropped to less than 8%.
Petronas said it expects global air traffic to increase sharply after the epidemic is over, and aviation fuel production and sales will rebound much faster than all other fuel products.
According to data from Korea National Oil Corporation, as Asia's major aviation fuel supplier, South Korea produced an average of 14.23 million barrels of aviation fuel per month in 2019. Last year, production plummeted to 9.4 million barrels per month, and so far this year it is only 7.5 million barrels per month. Once the Asian aviation industry regains its vitality, South Korea will quickly increase production to at least 13 million barrels per month, and then gradually increase it to pre-epidemic levels.
However, Cirium, a global aviation data and analytics company, pointed out that the recovery speed of the global aviation industry is "snail-like". Throughout this year, aviation activity is expected to remain 40% lower than in 2019. The International Air Transport Association said that Asian aviation activities are expected to "get back on track" in 2024, and the demand for aviation fuel in the region may not return to pre-epidemic levels until 2023 at the earliest.
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