Global air travel may stage a quicker than expected rebound from the Covid-19 pandemic as vaccines are rolled out, helping boost jet fuel demand, Japanese energy firm Cosmo Oil's general manager for crude and tankers Mitsuyasu Kawaguchi said.
The International Air Travel Association (Iata) said last month it does not expect global air passenger numbers to return to 2019 levels until 2024 at the earliest because of the lingering impact of the pandemic.
But that may underestimate progress in developing vaccines, Kawaguchi said.
"I have a feeling that [global air travel] will return more quickly, as vaccines are developed at a much faster pace than originally thought," Kawaguchi told Argus. "I think Iata's prediction is conservative."
Any recovery in demand remains hugely vulnerable to the development of Covid-19 vaccines and the speed at which they can be rolled out, he added.
Japan's jet fuel consumption is only at around 50pc of pre-Covid levels, while gasoline and diesel demand have now almost fully recovered. Increased car travel and cargo demand may support consumption of road fuels, although demographic issues and a slowing economy are shrinking the country's oil product demand by 2-3pc/yr, Kawaguchi said.
Japan's jet fuel sales for domestic flights averaged 56,000 b/d during January-October, down by 37pc on the same period last year, while bonded sales for international flights fell by 56pc to 59,000 b/d, according to industry figures. Domestic gasoline sales were down by 9pc to 777,000 b/d over the same period. Neither jet fuel nor gasoline demand is likely to rise in 2021 from current levels, industry lobby group the Petroleum Association of Japan said earlier this month.
Japanese refiners have largely recovered from the short-term impact of the Covid-19 pandemic, partly because they have a guaranteed domestic market through their own marketing outlets and retail networks. This left them better placed compared with "merchant refineries" in the region, which were forced to cut runs and are still having a tough time, Kawaguchi said.
Refiners in Japan "did not have to sell their products at a bargain price in the international market. The system, or 'captivity', worked to their advantage", he said. Cosmo is Japan's third-largest refiner by capacity behind Eneos and Idemitsu.
The entire industry still went through drastic changes earlier this year. "Refining margins disappeared at one point around March and April, and so did the price spread between petroleum products. The pandemic created an environment in which no refinery could cope, even highly advanced, or complex, refineries with secondary units such as reformers, crackers and cokers," Kawaguchi said.
"Confusion in the products market lasted for a while and is continuing to some extent. [But] the market is now back on a recovery track," he said.
Click here for the full Q&A with Mitsuyasu Kawaguchi, who will be one of the speakers at the Argus Crude Live virtual conference taking place over 26-28 January 2021. For full details of the conference programme and how to register to attend, please visit our event page.
