The short-term impact of the Covid-19 pandemic on travel activity is likely to benefit gasoline at the expense of jet fuel, participants at the Argus Crude Live virtual conference said. But the longer-term outlook for jet fuel demand remains mired in uncertainty.
More people are choosing to travel by car rather than plane, reflecting health concerns and a rise in domestic travel as border restrictions remain in place, said Andrew Laven, chief operating officer at Dubai-based trading firm Sahara Energy Resources. The impact on motor fuel demand is being partly offset by a fall in commuter travel as more people work from home, he added.
Pent-up demand for leisure travel is also supporting fuel use, said Parash Jain, Hong Kong-based head of Asia-Pacific transport fuel research at bank HSBC. "Business travel may be curtailed… but leisure travel will come back, although it may be in a different shape — you may not see a lot of group tours but you will see individuals travelling," he said.
Global gasoline demand fell by 12pc to 22.3mn b/d in 2020, according to Argus estimates, significantly less than a 35pc drop in jet-kerosine consumption to 4.9mn b/d.
The prospects for a recovery in jet fuel demand after the pandemic is brought under control are far less assured. Domestic air travel in China recovered to pre-Covid-19 levels as early as September last year, said Jain, while the International Air Transport Association (Iata) is forecasting that passenger numbers will recover by 2024 at the latest. International travel, and particularly business travel, may struggle to rebound as quickly as domestic activity, he said.
Short-haul air travel is likely to be hit by rising prices and environmental concerns, the speakers agreed. But inter-regional travel, which is a major driver of jet fuel demand, will continue to increase, said Eugene Lindell, head of clienting at oil and gas advisory firm JBC Energy. JBC does not expect jet fuel demand to peak until 2038, although it has reduced its growth forecast by over 500,000 b/d — a significant chunk of a 7mn b/d market.
But Sahara's Laven took a much more negative view. The post-Covid-19 recovery in air travel "is going to be sporadic, and I am not sure yet that we will ever get back to the level of demand that we have had previously." The world is facing a permanent reduction in air passenger travel as working from home becomes increasingly common, which will have a major impact on jet fuel demand and refinery activity, he said.
