China: Travel rebound risks raising jet fuel prices

After years of pent-up demand for leisure and business travel due to the ravages of Covid-19, millions of Chinese are taking to the skies again as the nation leads an aviation boom across Asia. China’s return is thought to be the final missing piece in global air travel recovery. Domestic travel has led the rebound in Asia’s top aviation market, and now international travel is set to take off after the lifting of a ban on group tours to popular destinations. Yet the resurgence comes with a drawback: It’s likely to lift jet fuel consumption amid tight supplies, potentially super-charging prices. In recent months, the availability of aviation fuel has slipped, with stockpiles at hubs such as Singapore and Amsterdam-Rotterdam-Antwerp below seasonal averages. That’s due to a series of unplanned refinery outages, as well as increased diesel production at the expense of jet fuel. While aviation fuel prices are nowhere near the highs of last year, they’ve jumped about 30% this month compared with the start of July, trading above US$116 a barrel in Singapore, according to Bloomberg Fair Value data. Higher jet fuel prices may weigh on airlines currently enjoying bumper profits, while travellers could see higher fares if companies pass along those steeper costs. Global oil prices have risen more than 15% in the past two months, due to Opec+ output curbs, as well as higher run rates by refiners looking to cash in on good fuel-making profits. Banks such as UBS AG have adjusted their oil price forecasts upward, citing a market deficit. A big question mark for the outlook on oil and the global economy has been China’s uneven recovery. While overall growth in the nation has been weaker than expected, various data on flight bookings are an encouraging sign.<br/>