Global air traffic is staging a steady comeback but remains 36% below pre-pandemic levels, tracking data shows, as the threat of new regional lockdowns and COIVD-19 variants looms over the oil demand recovery outlook.
Commercial flights, a key proxy for jet fuel demand, rose to average 65,466 in the week to March 28, up 3% on the previous week and almost three times the level seen at the nadir of lockdown travel curbs in April 2020, according to tracking data from AirNav.
In Western Europe, which has suffered most globally in lost airline capacity, seat capacity improved to 69% below pre-pandemic levels on March 29, according to aviation data provider OAG, after hovering close to 78% below pre-COVID levels for weeks.
The region has been hit by a wave of fresh travel and commercial restrictions to contain the latest surge in COVID-19 infections, shaking confidence in oil demand markers. Even with signs of land mobility faltering in Southern Europe, the region seems to be seeing air travel recover.
"The third coming of COVID-19 in Western Europe does not appear to be having any impact on capacity as we head to the [Easter] holiday weekend with some 930,00 additional seats operating this week or a modest 20% growth week on week," OAG said in a note.
But with infection rates climbing in some parts of Europe and Latin America, oil market watchers remain cautious over the recovery path for the worst-hit oil product in terms of the scale of its demand destruction since early 2020.
In the UK, Europe's biggest jet fuel market, ongoing curbs on international travel are still keeping a lid on the recovery in demand for flights. Air travel to and from the UK remains severely reduced at 83% below the same week in 2019 and is even 9% lower than year-ago levels when the first lockdown was kicking in, AirNav data shows.
Looming threats
In terms of oil demand, forecasters continue to weigh up the potential for new COVID mutations emerging capable of scuppering the impact of vaccine roll-outs. The risk of new major outbreaks if lockdowns are lifted prematurely is also a threat to demand.
S&P Global Platts Analytics this week cut its estimate for 2021 oil demand growth by 100,000 b/d, despite strong real-time oil demand markers from the US.
"With four different vaccines now approved in the West, additional vaccines from China and Russia, and COVID-19 cases declining in some countries, people are eagerly awaiting to unleash their wanderlust," Platts Analytics said in a note.
"We now feel more confident that road and jet fuel demand will ramp up their recovery from the pandemic, though jet remains far from normalized fully... Continuing normalization of flight traffic supports improvement in kerosene-jet demand, but it will still lag the demand normalization seen in other parts of the barrel," it said.
Globally, Platts Analytics expects demand for jet and kerosene to recover to average 6.24 million b/d this year, up from 4.84 million b/d in 2020 but still 23% below 2019.
With air travel demand expected to be structurally damaged due to behavioral changes as a result of the pandemic, however, Platts Analytics does not expect global jet and kerosene demand to return to 2019 levels of 8.1 million b/d before 2026.
Overall, Platts Analytics forecasts 2021 global oil demand growth at 5.8 million b/d, with European oil demand growing by 900,000 b/d in 2021.
