Global aviation fuel demand set to reach pre-pandemic levels by 2025, S&P reports

The global demand for air passenger travel, measured in revenue passenger kilometers (RPK), surged by 9.1% year-on-year in June, driven by the summer vacation season, leading to a rise in jet fuel prices, according to data from the International Air Transport Association as of July 31.

According to Report, which cites S&P Global Commodity Insights, international demand grew by 12.3% year-on-year over the same period, with the Asia-Pacific region leading the growth at 22.6%, followed by Africa and Latin America at 16.9% and 15.3%, respectively.

Platts, a division of S&P Global Commodity Insights, assessed the CIF NWE jet cargo price differential at a premium of $48.75 per ton to the front-month ICE LSGO futures contract on August 6, significantly higher than the year-to-date low of $9.75 per tonne recorded on March 3.

Commodity Insights forecasts global jet fuel and kerosene demand to reach 8 million barrels per day this summer for the first time since late 2019, with the annual average returning to pre-pandemic levels for the first time in 2025.

The main driver of oil demand growth since 2021, the average global annual jet fuel/kerosene demand growth, is projected to be around 550,000 barrels per day in 2024, slowing to 300,000 barrels per day in 2025, primarily from Western Europe and China.

Jet fuel spreads in Europe and the US Gulf Coast have retreated from the peak caused by the Russia-Ukraine conflict but remain robust and above the historical average of around $16 per barrel. Jet fuel spreads are expected to broadly track diesel spreads through the end of the year; thus, jet fuel is expected to price above diesel from this winter into next year.

Going forward, Commodity Insights expects jet crack spreads to narrow on average but could exceed the long-term historical range of up to $20 per barrel. S&P believes that global jet demand is growing rapidly as more passengers return to the skies, with summer air travel bringing jet fuel prices closer to pre-pandemic levels.

"While global air travel, as measured by flights, first returned to pre-pandemic levels in mid-2023, jet fuel demand has not kept pace. So far, global jet demand in 2024 remains at around 95% of 2019 levels due to efficiency gains, larger aircraft, and the slower recovery of more fuel-intensive long-haul flights," Commodity Insights emphasizes.