Let's Get Even More Specific About Demand, It's Jet Fuel
Please read our piece last week titled, "At The End Of The Day, It's Just All About Oil Demand."
It is all about demand, but oil demand can imply many things. So what exactly is that key variable we have to watch?
It's jet fuel.
Source: IEA
In IEA's latest oil market report, IEA spent most of the report on China and the potential reopening. And while it talks about the potential increase in jet fuel demand, this is what it said:
The revival in jet/kerosene demand continued to build impetus, with global commercial flight counts consistently surpassing 2019 levels for the first time in early February, per FlightRadar24 data (however, fuel use has yet to catch up, mainly because of efficiency gains). Progress has been rapid over the last two months. Air traffic was more than 10% lower than 2019 in mid-December. Roughly half of the earlier 10 000 flight/day gap was closed by the rebound in the domestic Chinese market. Counts remain most reduced for international routes involving Asia (particularly China) and the region offers scope for further gains. Worldwide growth in the use of jet/kerosene is expected to accelerate to 1.1 mb/d in 2023 (from 920 kb/d last year). With the exception of Russia, every major market will see substantial expansion, though 60% of this will take place in Asia-Pacific.
Now if you have been watching global commercial flight counts, you will note that we are above 2019 levels.
Source: Flightradar24.com
But as IEA had already pointed out, efficiency gains have tempered some of the jet fuel demand usages, so more flights are needed to boost higher demand figures. In particular, international flights (which use more jet fuel) need to pick up to see a material impact on jet fuel demand.
This is why for oil bulls, it is important to track the number of international flights on the horizon.