Jet fuel will be the biggest driver of oil demand growth in 2023, according to energy analysts at Capital Economics, who expect a boost from more international flights.
While aviation represents only a small share of global oil consumption, the London-based research firm says jet fuel could account for 64 per cent of the 1.4 million barrel per day (bpd) rise in overall demand for crude it expects this year. Capital Economics sees jet fuel demand climbing by 900,000 bpd in 2023.
“Aviation will account for the bulk of oil demand growth,” analysts wrote in research published Wednesday. “International flight activity continues to grow in China and the rest of the world.”
Airline industry estimates from the International Air Transport Association (IATA) imply global jet fuel consumption rose by around 20 per cent in 2022, to roughly 6.4 million bpd. IATA’s 2023 forecast calls for a nearly 15 per cent rise this year, to 7.3 million bpd.
“Demand remains suppressed relative to pre-virus levels though, suggesting that consumption can continue to grind higher over the rest of the year,” Capital Economics wrote.
Last month, Air Canada’s (AC.TO) CEO cited strong advanced bookings for flights as Canada’s largest airline reported strong first-quarter financial results.
Meanwhile, concern about the health of the global economy has weighed on demand sentiment for oil this year, pushing benchmark prices lower.
However, in its June oil market report, the International Energy Agency predicted global oil demand would rise by 2.4 million bpd this year to a record-setting average of 102.3 million bpd.
“China accounts for 60 per cent of the gains, with soaring transport and petrochemical use propelling apparent demand in April to an all-time high of 16.3 million bpd,” the agency wrote. “By contrast, OECD demand remains lacklustre amid an ongoing manufacturing slump and generally subdued economic growth.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.