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I’m anticipating oil demand to exhibit above-trend and above-consensus growth in the coming year, projecting an increase of 1.5 mb/d. A key factor influencing this outlook is the substantial growth expected in jet fuel consumption. I’ve closely monitor and model this trend using global flight and scheduling data, allowing me to delve into the trends and prospects of air travel.
My expectations include a forecasted growth of 0.6 mb/d in jet fuel demand for the year 2024, surpassing the trend by 0.4 mb/d. The primary driver behind this growth is the rebound in petrochemical markets, aided by the conclusion of the global goods destocking cycle, which is anticipated to boost airborne freight demand.
Despite international travel remaining significantly below pre-pandemic levels, with December 2023 jet demand being 8% (equivalent to -0.5 mb/d) lower than December 2019 levels, I foresee continued above-trend growth. This discrepancy is particularly concentrated in China and other Asian economies, where the reopening was slower, and GDP scarring was more substantial than in Western countries.
Looking ahead to 2024, I anticipate a further increase in jet fuel demand by 0.4 mb/d, exceeding the trend by 0.2 mb/d and finally surpassing 2019 levels. By the end of 2024, I project jet fuel demand in developed and emerging markets to be -5% and -10%, respectively, below pre-pandemic trends, with structural GDP scarring accounting for the entire divergence.
Revising my global jet demand scarring expectations from -10% to -8%, I observe that developed market airlines have mitigated much of the loss in business travel. Business travel, which has stabilized at 75% of pre-pandemic levels, has been compensated by the rise in 'premium leisure' as flexible post-pandemic work schedules enable more frequent travel. However, this is slightly offset by larger GDP scarring in emerging markets than initially anticipated.
While biofuel alternatives, such as Sustainable Aviation Fuel (SAF), are expected to have a minimal initial impact on jet demand, I project SAF to increase from 20 kb/d in the previous year to 75 kb/d in 2025, reaching approximately 4.5% of global demand by 2030. More critically, continuous efficiency gains in aircraft, estimated at around 2% annually, contribute to a lighter per-passenger load, equivalent to about 0.15 mb/d in demand.
In conclusion, my expectation for above-trend and above-consensus oil demand growth stems from various factors, with a significant focus on jet fuel consumption. My projections for the coming years indicate a resilient air travel industry, despite the challenges posed by the recent global events.
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