【Ferro-alloys.com】The prospects of near-term recovery in Australia's jet fuel demand remain bleak as a surge in omicron infections upend staffing levels and summer holiday plans despite the country's high vaccination rates, industry sources said.

However, the outlook for the medium term is more optimistic, with industry sources deeming the dent in the country's immediate jet fuel demand a temporary setback as the number of omicron cases was seen to be nearing it is peak in the most populous eastern states.

"Australia's kerosene/jet demand is expected to slow in Q1 with rising COVID-19 cases in the country, but we still expect demand to improve in H2 as the COVID outbreak gets under control," said JY Lim, oil market adviser at S&P Global Platts Analytics.

Australia's kerosene/jet fuel demand is expected to rise to 108,000 b/d in H2 from 70,000 b/d in H1, but over the full year demand will average close to 46% below pre-pandemic 2019 levels, he said.

The country has reported a surge in COVID-19 cases over the past two weeks despite its earlier success in curtailing outbreaks in 2020 and 2021 and close to 93% of its population being double vaccinated.

The Australian Government's Department of Health website recorded total cases at over 1.35 million Jan. 16 and 2,668 deaths, and on Jan. 17 reported that over 19 million residents had been double vaccinated, equating to 92.6% of the population aged 16 or over.

A "code brown" has been declared in the southeastern state of Victoria, enabling hospitals to cancel leave for healthcare workers to meet staffing shortages as hospitalization rates rise, local media reported.

Jet fuel imports capped
Omicron's interruption to Australia's January holiday season comes after jet fuel imports had already been lackluster for several months. Supply of aviation turbine fuel to Australia fell 29% month on month to 923,973 barrels in October, although it was up 11.9% year on year, latest preliminary data from the Department of Industry, Science, Energy and Resources showed.

This marked the fifth month that imports were below 1 million barrels since the pandemic began. Jet fuel inflows dropped to as low as 27,675 barrels in May 2021, the data showed.

In September, Australia's jet fuel imports rose 21.7% month on month and were up 10.9% year on year at 1.29 million barrels as airlines including Qantas Airways and Jetstar ramped up flight operations with the reopening of international borders from Nov. 1.

However, the recovery proved short-lived.

Both airlines in early January reduced flights after the sudden surge in COVID-19 cases.

"The Qantas Group now expects domestic capacity for the third quarter of FY22 to be at around 70% of pre-COVID levels, down from the 102% that had been planned," the company said in a statement on Jan. 13. January-March 2022 is the third quarter of Australia's July-June fiscal year.

Qantas' total international capacity for the quarter was expected to fall from 30% to around 20% of pre-COVID levels due to increased travel restrictions in countries like Japan, Thailand and Indonesia, although other markets such as London, Los Angeles, Vancouver, Johannesburg and India continue to perform well, it said.

Asian middle distillate traders said that for the moment, inflows of aviation fuel to Australia remain largely consistent.

"Jet fuel imports into Australia have been steady, but nothing that exciting," an Asian middle distillates trader said late Jan. 17.

The steadiness in inflows comes even as Australia's domestic production levels of jet fuel have been declining on the back of refinery closures, the most recent being BP's Kwinana and ExxonMobil's Altona facilities.

Easter travel hopes
"The sudden uptick in COVID cases is having an obvious impact on consumer behavior across various sectors, including travel, but we know it's temporary," Qantas Group CEO Alan Joyce said Jan. 13.

"People are already looking beyond what's happening now with early bookings for the Easter holidays in April looking promising for both domestic and international," he added.

Despite pockets of uncertainty, the Asian jet fuel market remains supported by supply tightness, particularly after China's lower oil products export quota allocation for 2022.

China's Ministry of Commerce has allocated 13 million mt of oil product export quota in the first round to seven oil companies for 2022, down 55.9% from the same round in 2021.

The FOB Singapore jet fuel/kerosene cash differential was up 11 cents/b day on day at plus 92 cents/b to the Mean of Platts Singapore jet fuel/kerosene assessment at the 0830 GMT Asian close Jan. 17, jumping 39 cents/b, or 73.58%, in a week, S&P Global Platts data showed.

"Western aviation is taking off ahead of Asia, [but] generally, it will take a year or two [for the aviation sector] to recover," a regional jet fuel trader based in Singapore said Jan. 14.

The Association of Asia Pacific Airlines in a traffic results release Jan. 11 said that for the first 11 months of 2021, international passenger volumes were 4% of the same period in 2019.

"Overall, full restoration of international air travel remains some way off," AAPA Director General Subhas Menon said, adding that the abrupt re-imposition of travel restrictions by many governments due to rising omicron infections threatened to derail the long-awaited revival of Asia's travel and tourism industry.

"Collaboration and coordination of industry stakeholders across borders are critical to the safe and sustained resumption of international air travel, without which, the recovery journey will likely be volatile and uneven," he added.

• [Editor:zhaozihao]