Swine flu fears reduce air travel, lowers jet fuel demand

06 May 2009 23:08  [Source: ICIS news]

HOUSTON (ICIS news)--Last week's reduction in air travel to Mexico stemming from the swine flu outbreak was the latest in a string of factors depressing jet fuel demand in the US, an industry economist said on Wednesday.

John Heimlich, chief economist for the US trade organisation Air Transport Association (ATA), said US airlines cutting routes to Mexican destinations only added to items such as the global recession and the substantial spike in fuel prices last year that have limited the need for jet fuel.

"It's yet another detrimental factor in already declining jet fuel demand," he said.

Year-to-date demand for daily jet fuel in 2009 was down by 9.7% to 1.401m bbl/day compared with 1.552m bbl/day during the same period last year, according to the US Energy Information Administration (EIA).

The EIA said on Wednesday that domestic inventories of kerosene-type jet fuel increased by 1.2m bbl last week to a total of 40.7m bbl.

The jump in stocks could be attributed to reduced passenger airline travel last week, but Heimlich said the ailing economy continued to curtail cargo traffic also, especially the fuel-intensive, trans-Pacific flights.

Cash values for jet fuel were up in both New York Harbor and US Gulf regions in Wednesday trading, largely a result of the spike in the New York Mercantile Exchange (NYMEX) heating oil contract.  

New York Harbor prices were pegged at 147.50-147.75 cents/gal while the US Gulf prices traded at 144.00-144.25 cents/gal, according to traders.

A US Gulf jet fuel trader said last week's build in stocks due to swine flu does not represent a trend, which in turn does not shake the market as a whole.

The wider worry, the source said, is the swine flu's potential rebound later this year could affect crude oil's pricing and have a broader impact on energy markets.

Fear over the spread of swine flu seems to have dissipated this week and US passenger airlines are opening flights back to Mexico.

The latest tally from the World Health Organization (WHO) has 1,516 cases of swine flu confirmed in 22 countries.

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By: Ryan Hickman
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