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Oil prices exceed USD80/barrel; Airlines express concern about rising fuel prices

6-Aug-2010

IATA, this week in its June-July Airlines Financial Monitor, raised concerns about the potential for future oil price increases, with carriers, in their second quarter financial reports, echoing the concerns.

See related article: Airline shares rise in Jul-2010; Improvement in average fares and profitability; fuel cost concerns

IATA added that by late Jul-2010, jet fuel prices sat near the lower end of the USD80-100 range seen since the beginning of this year, although “even at this level, the average price for the year to date is 24% higher than for the full year 2009”. IATA continued: “Mixed economic news in the US and Europe may partly temper upward pressure on oil prices, but growth continues apace in other regions increasing energy demand.”

Jet fuel and crude oil prices: Jun-2005 to Jul-2010

IATA also stated that the balance of respondents to IATA’s July Airline Business Confidence survey indicate that input costs – dominated by fuel – are likely to rise over the year ahead.

Crude oil reaches 12-week high; exceeds USD80 mark

On 02-Aug-2010, crude oil for Sep-2010 delivery rose 3% to close at USD81.34/barrel on the New York Mercantile Exchange, reaching a 12-week high. It was also the first time crude futures have settled above USD80 since May-2010, after strong manufacturing-sector data renewed optimism of a global economic recovery. Prices have remained above the USD80 mark for the remainder of the week.

WTI spot price (USD per barrel): 03-Aug-2009 to 03-Aug-2010

Daily jet fuel prices (kerosene, cents per gallon) at New York, US Gulf Coast, Los Angeles, Amsterdam, Singapore: 04-Aug-2009 to 03-Aug-2010

In other markets, jet fuel prices increased during the week, with the largest gains seen in New York Harbour (+8.7%), US Gulf Coast (+8.5%) and Los Angeles (+7.8%), with prices in all markets (except WTI Spot) rising to settle in the USD217-227 range as at 03-Aug-2010, for a 12 month change in the 13-18% range. 

Daily jet fuel prices (kerosene, cents per gallon) at New York, US Gulf Coast, Los Angeles, Amsterdam, Singapore vs Crude Spot price (WTI, USD per barrel): 27-Jul-2010 to 03-Aug-2010

 

27-Jul-10

28-Jul-10

29-Jul-10

30-Jul-10

02-Aug-10

03-Aug-10

One week Change

12 month Change

New York Harbor

204.42

204.25

208.35

213.3

220.2

222.29

8.7%

13.8%

U.S. Gulf Coast

201.92

200

204.1

209.3

215.45

219.04

8.5%

16.4%

Los Angeles

210.38

210.44

214.67

217.3

224.2

226.79

7.8%

17.2%

Amsterdam-Rotterdam-Antwerp

208.33

208.71

212.49

214.23

220.8

222.99

7.0%

17.9%

Singapore

209.4

205.12

205.95

207.86

212.5

217.26

3.8%

17.1%

WTI Spot*

77.46

77.06

78.3

78.85

81.25

82.52

6.5%

15.3%

Jet fuel increases in India; potential reductions in Japan

Meanwhile, jet fuel for domestic airlines in India was raised this month, for the ninth increase since Mar-2010, while Japan is reportedly planning to reduce aviation jet fuel taxes.

Jet fuel-specific developments: 01-Aug-2010 to 05-Aug-2010

Country

Development

India

Indian Oil Corp raised the price for jet fuel for domestic airlines by 2.7% in New Delhi and Mumbai. Prices from 01-Aug-2010 are INR41,177 (USD890) per kilolitre in Delhi and INR42,484 (USD918) in Mumbai. The increase follows a 3.3% reduction in prices announced on 16-Jul-2010 and marks the ninth increase since Mar-2010.

Japan

Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLITT) plans to reduce aviation jet fuel taxes, with the reductions expected to reduce the government's fuel tax income from USD825 million to USD710 million.  The tax has been fixed at JPY26,000 (USD300) per 1,000 litres since 1979.

Hong Kong

Cathay Pacific and subsidiary Dragonair cut fuel surcharges on services between Hong Kong and mainland China from USD13.5 to USD12.6 on 01-Aug-2010. Dragonair and Cathay also adjusted their international fuel surcharges to India, Australia, New Zealand, North America, Europe, Africa and the Middle East from USD65.8 to USD64.7. All Nippon Airways increased the carrier’s fuel surcharge on services between Japan and China from USD28.3 to USD37 per sector.

Nigeria

Aero Airlines Head of Commercial, Robert Prophet, stated the rise in aviation fuel prices in Nigeria “defies all logic” and prices in the country are now among the highest in the world.

South Korea

Korean Air and Asiana Airlines are planning to reduce fuel surcharges for return services to Europe and the US from USD118 to USD100 in Sep-2010. 


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