Oil prices slide back to USD70 per barrel

OPEC, which produces around one third of the world's oil, revised its 2010 forecast for oil demand as global economies recover in 2010, led by the developing world. The US Energy Information Agency (EIA) forecasts revenue from OPEC oil sales would approach USD759 billion in 2010, some 32% higher than in 2008.

The International Energy Agency has also revised its demand and consumption forecast for 2010 upwards. However, lingering and underlying economic weakness and the expected end of government-spending led stimulus in some economies by mid-2010 has prompted some analysts to forecast either a status quo situation, or a retreat in oil prices from early in the new year.

IATA forecasts USD75 per barrel oil in 2010

In its latest industry financial forecast, IATA raised its 2010 oil price forecast to USD75 per barrel, with total industry expenses of USD123 billion. Oil prices for 2009 are expected to be around USD62 per barrel, for a total industry fuel cost of USD114 billion.

IATA oil prices: 2001-2010F

	2001	2002	2003	2004	2005	2006	2007	2008	2009F	2010F
Fuel expenses (USD billion)	43	40	44	65	91	107	134	172	114	123
% of expenses	13%	13%	14%	17%	22%	24%	27%	32%	25%	27%
Price (Brent, USD per barrel)	24.7	25.1	28.8	38.3	54.5	65.1	73.0	99.0	61.8	75.0

Source: IATA

Jet fuel up in China, lower in India

Despite the drop in oil prices, the lag effect between purchase and consumption for airlines means that many carriers, particularly in North Asia, are increasing their fuel surcharges. Japan Airlines and All Nippon Airways intend to increase their passenger fuel surcharges from 01-Jan-2010.

The Hong Kong Civil Aviation Department approved a 4% increase in passenger fuel surcharges by All Nippon Airways, Cathay Pacific and Singapore Airlines.

More impetus to raise fuel surcharges has been provided by the Chinese Government, which raised the import tariff on jet fuel for 2010 from 5% to 6% on Wednesday.

However, Indian carriers received a boost from India's state-owned oil companies, as they announced a 1.6% reduction in aviation fuel prices on 15-Dec-2009.

Oil prices approach USD70 per barrel

Oil prices for the week to 15-Dec-2009 fell another 2.7%, after the 7.4% decline in the previous week. Prices were below USD69 per barrel briefly, and have now retreated around USD10 from their mid-Oct-2009 highs above USD81 per barrel.

WTI spot price: Jan-2009 to Dec-2009

Source: Centre for Asia Pacific Aviation & US Energy Information Administration

Jet fuel were down in most markets. The exception was Amsterdam-Rotterdam-Antwerp exchange prices which rose 0.8%. Singapore prices were down most strongly (-5.5%), followed by Los Angeles (-4.3%), US Gulf Coast (-4.1%) and New York Harbour (-1.15). Prices are now firmly below USD2 per gallon, but are 30-45% higher than they were 12 months ago.

Daily jet fuel prices (kerosene, cents per gallon) at New York, US Gulf Coast, Los Angeles, Amsterdam, Singapore: 05-May-09 to 15-Dec-09

Source: Centre for Asia Pacific Aviation & US Energy Information Administration

Major oil market movements, USD cents per gallon

	08-Dec-09	09-Dec-09	10-Dec-09	11-Dec-09	14-Dec-09	15-Dec-09	one week Change	12 month Change
New York Harbor	195.8	190.17	189.85	192.35	191.96	193.64	-1.1%	29.3%
U.S. Gulf Coast	198.3	190.42	189.35	190.85	190.46	190.14	-4.1%	44.6%
Los Angeles	201.05	193.17	193.1	193.6	192.71	192.39	-4.3%	47.7%
Amsterdam-Rotterdam-Antwerp	194.43	186.8	191.87	192.62	194.59	196.02	0.8%	34.1%
Singapore	200	197.74	191.07	189.05	188.21	188.93	-5.5%	31.9%
WTI Spot	72.59	70.67	70.54	69.86	69.48	70.62	-2.7%	58.3%

Source: Centre for Asia Pacific Aviation & US Energy Information Administration
*USD per barrel