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Oil soars above USD77 per barrel

16-Oct-2009

Both the Dow Jones Industrial Average and the price of oil have hit 12-month highs this week, as investors respond to signs of an impending economic recovery. The Dow finished above 10,000 for the first time since its Oct-2008 plunge on Wednesday.

Oil prices hit USD75.20 per barrel on Wednesday, 12 months to the day since prices last topped USD75 per barrel - and have surged a further 3.2% overnight to USD77.58 in New York.

Demand down for major US carriers

While prices may be surging again, demand for jet fuel has still not recovered. The US Air Transport Association reports that fuel consumption by its 13 members was down 10.8% in Aug-2009. The carriers’ combined fuel costs for the month were USD3,015 million, while the average price paid was USD2.01 per gallon, a 43.2% decrease year-on-year, but 5% above average market prices.

ATA Airlines fuel consumption & average price paid: Jan-2009 to Aug-2009

Chinese demand still growing

However, not all aviation fuel markets are shrinking. Chinese consumption is swelling, driven by very strong domestic passenger demand, and Chinese producers increased aviation fuel refining by 10% in 1H2009.

Air China reported yesterday that it purchased 260,000 tonnes of jet fuel in Sep-2009, at an average purchase price of approximately USD750 per tonne, a 39% year-on-year decline in price, despite the USD44 per tonne fuel hike at the beginning of the month.

The carrier paid an average purchase price at international airports of USD662 per tonne, and the average purchase price of jet fuel for international flights at the top six Chinese airports was USD713 per tonne, representing declines of 41% and 40% year-on-year, respectively. The company’s average jet fuel purchase price for domestic services was USD802 per tonne, a 37% year-on-year reduction.

India announces third consecutive price drop

Meanwhile, the price of jet fuel in India continues to fall. India’s state-owned fuel companies, Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp, announced another 2.4% reduction in fuel prices on 16-Oct-2009, due to the strengthening of Indian rupee against the US dollar.

This is the third fortnightly reduction in a row, after a 3.2% cut in mid-Sep-2009 and a 2.1% cut on 01-Oct-2009. The cuts more than unwind the 7.6% increase in prices that the Indian state owned oil companies brought in over three increments in early 3Q2009.

See related report: India and China traffic on the rise, Singapore Airlines and Qantas see ongoing yield pressure

Oil surges USD6 per barrel

Oil prices have moved from below USD70 per barrel to above USD75 per barrel over the past week. For the week to 14-Oct-2009, the underlying crude oil price rose 8.0%, topping the previous week’s 6.2% surge.

WTI spot price: Mar-2009 to Oct-2009

Jet fuel prices rose even faster than oil prices. New York Harbour and US Gulf Cost prices rose 8.4% and 8.7% respectively, while Los Angeles prices increased 9.3%. Amsterdam-Rotterdam-Antwerp exchange prices rose 8.5%, while Singapore prices have again lagged the other markets, up 5.5%, after only increasing 2.7% last week.

Prices were up USD10-15 cents per barrel across the markets. With the increases, fuel prices are now only 10-20% below where they were this time last year.

Major oil market movements, USD cents per gallon

 

07-Oct-09

08-Oct-09

09-Oct-09

12-Oct-09

13-Oct-09

14-Oct-09

one week Change

12 month Change

New York Harbor

181.22

185.79

189.11

191.74

194.55

196.4

8.4%

-19.2%

U.S. Gulf Coast

177.97

182.54

186.86

189.24

191.05

193.4

8.7%

-18.5%

Los Angeles

182.47

187.04

191.61

193.74

197.05

199.4

9.3%

-11.4%

Amsterdam-Rotterdam-Antwerp

180.38

181.44

184.09

189.75

193.07

195.72

8.5%

-18.9%

Singapore

179.29

175.83

179.05

183.21

187.26

189.17

5.5%

-16.3%

WTI Spot

69.6

71.69

71.75

73.24

74.1

75.2

8.0%

-4.4%


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