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Oil price at six-month high, jet fuel rising. Airline surcharge increases "impossible" - CAPA

Oil prices have surged above USD65 per barrel to a six-month high overnight in New York - placing considerable pressure on an airline industry reeling from weak demand and steep reductions in yields. Crude prices have doubled in less than three months on some "green shoot" signs of improvement in the US economy. Crude still remains down 50% on the same level a year ago, but the global economic landscape couldn't be more different.

Jet fuel spot prices have again (mostly) trailed the 6.5% increase in crude prices in the past week (to 27-May-09), rising 4.9% in New York, 4.4% at the US Gulf Coast, 6.7% in Los Angeles (the exception), 4.0% in Amsterdam and 3.7% in Singapore.

Jet fuel prices are down around 60% year-on-year, with the growing gap to the underlying crude price reflecting continued weak demand for jet fuel as airlines slash capacity in response to deteriorating demand and yields. Qantas today reports its international yield fell 13% last month, despite significant capacity cutbacks by the Australian carrier.

Few airlines can contemplate passing on higher fuel costs in the form of increased surcharges or fares in such a weak demand environment. The impost will have to be borne by the carriers in the near term, until underlying conditions stabilise.

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): 19-May-09 to 27-May-09

 

19-May-09

20-May-09

21-May-09

22-May-09

26-May-09

27-May-09

one week
Change

12 month
Change

New York Harbor

150.45

156

155.59

156.15

156.8

157.8

4.9%

-59.5%

U.S. Gulf Coast

147.95

153.75

152.59

154.14

153.42

154.41

4.4%

-60.6%

Los Angeles

152.7

157

154.84

157.65

160.92

162.91

6.7%

-59.4%

Amsterdam-Rotterdam-Antwerp

152.51

155.61

154.7

157.12

158.02

158.63

4.0%

-62.0%

Singapore

153.45

154.05

156.43

157.02

155.12

159.17

3.7%

-61.6%

WTI Spot

59.52

61.45

60.49

61.15

62.48

63.41

6.5%

-50.8%

Daily jet fuel prices (kerosene, cents per gallon) at New York, US Gulf Coast, Los Angeles, Amsterdam, Singapore: 02-Dec-08 to 27-May-09