Goldman forecasts Aug. jet fuel demand at 5 m bpd, Dec22 at 6.2 m bpd

London (Quantum Commodity Intelligence) - US bank Goldman Sachs sees August global jet fuel demand at 5 million barrels per day, up from 3.9m bpd in May, although the recovery will be long - extending past next year with December 2022 still 12.7% below pre-pandemic levels at 6.2m bpd.

The forecast is revised up slightly based on accelerated emerging market vaccination forecasts, although the recovery will be slow due to long-term demand destruction of 30% on business travel, the bank said in a research note Thursday.

"We have remained optimistic on the recovery in jet demand in our demand forecasts due to our economists' optimistic expectations on global vaccinations and GDP growth that have largely borne out so far for DM [developed market] economies."

Key factors will be the vaccination threshold at which case rates low enough for governments to be comfortable reopening borders to visitors, with Goldman working on a 50% level.

US jet fuel demand has already recovered quickly due to a higher number of domestic flights, while European demand should ramp up sharply in July, said the note.

However, if governments take a more cautious approach to easing restrictions, particularly in Asia where high sensitivity to upticks in case rates has already been shown, the Goldman model predicts significant delays to demand growth.

"A vaccine threshold of 60/70% would mean demand of 4.75/4.35m bpd in Oct-21 respectively, and delay the increase to 5m bpd until Dec-21/Apr-22 respectively," said the note.

Upside risk is also present based on the possibility that a small number of additional routes could see a disproportionate amount of passenger demand added, or that fuel-hungry long-haul routes with small passenger numbers could accelerate fuel demand beyond passenger number increases, Goldman added.

In Asian trading hours Thursday jet kero refining margins for spot FOB Singapore weakened relative to the forward curve, with cash differentials for jet fuel down $0.1/b on the day to $0.50/b below the underlying swaps market.

However, front-month cracks rose $0.14/b to $4.17/b while Q4 cracks rose $0.12/b to $6.49, according to Quantum data, the highest level in more than two weeks.