Cricket lovers propel India's Nov jet fuel demand past prepandemic levels

India's appetite for jet fuel surged nearly 12% year on year in November as the festive season coupled with the world's biggest cricket championship sharply boosted demand for air travel, helping average monthly demand for the oil product surpass 2019 levels before the pandemic, analysts told S&P Global Commodity Insights.

Data from the Petroleum Planning and Analysis Cell showed that the country's jet fuel demand stood at 690,000 mt, rising 11.7% year on year from the same period a year earlier at 618,000 mt. This took cumulative demand for jet fuel in the nine-month period to 7.32 million mt, up 18.8 % year on year from 6.16 million mt in the same period a year earlier.

As a result, jet fuel has turned out to be the product registering the sharpest growth in India so far in 2023.

"In November, India's jet fuel demand crossed the average demand seen in 2019 although flight departures, both domestic and international, and domestic passenger footfall had crossed the pre-pandemic level long before. Led by extensive travel during the festive season and the country hosting the 2023 cricket world cup, India's flight departures during the month got a sharp boost," said Himi Srivastava, an analyst for South Asian oil markets at S&P Global.

Key theme for 2024

Jet fuel demand recovery is a key theme in 2023 and will remain so in 2024 in India and globally. India's flight departures during November increased 3% month on month and 9.4% year on year, while the average growth seen for the 11 months of 2023 was about 16% above the same year-ago period. On the same lines, domestic passenger footfall grew 26% year on year for the first 10 months, about 6% above 2019 levels, according to S&P Global data.

"With the rise in economic growth and incomes, we are seeing busier airports as people have resumed traveling for work. This is back to pre-COVID levels. Also, with the reopening of travel in all the countries, people are traveling for vacations as well. And this year, with India hosting important events like the G20 meeting and the Cricket World Cup, which was organized in many cities, even domestic travel picked up a lot," said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis.

The ICC Cricket Men's World Cup is organized by the sport's governing body, the International Cricket Council, every four years. This year, it was held in India, starting Oct. 5 and ended on Nov. 19.

"India is seeing an average demand of 175,000 b/d in 2023, slightly lagging behind the average of 178,000 b/d seen in 2019. However, November demand marks the first month of the year where the number has outpaced the average pre-pandemic demand and we do not expect any looking back from here," Srivastava added.

"On a year-on-year basis jet demand in 2023 is expected to see a growth of 18%, but growth is projected to slightly slow down to 16% in 2024."

Promising outlook

Looking at the overall trend over the past few years, the number of air passengers have increased to as high as 145 million from just about 60 million in 2014, highlighting the Indian government's efforts in increasing air connectivity, as well as reflecting a rise in purchasing power. It is expected that the number of air passengers will triple to 420 million by 2030, offering an exciting growth opportunity to both domestic as well as international airlines, according to Sumit Pokharna, vice president at Kotak Securities Ltd.

"Going forward, the consumption of jet fuel will increase with GDP growth and increase in number of air passengers. However, the major headwind is the elevated crude oil prices and ATF prices. Air turbine fuel is close to 40% of operating cost of airlines. Hence, any meaningful correction in commodity prices will be big positive for the sector," Pokharna added.

On an annual basis, global kero/jet demand is expected to grow 1.02 million b/d in 2023, up from 827,000 b/d in 2022. Asia is mostly driving growth this year as China reopens for travel. Global kero/jet demand is expected to grow by 420,000 b/d in 2024 before increasing 332,000 b/d in 2025. However, global kero/jet fuel demand in 2024 and in 2025 will still be 5.9% and 1.8% lower than 2019 levels, respectively, as international travel will take time to fully recover, according to S&P Global.