European jet in fragile state as travel restrictions kick in

London — The outlook for European jet fuel demand is worsening as fears arising from the coronavirus are beginning to affect business travel in the region.

Several European companies are advising their employees to only travel when necessary with not only Asian travel restricted.

"It is a disaster for jet demand...hearing more internal [business] travel restrictions," said a jet fuel trader based in Northwest Europe.

The winter travel season, which is typically low demand, already hangs over the European market exuding downward pressure. And, as the coronavirus spreads globally, companies are trying to limit

potential economic losses by curbing travel.

Impact on IP Week

A similar effect is also being felt on the oil markets. Several European oil traders have put their travel plans on hold as companies move to limit the potential impact from the virus.

Many in the oil industry are rethinking their attendance at the International Petroleum week in London, which starts on February 24, and is Europe's premier oil event.

"We don't know if we will come for IP week," a middle distillate trader said Wednesday. "With all the travels, flights, business meetings, the parties where people congregated, there is a risk,

and even if the risk [of getting infected] is tiny, the cost for the company would be huge, " he also said, adding he didn't know whether the global panic was justified.

Recent oil and gas conferences in Europe also faced angry climate change protesters, disrupting various events and speeches. Traders said this was also discouraging them to travel for IP week.

"We are lobbying very hard to cancel all our travels especially IP Week," said another oil trader. "Activists will be throwing rotten eggs at us while we catch all kinds of disease. I don't see much upside in going under those conditions."

Some oil companies that host large parties and gatherings at IP Week have also cancelled their events, according to several trading sources.

"Due to recent global developments concerning the spread of the coronavirus and after careful consideration, we unfortunately had to decide to cancel this year's [event]," read the email of

a European company that hosts a party at every IP Week.

"Normally I am come for IP Week but currently we are calling into question quite a lot of travel plans," a third trader added.

There is also expected to be a sharp drop of visitors from Asia-based oil traders to London, according to sources.

Asia is the main oil demand hub, where four of the world's largest crude oil importers are based, namely China, India., South Korea, Japan.

Globally, the number of confirmed cases has risen to 40,645, with 40,262 of those in China, according to the World Health Organization.

Jet cracks fall

This does bode well for the global jet fuel complex, which has continued to crash amid the growing bearish sentiment.

The jet CIF NWE cargo swaps hit multi-year lows this week, declining since the news of the outbreak.

Jet fuel CIF NWE front-month swap's differential to ICE low sulfur gasoil futures was down to $24.75/mt, its lowest level since October 2017, while the second month was at $26.25/mt, its lowest since August 2016, Platts data showed.

By mid-week, cracks recovered slightly but with demand poised to fall further, traders expect more downward pressure.

Looking further out, even the Q2 and Q3 2020 Jet CIF NWE cargo swaps have been weakening, adding to the bleak outlook, traders added.

The outbreak has slammed the brakes on China's oil-hungry economy, sending oil prices down by more than $10/b or almost 20%, when news of the virus first emerged.

Global oil demand is poised to contract for the first time in a decade during the first quarter of 2020, according to the International Energy Agency.

The IEA cut its 2020 oil demand growth forecast by 365,000 b/d to 825,000 b/d, the lowest since 2011, in its recently published monthly outlook.