Singapore's Phase 3 reopening from Dec. 28 and imminent vaccines rollout herald positive news for the Asian jet fuel industry, which has struggled due to the massive slump in demand, reflecting the colossal challenges posed by the coronavirus pandemic, industry sources said.
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Singapore's Prime Minister Lee Hsien Loong, in a nationwide address on Dec. 14, announced Phase 3 of the country's reopening, which will include easing capacity limits in public places like malls and attractions, while also giving an update on the COVID-19 situation in the country.
The Health Sciences Authority has approved the Pfizer-BioNTech vaccine for pandemic use, Lee said. The first shipment should arrive by the end of this month and Singapore will also take other vaccines in the coming months, he added.
"I think that following PM Lee's speech yesterday, there is no denying that tourism for Singapore will see improvement [in 2021]," a Singapore-based refining source said Dec. 15.
"If you factor in the air travel bubble and corridors with other nations like Hong Kong and Taiwan, the improvements will definitely be more significant," he said.
Singapore's Civil Aviation Authority, or CAAS, on Dec. 11 said that it will lift border restrictions for visitors from Taiwan from Dec. 18
Earlier, a similar air travel bubble was planned with Hong Kong to facilitate leisure travel. However, the CAAS on Dec. 1 said it was deferring its start, given that the number of local unlinked cases in Hong Kong was still high.
Meanwhile, Singapore has also established Fast Lane travel arrangements with various countries and regions.
Air passenger traffic in doldrums
The Association of Asia Pacific Airlines reported on Dec. 2 that Asia Pacific air passenger traffic tumbled 95.1% on the year in October amid prolonged border restrictions leading to "precipitous declines in air traffic and global connectivity".
The AAPA added that Asia-Pacific airlines carried 1.5 million international passengers in October -- representing just 4.9% of the 31.3 million that traveled in the same year-ago period.
While, the air travel bubbles will likely spur travel somewhat, international travel will see a gradual recovery rather than an immediate spike, a source said. However, the pace of vaccinations could change this, he added.
"If the oil price is to be measured by mobility from point A to B, we might have to add it to the equation as travel demand will most certainly see more planes in the sky post-global immunization," Stephen Innes, chief global markets strategist at Axi, said.
"As more folks in the general population get vaccinated, mobility will increase substantially," he added.
Prices resuscitate on vaccine hopes
Evidencing the buoyed sentiment, the FOB Singapore jet fuel/kerosene cash differential spiked 11 cents/b, or 44%, day on day to a discount of 14 cents to the Mean of Platts Singapore jet fuel/kerosene assessment at the 0830 GMT Asian close Dec. 14.
The cash differential slumped as low as MOPS jet fuel/kerosene minus $4.67/b on May 4 as the aviation sector buckled under the impact of the coronavirus pandemic, Platts data showed.
In the derivatives market, the M1-M2, or January-February timespread also trended higher to minus 23 cents/b at the Dec. 14 close, rising 5 cents/b on the day. Further down the forward curve, the Q1-Q2 quarterly spread rose to a 10.5 month high of minus 57 cents/b. According to Platts data, the spread was last higher on Jan. 29 at minus 14 cents/b.
Still, any further gains will likely be capped, market sources said.
"Our baseline assumption considers that the vaccines' effect on economic activity everywhere will start to become apparent in the latter part of 2021," JY Lim, oil market adviser at S&P Global Platts Analytics said. "Even so, jet fuel demand is expected to remain weak next year due to changing consumer behavior and airlines are likely to continue to function well below capacity, especially for international flights," Lim added.
Singapore Airlines Group to rebuild network
Meanwhile, national carrier Singapore Airlines, and SilkAir have announced their flight schedules through March 2021, with new cities added and frequencies increased in a statement last updated Dec. 15.
Scoot -- the SIA Group's low cost airline -- will temporarily suspend its service to Kuala Lumpur, Manila and Perth, while SIA and SilkAir will increase their frequencies on those routes, it said, adding that the group's passenger capacity will reach about 20% of its pre-COVID-19 levels by end-March 2021.