By Koustav Samanta

SINGAPORE, (Reuters) – Global jet fuel markets remained under pressure Tuesday as more countries increased border restrictions in an effort to stop the Omicron coronavirus variant. This prompted travellers to reconsider their travel plans.

According to an International Energy Agency report, Nov. 16, jet fuel demand was the largest laggard within the oil industry. It had been predicted to experience the highest growth rate of 550,000 barrels per days to 5.9million bpd for the fourth quarter.

Omicron poses the greatest threat to jet fuel use. Hong Kong extended a ban against entry to non-residents for several countries. It is the latest move to tighten travel controls after Japan, Israel, and Japan announced their border closings.

Australia and Britain tightened their rules on all arrivals to accommodate the new version. This is why thousands upon thousands of travellers will be considering cancelling or delaying their travel plans in light of these restrictions.

Energy consultancy FGE stated in a note that “the real danger from this new variant is… the imposition of greater flight restrictions during winter, and again reducing global jet fuel consumption of around 6 million barrels/day significantly.”

Graphic: Asia jet fuel prices https://fingfx.thomsonreuters.com/gfx/ce/akpezmdyxvr/Pasted%20image%201638249448721.png

Asian refiner margins of jet fuel fell to $6.92 per barrel on Monday. Meanwhile, the front-month spread in Singapore for aviation fuel flipped to contango for first time since September.

In a November 26 note, Goldman Sachs analysts stated that “current jet demand levels were just 1 mb/d higher than last winter when hospitalizations and cases were much higher” (NYSE:).

Given what we know, the worst outcome would be to return to levels last winter. But, it is reasonable to assume that there will be no 0.5 Mb/d drop in base-case to 2Q22.

Graphic: Asia refining margins slip from 2-year highs https://fingfx.thomsonreuters.com/gfx/ce/egpbkardzvq/Pasted%20image%201638159705598.png

The latest version of the virus is affecting global airlines. Many of these have suffered since last year’s slump in air travel, with the vast majority of international long-haul flights remaining grounded.

OAG, an aviation data company, stated that 2.4% of global airline capacity had been removed over the past four months.

However, it’s too early to know if the Omicron virus of COVID-19 is causing an increase in international flight restrictions.

According to trade sources, the new version has dampened any near-term prospects for a substantial recovery in demand.

It’s almost like the ladder and snake boardgame. A Singapore-based jet fuel trader stated that Vaccinated Travel Lanes, or VTL (Vaccinated Travel Lanes), would help maintain the industry’s momentum.

“Definitely, it’s not possible to see a rapid recovery like was predicted before this Omicron variation.”