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Are Air Traffic and Jet Fuel Prices Supporting Expectations for Higher Prices?

Minneapolis, MN | August 8, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC

Air traffic notches upward in key regions, and cracks support greater distillate runs, suggesting a supportive contribution to demand numbers, but failing to accelerate and support greater upside.

Three Things

  1. Jet fuel demand was, at least for a moment, the next driver of the prevailing supercycle narrative. If jet demand recovered, prices would rise. Passenger traffic has consistently improved, but cargo traffic hasn’t kept pace.

  2. Europe and Asia have reported stable demand. Combined with diesel demand, distillate cracks incentivized refineries to lean toward distillate output, possibly slowing the rise. Wider cracks are nevertheless a good signal for prices.

  3. Stable prices followed stable demand.

Air Traffic Mixed but Supportive

For months analysts pointed to jet fuel demand as the key ingredient to an accelerating bull run. Reports from across the globe have been mixed. For bulls, they offered a tease of demand recovery. For bears, it confirmed we hadn’t recovered. That pattern persists with the most recent releases from global airline associations. The Association of Asia Pacific Airlines, which covers the demand centers public analysts had pinned their forecasts on, again reported stable passenger demand growth combined with weaker-than-expected cargo demand growth. This combination is a good summary of the risks in the market - a mix of recovery v. localized recessionary signals.

*This summary is based off July 30, 2023

A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


Meet the Author!

Phone: +1-832-413-3124

Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.

He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.

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