Memorial Day Air Travel Hits 20-Year High, Boosts Jet Fuel Demand by 430,000 B/D

Key Takeaway

• Memorial Day air travel is set to hit a 20-year high, boosting jet fuel demand by 430,000 barrels/day through August.
• US jet fuel demand has surged to its highest since 2019, with expectations of a 5% increase in 2024.
• Rising jet fuel consumption contrasts with stagnant gasoline demand, offering potential relief for oil bulls seeking a summer rally.

Surge in Air Travel

This Memorial Day weekend, a significant shift in travel patterns is emerging as more Americans opt to fly rather than drive. Roshni Sharma, a 27-year-old nurse from Alexandria, Virginia, exemplifies this trend. Typically, she drives to her parents' house in Pennsylvania, but this year, she and her husband are flying to Austin, Texas, to visit a friend. "Driving down to Texas would have easily been a two- to three-day affair one way, and the entire span of our trip is two or three days, so flying is faster," Sharma said.

The American Automobile Association (AAA) projects that the number of travelers flying this Memorial Day weekend could be the highest in nearly 20 years, marking a 4.8% increase from last year and a 9% rise from 2019. This surge in air travel is reshaping the summer market for refined oil products, with jet fuel demand outpacing gasoline. According to US government data, jet fuel demand has already surged to its highest level since 2019 on a four-week-average basis. US passenger volumes for the week ending May 17 climbed by around 1.5% from the previous week, and BloombergNEF expects passenger numbers to continue growing toward the end of the month.

Rising Oil Demand

The Memorial Day weekend traditionally marks the start of the peak US driving season, and broader oil demand is expected to pick up in the coming weeks. JPMorgan Chase & Co.'s global commodities research team forecasts that global crude consumption will increase by 2.8 million barrels a day from the end of April through the end of August. Jet fuel demand alone is expected to rise by 430,000 barrels a day during this period.

Austin Lin, an analyst for Wood Mackenzie, highlighted the robust growth in jet fuel demand, stating, "We see jet as our fastest-growing fuel globally." He added that US jet fuel demand might advance about 5% in 2024, with global consumption rising at a slightly higher rate, driven by strong American consumer spending and a delayed recovery from the pandemic in China.

Gasoline Demand Outlook

In contrast to the strength in jet fuel, the outlook for gasoline remains lackluster. While US demand for road fuel rose this week, it is still languishing at two-year seasonal lows. JPMorgan forecasts that global gasoline demand will fall by an average of about 100,000 barrels a day in 2025. This has driven bullish gasoline bets to their lowest level in six months, as money managers failed to see returns on spring investments in the fuel. Although traders still anticipate a seasonal boost, it may be tempered as consumers grow weary of high prices at the pump.

The trend of longer average flight lengths and growing passenger volumes is more than compensating for the increased efficiency of jet engines. Aixa Diaz, a spokesperson for AAA, noted that consumers have favored spending money on experiences since the Covid-19 pandemic, prompting more travelers to splurge on once-in-a-lifetime trips to Europe or Asia. Lin from Wood Mackenzie sees jet fuel demand benefiting from this cultural shift over the longer term. "People are not feeling a lot of pain in their spending," Lin said. "There wasn’t a consequence to that post-Covid spending boom. Nothing bad happened, so there is a bit of an adaptive behavior out of that."

Street Views

• Austin Lin, Wood Mackenzie (Bullish on jet fuel demand):

  "We see jet as our fastest-growing fuel globally. US jet fuel demand may advance about 5% in 2024, and global consumption may rise at a slightly higher rate, driven by robust American consumer spending and a delayed recovery from the pandemic in China."