The head of a body representing global airlines said on Wednesday that even if Iran reopened the Strait of Hormuz it would take months for jet fuel supply to recover given disruptions to Middle East refining capacity.
Oil fell below $100 per barrel after U.S. President Donald Trump said he had agreed to a two-week ceasefire with Iran that was subject to the immediate and safe reopening of the Strait of Hormuz, which normally carries about a fifth of the world's oil trade.
Director General of the International Air Transport Association (IATA), Willie Walsh, told reporters in Singapore that while he expected crude oil prices to fall, jet fuel costs were likely to remain slightly elevated due to the impact on refineries.
"If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East, which is a critical part of the global supply of refined products, and not just jet fuel for other products as well," Walsh said.
Airlines across Asia have been cutting flights, carrying extra fuel from home airports and adding refuelling stops as the Middle East conflict squeezes jet fuel supply, adding to pressure on an industry already hit by a doubling of jet fuel prices.
The pain has so far been sharpest in lower-income, import-dependent markets such as Vietnam, Myanmar and Pakistan after China and Thailand halted jet fuel exports and South Korea capped them at last year’s levels.
If crude started flowing again then "I would like to think" that China as well as South Korea would restart their exporting of refined products, Walsh said.
"So there is (refining) capacity available once we get the crude oil flowing, but it'll take a little bit of time, and with the crack spread elevated the way it is, I think that provides an incentive for refineries to increase the production of jet fuel," Walsh said.
The crack spread refers to refinery margins.
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