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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Russia is considering the possibility of joint projects with the United States and China, Kirill Dmitriev, Head of the Russian Direct Investment Fund, (Russia's sovereign wealth fund), was quoted as saying by state media on Wednesday.
Two Chinese tankers laden with oil exited the Strait of Hormuz on Wednesday, shipping data showed, brightening hopes that the U.S.-Israeli conflict with Iran may soon be resolved after positive comments from the U.S. President and his Deputy.
Iranian Foreign Minister Abbas Araghchi said Tehran remained committed to reaching a diplomatic settlement with the U.S. while continuing to strengthen its defensive capabilities amid ongoing regional tensions.
Finance ministers from the Group of Seven (G7) have urged the International Monetary Fund (IMF) and the World Bank to increase support for countries hardest hit by the conflict in the Middle East.
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Turkish Foreign Minister Hakan Fidan and German counterpart Johann Wadephul said Monday that Ankara and Berlin are both keen to deepen strategic cooperation.
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