China’s holiday air travel boost a bright spot for battered oil

Chinese tourists returned to the skies in droves over the Labor Day holidays as people embraced travel again following the end of Covid curbs, providing a bright spot for an oil market facing broader demand concerns.

About 9.42 million air passenger trips were made during the five-day break, with the daily average 4.2% higher than the same holiday period in 2019, prior to the pandemic, the Ministry of Transport said late Wednesday.

Chinese jet fuel consumption is seen as the single biggest driver of global oil demand growth this year, JPMorgan Chase & Co. said in a note this month, and investors will be keenly watching to see if the holiday rebound will translate into a sustainable trend. Crude futures have buckled this week as fears over a US recession hang over the market.

Air travel within China accounts for 70% of the country’s jet fuel consumption, and the market is watching for a pick up in international flights after years of closed borders due to the nation’s restrictive Covid Zero policy.

Domestic travelers flew an average 1,638 kilometers (1,000 miles) over the break that started April 29, almost matching 2019, according to a statement from the nation’s top online travel platform, Trip.com Group. The number of international flights was 40% of the level recorded four years ago, Trip.com said, citing FlightAI data.

China’s jet fuel demand is expected to climb by 325,000 barrels a day this year and average 725,000 barrels a day, which will be 10% lower than 2019, said Mukesh Sahdev, the Sydney-based head of oil trading at Rystad Energy. Consumption will peak in August and September at around 780,000 barrels a day, he added.