Airlines Hedge Against Rising Fuel Prices
November 8, 2021
US oil rigs increased by six to 450 this past week, to their highest level since April 2020. This is from the Baker Hughes Rig Count Report.
Crude oil and refined fuels product prices close higher on Friday after reaching a one-month low on Thursday. OPEC+ decided on Thursday in a monthly meeting to stick to their current agreement and not add any additional barrels to the market. The US, Japan, and India had made a public request asking OPEC to increase oil output to meet rising demand and try to lower prices.
Supportive of oil prices and fuel demand, the US Bureau of Labor Statistics reported early Friday that 531,000 new non-farm jobs were created in October. This was much higher than the 450,000 new jobs expected by economists. BLS also revised September new jobs up to 312,000 from an initial estimate of just 194,000. This helped to support prices on Friday.
Having lagged a recovery in demand to pre-pandemic levels enjoyed by other fuels, jet fuel demand appears set to finally increase as more governments make air travel easier.
Many of the world’s airlines are again hedging against higher prices. European carriers including Lufthansa Group Air France-KLM and Ryanair Holdings Plc have said in recent days that they fixed at least half of their fuel bills for parts of next year.
The US Congress passed a $1 trillion infrastructure bill over the weekend and that is expected to increase growth and demand for energy.
Saudi Arabia raised its official selling prices on crude oils late last week. They made some of the biggest price increases in decades, a move that was allowed because of low global stockpiles and tight supplies, according to Vitol Group.