ANS, Brent mid-$70s
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Corporate travel returning, will undergo transformation, Delta CEO says
Steve Sutherlin Petroleum News
North Slope crude closed at $73.62 per barrel June 16, slipping 30 cents from its post-COVID high of $73.92 set the day before. Brent continued to a new high, jumping 40 cents to close at $74.39 and WTI rose 3 cents to close at $72.15.
WTI remained above $70 for the five days leading up to June 16, as Brent and ANS staked out the middle $70s under a robust demand scenario that had analysts in wide agreement that prices will continue an upswing due to robust demand, which has outstripped additions to supply. Several analysts said oil would get much more expensive, with the $100 mark in play.
Maglan Capital President David Tawil told Fox Business June 16 that he anticipated an oil crisis within the next three years due to “incredible” demand and pressure on the supply side.
Tawil said he expected oil to hit $100 by the end of 2021.
“Simply from supply and demand dynamics, we are going to have a much, much higher oil and gasoline environment,” Tawil said.
The hot streak was cooled at the end of the day June 16, as the U.S. dollar posted its strongest single-day gain in 15 months on comments from the Federal Reserve that it may raise interest rates more quickly than expected.
Fed officials indicated that rate hikes could commence in 2023, after statements in March that the Fed anticipated no increases until at least 2024.
A stronger dollar is bearish for commodities, and that rule held sway as Brent and WTI prices fell by more than 1%, as early June 17 trading kicked off in Asia.
Losses were held in check, however, by data that pointed to increasing demand.
The U.S. Energy Information Administration said U.S. commercial crude oil inventories for the week ending June 12 decreased by 7.4 million barrels from the previous week to 466.7 million barrels - 5% below the five-year average for this time of year.
China continued to see signs of stronger demand with refinery throughput in the country at a record high, up 4.4% in May from the same month a year ago.
Aviation demand gains altitude An important air travel milestone was passed June 11, as the U.S. Transportation Security Administration screened more than 2 million travelers in one day.
The 2,028,961 people passing airport security checkpoints marked the first time that more than 2 million individuals were screened in a day since March 2020, the TSA said in a June 12 release, adding that June 11 saw 74% of travel volume versus the same day in 2019 and 1.5 million more travelers than the same day in 2020.
The June 11 passenger numbers mark a dramatic comeback from April 13, 2020, when just 87,534 individuals were screened at airport security checkpoints.
Aviation fuel demand has throughout the pandemic recovery lagged gasoline and road fuels demand and while road traffic has largely returned to pre-pandemic levels in the United States and Europe, airline travel is yet to recover.
According to Delta Airlines CEO Ed Bastian, the U.S. consumer is leading the recovery in air travel.
“Domestic leisure is expected in June to be more than 100% recovered,” Bastian said in remarks to the Bernstein Strategic Decisions Conference June 3. “Booking volumes are also more than 100% recovered to 2019 levels, which indicates that demand for travel is going to continue to accelerate from this point.”
Business and long-haul travel is yet to recover, however.
“Corporate travel is improving - still not where it needs to be by any means, but domestically, we’re at about a 30% recovery level,” Bastian said.
Corporate travel is on the mend, getting stronger each week, he said.
“Anecdotally, from the many CEOs and business leaders I talked to, people are just - they’re ready to go and they are starting to move,” Bastian said. “In large part, this is going to be initiated by the reopening of businesses.”
Bastian said he expects that corporate America will be open for business no later than Labor Day.
“As the businesses are reopening, corporate travelers are getting back to doing what they do which is driving their business, being out, making connections, and continuing to lead their businesses forward,” he said. “For Delta, for example, we are fully open now this month of June, and many, many companies here in the southeast are already back to 2019 levels.”
Business travel in transformation Bastion said he expects that going forward, the traditional corporate travel that Delta has carried will be reduced by 20% to 30%, but it doesn’t mean the overall volume is going to be 20% to 30% lower.
“I think the lines actually will hold in just fine with where we were in 2019; I think the mix is going to change; the nature of the travel is going to change,” he said.
Video conferencing tools are here to stay, but they will complement business travel rather than be a substitute for it, Bastion said.
“Now, that everyone’s used to video technology, you literally take your office with you when you get out on the road,” he said, “Video technology makes you mobile, it doesn’t make you immobile; it actually gives you freedom to move. That’s just one of many ways we’re going to see that technology complements what we do.”
Internationally, some business trips such as overnights to Europe won’t return, and they shouldn’t return because they are and inefficient use of people’s time, Bastian said.
“When people travel internationally, I think people are going to spend more time, getting back and actually investing in relationships,” he said. “The world needs to get reconnected, and we’ve never felt as disconnected as a society as we are today… one of the reasons is because people haven’t been able to be with each other.”
“I think there’s going to be a renaissance of business travel in our country,” he said.
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