The True Edge
A Navarik Market Update
Delta Airlines this week posted higher-than-expect profits, on the back of increased revenue per available seat mile (an industry metric) and lower fuel costs. This was in spite of Hurricane Irma disrupting flights out of Atlanta-Hartsfield Airport. It would be easy to speculate that the latter industry-wide advantage might dissipate if OPEC’s supply cuts are finally working after all, but on deeper inspection we see this is not quite the case.
First, if the International Air Transportation Association (IATA) is correct in its assessment that the purchasing manager’s index (PMI) is indicative of passenger and freight revenues, then the fact that the PMI has recently flattened should suggest that aircraft utilization should stabilize. Second, US domestic production of jet fuels is recovering from it’s brief tenure at multi-year lows. Third, Navarik proprietary data on expected imports into the US West Coast suggests that the outlook for the remainder of 2017 is tracking almost exactly 2016.
These trends suggest that there should be existing supply capacity to meet stabilizing customer demand. So even if jet fuel input prices (i.e. crude) rise, this should be evenly handled by the price system rather than creating an external shock. But should one of these projections fail to hold, there could be some turbulence ahead.
• CNBC, October 11 2017
Colin McCann is an Oil & Gas analyst with Navarik Corporation. The Navarik Data Products team analyzes Navarik's proprietary data sets and external sources to provide insights into the oil & gas shipping market. The resulting analysis enables physical and paper traders to see ship movements across the barrel before anyone else in the market.
A list of current available trade flow reports can be found here.