Airlines, shippers paint souring oil demand picture

TARIFF WAR

- ALEX LONGLEY

The world’s big industrial-scale consumers of oil are flashing warning lights for demand as the tariff war causes the outlook for the global economy to deteriorate.

Several US airlines withdrew earnings guidance for this year over the past several weeks, citing uncertainty in the global economic environment and a recent spate of soft domestic bookings. In the freight market, more than 40% of container ship capacity between Asia and the US has been cancelled for some of the coming weeks and top liners are using smaller vessels to meet customer needs.

Collectively, they offer some of the first real-world reactions to a tariff war that's meant to reset US relations with the nation’s top trading partners. The aviation and marine fuel sectors account for more than 10% of global oil consumption combined, and there are potential knock-ons for the truckers transporting containers when goods arrive at their destinations, leading to a further threat to diesel consumption.

“The year started out very strong, however, that changed and we saw demand weakened as the quarter progressed, especially in leisure demand,’ Bob Jordan, chief executive officer of Southwest Airlines Co, said in an earnings call this month. “We have seen softer booking trends continue into the second quarter.”