Looking ahead into 2022, US crude oil export flows will continue to recover and grow as demand and prices surge, but will we see export…
Jan 13, 2022
Looking ahead into 2022, US crude oil export flows will continue to recover and grow as demand and prices surge, but will we see export volumes return to the record levels we were seeing a couple of years ago?
S&P Global Platts US crude managing editor Laura Huchzermeyer, US Gulf Coast crude reporter Kristian Tialios, and Platts Analytics’ North American oil analyst Lisa Orme discuss market trends impacting the waterborne crude oil market on the US Gulf Coast, along with the forecast for volumes in 2022.
Dec 20, 2021
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Jan 25, 2022
Crude oil futures rose in mid-morning trade in Asia Jan. 25, after a selloff the previous day, as the Pentagon put 8,500 troops on “heightened readiness” over the Ukraine tensions, and amid geopolitical tensions in the Middle East.
At 10:46 am Singapore time (0225 GMT), the ICE March Brent futures contract rose 57 cents/b (0.66%) from the previous close at $86.84/b, while the NYMEX March light sweet crude contract rose 40 cents/b (0.48%) at $85.71/b.
The US Pentagon said late Jan. 24 it has put 8,500 troops in the US on heightened alert over tensions in Ukraine. The group will be part of the NATO Response Force if activated.
A foiled Houthi missile attack on Jan. 24, directed at OPEC’s third-largest oil producer the UAE, have also raised supply concerns.
The intercepted attack followed a Jan. 17 drone and missile strike on an Abu Dhabi National Oil Co. fuel depot in the industrial zone of Musaffah.
“Oil prices climbed on Tuesday morning [Jan. 25] to regain some of the ground lost overnight on concerns over possible supply disruptions amid rising geopolitical tensions in both Eastern Europe and the Middle East,” Avtar Sandu, senior manager of commodities at Phillip Futures said.
Outlook on demand remained healthy, even as the number of COVID-19 infections have risen in recent weeks, with oil producers seen struggling to meet rising demand, analysts said.
“The International Energy Agency joined OPEC in noting that demand has been relatively robust. Saudi Aramco CEO Amin Nasser said that demand is nearing pre-COVID levels. He also warned that producers are investing too little,” ANZ analysts said in a Jan. 25 report.
This has seen OPEC struggle to increase output despite the group raising quota levels in recent months… US crude oil output remains well below pre-pandemic levels amid subdued investment from the US shale oil industry,” they added.
Total US commercial crude oil stocks likely fell 2.1 million barrels to around 411.7 million barrels in the week ended Jan. 21, analysts surveyed by S&P Global Platts said Jan. 24, as exports pushed to six-week highs.
The draw would leave stocks at its lowest since October 2018 and around 8.7% behind the five-year average of the US Energy Information Administration data.
Crude oil prices rebounded during Jan. 25 morning trade after a selloff on Jan. 24 when prices fell sharply during midday US trading.
“As the FOMC [Federal Open Market Committee] sits down to discuss the economic outlook, concerns are mounting that they will raise rates quicker than previously expected amid high inflation. A stronger US dollar also weighed on investor appetite,” the ANZ analysts wrote.
The FOMC will meet Jan. 25-26.
Joel Hanley, Global Director, Crude & Fuel Oil Markets, discusses with ICE on the expansion of their U.S. Gulf Coast Crude futures contract. This video…
Dec 07, 2021
Joel Hanley, Global Director, Crude & Fuel Oil Markets, discusses with ICE on the expansion of their U.S. Gulf Coast Crude futures contract. This video was produced in collaboration with the 23rd annual S&P Global Platts Global Energy Awards which will be broadcast on Thursday, December 9th. For further details about this gala and how to attend, please visit https://www.spglobal.com/platts/global-energy-awards/attend.
Security incidents targeting oil facilities, pipelines and tankers are on the rise. According to data compiled by S&P Global Platts, security events such as physical…
Sep 08, 2021
Security incidents targeting oil facilities, pipelines and tankers are on the rise. According to data compiled by S&P Global Platts, security events such as physical attacks on petroleum infrastructure, or shipping, in the Persian Gulf and the Arabian Peninsula region have tripled on an annualized basis since 2017. This year has seen a peak in the number of incidents reported by Platts over the period, with 27 confirmed security events verified through to Sept. 6.
Prices for Russia’s Urals crude exports have hit near 12-month highs vs regional benchmarks in response to fears of escalation on the border with Ukraine.…
Jan 24, 2022
Prices for Russia’s Urals crude exports have hit near 12-month highs vs regional benchmarks in response to fears of escalation on the border with Ukraine. Europe is heavily reliant on direct imports via the Druzhba pipeline. For gas, the crisis comes amid controversy over Russia’s plans for a new Baltic supply route, Nord Stream 2, and supply shortfalls blamed on lack of storage, and disruptions in the North Sea.
Central European countries have long been trying to reduce dependence on Russian oil and gas, building import terminals and pipelines, with several projects still to be completed. Russia has become a major exporter of oil and petroleum products to the US, adding to the complex task facing President Joe Biden in talks with Moscow to ease tensions.
State oil company Petroecuador plans to drill a total of 33 wells in its largest oilfields this year, part of the government’s goal to double…
Jan 24, 2022
State oil company Petroecuador plans to drill a total of 33 wells in its largest oilfields this year, part of the government’s goal to double the country’s crude oil production, CEO Italo Cedeno said Jan. 24.
The company will drill 12 wells in the Shushufindi fields, 11 in Auca and 10 in Yuralpa, all in the Amazon jungle Napo Basin, Cedeno said in a statement.
“It’s our obligation to optimize the fields,” Cedeno said after visiting the fields. “We have to take advantage of the high oil prices.”
Auca is currently producing 74,980 b/d, followed by Shushufindi (58,807 b/d) and the Yuralpa block’s Coca-Payamino field (12,667 b/d), the company said.
Petroecuador’s oilfields are operating at 99% of capacity after restarting the 360,000 b/d SOTE oil pipeline, according to the company. The SOTE conduit reopened Dec. 30 after a three-week shutdown due to flooding.
Ecuador’s President Guillermo Lasso, a former banker who began his four-year mandate in May 2021, seeks to award Petroeduador’s refineries, oilfields and pipelines as private concessions this year in a bid to boost Ecuador’s oil production to 1 million b/d.
Barring dramatic changes, S&P Global Platts Analytics projects Ecuador’s crude production to grow from about 502,000 b/d in 2021 to more than 590,000 b/d by 2030.
Ecuador was producing 493,700 b/d of crude through Jan. 20, according to the ministry. Petroecuador accounts for about 80% of the country’s output.
The Jan. 24 announcement followed news last week that Canadian oil company Frontera Energy made the first oil find in Ecuador in six years.
The Jandaya-1 well was drilled to a depth of 10,975 feet and is expected to start long-term testing next month, Calgary-based Frontera said in a statement. The Perico oil and gas field, a joint venture with GeoPark, will see a second well (Tui-1) drilled in February, according to Frontera.
Our editors and analysts are keeping an eye on current oil prices and supply factors, as well as the global spare capacity over the next…
Jan 24, 2022
Our editors and analysts are keeping an eye on current oil prices and supply factors, as well as the global spare capacity over the next few months. Methanol and tin prices are also in focus, while container premiums are hitting the ceiling.
What’s happening? Recent oil supply disruptions include pipeline shutdowns in Ecuador affecting 270,000 b/d in December, the shutdown of 350,000 b/d from Western Libyan oilfields for three weeks through Jan. 10, and public unrest in Kazakhstan reducing January crude supply by an estimated 50,000 b/d. In addition, a deadly Jan. 16 drone attack in the UAE raises alarm in one of the only remaining sources of notable spare capacity, while odds for an Iran nuclear deal are diminishing and a potential Russian military incursion into Ukraine keeps markets on edge and risks Western energy sanctions.
Interactive: Platts Oil Security Sentinel
What’s next? Oil markets currently possess sufficient spare capacity to offset sporadic outages. However, this OPEC+ buffer will fall to 1.8 million b/d by June, just as oil demand is set to grow by 3.5 million b/d in H2 over H1. Additional oil supply could potentially come from an Iran nuclear deal, although these prospects look uncertain at best, while shale activity is restrained by capital discipline relative to prior cycles. In the event that disruptions become an increased reality, then higher prices and demand destruction become the necessary balancing mechanism.
What’s happening? Oil and other energy prices are the largest driver of US inflation, which is testing President Joe Biden ahead of the tightly contested November mid-term elections that will determine control of Congress.
What’s next? Biden said Jan. 19 he would “continue to work on trying to increase oil supplies” and acknowledged the burden that fuel prices are having on US drivers. Analysts expect the administration to consider the usual policies and rhetoric that get brought out when domestic fuel prices rise, including urging US and OPEC drillers to pump more, tapping the Strategic Petroleum Reserve again, promoting anti-OPEC legislation in Congress, pushing the Federal Trade Commission to keep probing price gouging, and potentially bringing back talk of US crude export restrictions.
What’s happening? The ongoing increase in prices for gasoline and gasoline components, such as MTBE, aromatics and ethanol makes methanol a suitable blendstock for some gasoline grades like those for West Africa or Libya. Consequently, spot methanol buying from gasoline blenders in Amsterdam-Rotterdam-Antwerp hub or in the Baltics resulted an uptrend in methanol prices, despite the firm methanol import activity, mostly from the US.
What’s next? With methanol production cost staying on the high side, due to the high feedstock (natural gas) and energy prices, source said that they expect the high methanol prices to persist while the gasoline blending outlet remains open. This also means that Europe remains an attractive destination for methanol trade flows from overseas and potentially increase further the arbitrage opportunities.
What’s happening? The tin price has maintained its upward momentum, hitting above $43,000/mt for the first time ever on tight inventories in a persistently undersupplied market. Tin is one of the so-called metals important for future technologies, or MIFTs, that is heavily used in electronics but its supply has been dwindling for more than two decades. Prices rose three-fold in the past two years. Tin prices closed at $13,180/mt in March 2020, at the start of the pandemic. The London Metal Exchange three-month spot tin price was trading at $43,650/mt as of 1236 GMT Jan. 21.
What’s next? Market sources have described the tin market as being “chronically undersupplied,” with the supply shortage being aggravated by continuous logistical issues. The tin market is minor in size at around 300,000 mt/year. A market analyst said Myanmar, one of the key suppliers to China, has long been experiencing issues with the depletion of its reserves. According to industry sources, there were very few new projects due for commissioning globally that could provide respite in terms of supply. The International Tin Association said due to positive growth forecasts for 5G technologies as well as “new markets for interconnection in electric vehicles and other climate change-related infrastructures the longer-term outlook for solder usage remains very positive.”
What’s happening? Container market rates remain elevated despite the anticipation of a slowdown during the upcoming Lunar New Year holiday. Rising COVID-19 cases aggravated concerns of supply chain disruptions. For the trans-Pacific, one of the most-active trade lanes, prices are currently at the record levels, with bookings from China to US ranging between $16,000-$21,000/FEU.
What’s next? While the exporters are bracing up for an extended lull in the market activity after the holidays, equipment shortages and booking rollovers may still be the norm due to port congestion, trucking issues, and curtailed workforce. Vessel cancellations continue to be a major pain point for shippers, together with a sharp increase in the transit time, especially on the ex-China routes. Despite weakening demand due to the saturated short-term bookings, industry participants expect trade volumes to remain high at least through H1 due to firm orders from electronics and pharmaceutical sector.
Reporting and analysis by Paul Sheldon, Alan Struth, Meghan Gordon, Stergios Zacharakis, Callum Colford, Filip Warwick, Parisha Tyagi, Greg Holt, George Griffiths
A foiled Houthi missile attack on Jan. 24 directed at OPEC’s third-largest oil producer, the UAE, has highlighted the ongoing geopolitical risks to the oil…
Jan 24, 2022
A foiled Houthi missile attack on Jan. 24 directed at OPEC’s third-largest oil producer, the UAE, has highlighted the ongoing geopolitical risks to the oil market.
The intercepted attack followed a Jan. 17 drone and missile strike on an Abu Dhabi National Oil Co. fuel depot in the industrial zone of Musaffah, which killed three people.
The incidents were “a reminder that Iran’s regional proxies will continue to act aggressively, with or without direct guidance from Tehran, while also demonstrating a clear ability to strike sensitive targets in the GCC,” said Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics.
The following are key facts on the potential impact for the UAE’s energy sector:
The UAE is a seen as a core OPEC producer with spare capacity to meet supply needs.
— The UAE is OPEC’s third largest crude oil producer, pumping 2.87 million b/d in December, according to the latest S&P Global Platts survey of the group’s output. The vast majority of the country’s crude is produced in Abu Dhabi by ADNOC.
— ADNOC’s primary crude grades are the onshore Murban and the offshore Upper Zakum, Das Blend and Umm Lulu.
— Along with the rest of OPEC and its allies, the UAE aims to completely unwind its pandemic production cuts through gradual quota hikes, with a production target of 3.50 million b/d by late 2022. That would represent a record production level for the country, if achieved. It has a long-term target of 5 million b/d capacity by 2030.
Major oil consumers in Asia are heavily exposed to geopolitical risk in the region and account for the largest share of the region’s exports.
— Japanese companies, who hold equity stakes in some of ADNOC’s concessions, are typically the largest customer of ADNOC crudes. Japan imported 737,000 b/d in December, 28% of the UAE’s total 2.598 million b/d in exports, according to Kpler shipping data. Other key buyers include China and India.
— Following the Jan. 17 attack, ADNOC said it had “activated the necessary business continuity plans to ensure the reliable, uninterrupted supply of products to its local and international customers”.
— The Abu Dhabi attacks, along with the ongoing Houthi operations aimed at Saudi Arabia, raise “modest security concerns in the world’s two biggest sources of spare capacity,” Sheldon at Platts Analytics said. By June 2022, global spare production capacity will fall to 1.8 million b/d, 95% of which will be in Saudi Arabia and the UAE, according to Platts Analytics.
— ADNOC also imports some crude to feed its giant Ruwais refinery, which is undergoing a modernization upgrade, and free up more Murban for export. Recent imports have come from Sudan, Cameroon, Angola, Nigeria and Argentina, according to Kpler.
— The UAE imports about 2 Bcf/d of natural gas from Qatar via the Dolphin Energy pipeline.
Oil prices have pushed closer to breaking above $90/b partly on heightened geopolitical concerns.
— Crude prices have surged in recent weeks on increased geopolitical risks in the market, including from the Russia-Ukraine crisis, as well as growing concerns over shrinking spare production capacity.
— Platts assessed Dated Brent at $89.81/b on Jan. 21. The global crude benchmark had hit $90.51/b on Jan. 19, its highest since Oct. 7, 2014.
— Platts Dubai, the key Middle East sour crude benchmark, was assessed at $86.74/b on Jan. 24, the highest since Oct. 14, 2014, though traders said spot activity had slowed, with an expected slowdown in Asian economic activity for the Lunar New Year.
Abu Dhabi hopes to establish its own domestic crude contract as a global benchmark.
— Murban crude futures have been traded on an Abu Dhabi-based exchange launched by ADNOC and ICE in March 2021.
— ADNOC bases its official selling price for its flagship Murban crude on the monthly average of the Murban futures prices, which go to delivery two months ahead of the month of trade. OSPs for Upper Zakum, Das and Umm Lulu are set as differentials to the Murban OSP.
The UAE has invested heavily to build capacity, new refineries, pipelines and underground storage.
— ADNOC’s main refinery is the 817,000 b/d Ruwais complex, where a $3.5 billion crude flexibility project is set to be completed in 2023. When fully operational, nearly half of Ruwais’s capacity will be able to process crudes other than Murban.
— Dubai’s Emirates National Oil Co. operates a 140,000 b/d refinery in Jebel Ali.
— ADNOC recently closed the 74,000 b/d Abu Dhabi, or Umm al-Nar, refinery, redeploying all personnel to Ruwais.
— The eastern port of Fujairah has developed rapidly in recent years to capitalize on its strategic location on the Gulf of Oman, outside the Strait of Hormuz chokepoint, with several tank farms, bunkering facilities and simple refineries.
— Fujairah is the terminus of the 1.5 million b/d Habshan pipeline, which carries Murban crude from Abu Dhabi to an ADNOC terminal.
— ADNOC is building underground caverns in Fujairah to store 42 million barrels of oil, with completion set for 2022.
— In May 2019, four commercial ships, including two Saudi-registered oil tankers, were sabotaged off Fujairah’s coast, with the UAE accusing a “state actor” for the attacks. In August 2021, a bitumen and asphalt tanker was boarded briefly by suspected hijackers off Fujairah’s coast.
The UAE has also become the first Gulf country to generate nuclear power.
— In December 2017, Houthi militia claimed to have struck Abu Dhabi’s Barakah nuclear power plant, which was still under construction at the time. UAE officials rebuffed the claims, saying the country’s air defense system was “capable of dealing with any threat of any kind” and that the reactor was “immune”.
— Barakah began operations in 2020 and currently has two working 1.4 GW units out of four that are planned.
Iraq’s State Oil Marketing Organization may sell some spot cargoes of Basrah Light this year if the deepwater Khor al-Amaya terminal is re-opened and domestic…
Jan 21, 2022
Iraq’s State Oil Marketing Organization may sell some spot cargoes of Basrah Light this year if the deepwater Khor al-Amaya terminal is re-opened and domestic refiners’ needs have been met, the marketer’s deputy director general told S&P Global Platts on Jan. 20.
SOMO excluded Basrah Light, previously its main stream until the creation of Basrah Medium last year, from its 2022 crude export allocations in order to dedicate the grade to local refiners, or to blend it with Basrah Heavy to make more Basrah Medium.
“This is not the end of Basrah Light in terms of exports,” Ali al-Shatari said in an interview. “In case Khor al-Amaya terminal comes back we might be able to sell some spot cargoes of Basrah Light and this needs to be evaluated with local consumption. The amount cannot be as big as before in 2021 because the majority of this amount is dedicated to local consumption.”
A new subsea pipeline to connect to the Khor al-Amaya oil terminal in the Persian Gulf, which was shut in 2017 because of a faulty pipeline, is currently being built. The re-opening of Khor al-Amaya, which is expected by late this year or early next year, will allow SOMO to sell spot Basrah Light cargoes from the terminal, one of two Iraq has in the Persian Gulf, Shatari said.
Khor al-Amaya terminal can handle vessels that are able to carry as much as 1 million barrels, but the flow rate is not yet set because it depends on the pumping rate and work on the subsea pipeline is not yet finished, Shatari said.
“The subsea line is a new project… because the old one was not commissioning, and flow rates went down dramatically so a vessel of 600,000 barrel capacity or an Aframax could stay there for 8 to 15 days for loading,” Shatari said. “So, it wasn’t functioning very well and a change of sealine is really needed.”
Iraq stopped exporting Basrah Light this year to dedicate the grade to its mainly old domestic refineries to produce more gasoline and diesel, helping to limit oil product import needs, Shatari said. Current utilization rates at the country’s refineries of up to 80% are expected to rise in 2022, which may mean higher consumption of Basrah Light crude.
Iraq exported 901,000 b/d of Basrah Light in December, the lowest of the three Basrah crudes. Up to Jan. 20, Iraq was exporting slightly more than 2 million b/d of Basrah Medium and more than 1 million b/d of Basrah Heavy, according to Shatari.
For 2022, SOMO expects exports of up to 3.28 million b/d of Basrah Medium and Basrah Heavy.
“It is not feasible to have a term contract [for Basrah Light] for three months or even two months so we may do that through some spot cargoes based on total export constraints as agreed by OPEC+,” he said. “Some of it might be also used in blending with Basrah Heavy to produce Basrah Medium. It can only happen if there is excess Basrah Light in case there is maintenance at one of our refineries and that refinery cannot take Basrah Light and because of limited storage capacity we may need to blend it with Basrah Heavy.”
Basrah Medium and Basrah Heavy exports are “subject to increase” as quotas rise with the progressive unwinding of the OPEC+ agreement, Shatari said. “We may expect bad weather to happen or any other things that may affect those exports [in 2022],” he added.
Iraq, OPEC’s second largest producer, has a January quota of 4.281 million b/d, which is up from 4.237 million b/d in December as members of the 23-member coalition continue to ease their production curbs by 400,000 b/d a month.
SOMO introduced Basrah Medium as a new grade in January 2021 after it split it from Basrah Light, previously the biggest oil stream, in order to stabilize and improve its fluctuating API gravity. Basrah Medium has a contractual gravity of 29 API and Basrah Heavy 24 API. Fluctuations in the API of Basrah Medium and Basrah Heavy will not be more than one degree, Shatari said.
Shatari said that all Basrah Medium exports now go through either a dedicated SPM (single point mooring) or the Basrah Oil Terminal and that it is all stored at the same storage farm, “so it will have more stability in its components,” adding that this also affords “more flexibility in exports of Basrah Medium.”
Last year, Iraq switched exports of Basrah Medium from the SPM to the Basrah Oil Terminal, but this year it has started using the SPM again so it can process higher export volumes of the grade, he said.
The surge in COVID-19 infections in several cities in India is likely to hit oil product consumption, but industry sources said crude demand may not…
Jan 21, 2022
The surge in COVID-19 infections in several cities in India is likely to hit oil product consumption, but industry sources said crude demand may not see an immediate impact as the third wave of the virus is likely to lead to less severe restrictions compared to the second wave in 2021.
Milder symptoms and better arrangements to combat the virus could also cushion the blow on crude demand this time, traders said.
“People are not going for [an] immediate reaction. Impact is not severe,” a trader with a South Asian refinery said.
“Now metros (large cities) are impacted, and the insides of India are not hit. Symptoms are not severe [and] people are getting back onto their feet soon,” the trader said.
On that note, S&P Global Platts Analytics said India’s oil demand in the second half of 2022 is expected to be around 283,000 b/d higher than in H1.
“[This would be] driven by a more broad-based pickup in economic activity amid an improving COVID situation and widening vaccination rollouts,” JY Lim, oil markets adviser at Platts Analytics, said, adding that crude imports are expected to rise further on the back of improving demand.
Still, refinery sources cautioned the impact on product consumption is likely to be more evident as private transportation slows down and people are confined to their homes.
“There is definitely reduction in product [consumption] compared to December. Many people are working from home [and] roads are clear,” the same trader with the South Asian refinery said.
Based on the latest development, Platts Analytics revised India’s 2022 oil product demand forecast to 270,000 b/d, down by 30,000 b/d from an earlier projection, though the full impact of the omicron variant is still being assessed.
OPEC said Jan. 18 that the economic recovery momentum in India has been slowing since the third quarter of 2021 amid the new wave of infection, as well as lingering impact of the delta variant.
“The slowdown in industrial and consumption activities might keep India’s economic outlook cautious, especially as the new omicron variant of COVID-19 may increase uncertainties entering Q1 2022,” the report said.
India’s gasoline complex might face some headwinds in the near term as state-wide lockdowns threaten mobility, but sources were hopeful that demand-side recovery would continue an upward trajectory when infection rates go down.
“Mobility is temporarily affected and will take a dip until lockdowns ease again, overall sentiment remains positive for the year as India gears toward living with the virus,” a Singapore-based source said.
Driving activity, a proxy for gasoline demand, has tapered off in the country, with latest Apple Mobility data showing Jan. 18 driving activity at 54.17% above baseline levels, falling from the month-to-date average of 79.18% above baseline levels.
On the gasoil front, sources noted the limited restrictions placed to contain the spread of the virus thus far could soften the impact on domestic demand for the product, adding that it is too soon to gauge the extent of the impact.
“Not sure about that, domestic [gasoil] demand is always lagging for the number, so we never know until probably February,” a source with a European trading house said.
Furthermore, tight supplies and strong gasoil cash differentials in the international market could incentivize refineries to export any excess barrels that cannot be absorbed domestically.
S&P Global Platts data showed that the FOB Singapore ultra-low sulfur diesel cash differential is averaging a premium of $1/b to the Mean of Platts Singapore gasoil assessment over January, up from 64 cents/b averaged over December.
Asian jet fuel market sources said that while India’s consumption of the product has been growing due to robust demand for domestic travel, this could pare back in the months ahead due to rising infection rates driven by the omicron variant as well as travel restrictions.
India’s domestic jet fuel consumption rose 9.52% month on month to a 22-month high of 552,000 mt in December, Petroleum Planning & Analysis Cell data showed, with climbing COVID-19 vaccination rates boosting year-end domestic travel.
Sources said the robust figures for jet fuel consumption in December were not unexpected, given that omicron only emerged end-November and that there is typically a lag time for the impact of the virus to be reflected on consumption and production patterns.
Moving forward, traders said India’s jet fuel consumption levels may take a hit due to a combination of factors, like surging infection numbers, numerous border and quarantine restrictions placed on travelers flying to and from India, as well as sky-high jet fuel prices.