Airlines to Shippers Cast Picture of Fast-Souring Oil Demand

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(Bloomberg) — 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.

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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 canceled for some of the coming weeks and top liners are using smaller vessels to meet customer needs.

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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. 

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“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.”

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Data from the Bureau of Economic Analysis in the US show that heavy truck sales fell to the lowest level since 2020 last month. Apollo Global Management said it expects trucking demand to grind to a halt in the US next month, leading to layoffs across the industry. 

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Consultant FGE said this week that it now expects global diesel demand to decline versus a year earlier in the second and third quarters as consumption slows, citing burgeoning impact of the trade war. 

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“This reflects both worsening trade and reduced manufacturing and industrial activity,” it said. 

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READ: Trump China Tariffs Set to Unleash Supply Jolt on US Economy

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Still, the picture isn’t uniformly doom and gloom.

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United Airlines Holdings Inc. said that while there was a decline in bookings between the US and Canada, its other international travel markets remained robust. 

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Outside the US, some European carriers said they’re yet to see a slowdown in forward bookings before summer. Still, Air France-KLM said it is seeing some softness in economy ticket sales, particularly for transatlantic flights.

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Similarly, for come container shipping companies, while volumes to the US from China have fallen, they’ve picked up from other southeast Asian nations. 

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Hapag Lloyd AG, the world’s fifth-largest container carrier, said about 30% of bookings from China to the US have been canceled, though journeys from Cambodia, Vietnam and Thailand are all heavily up. Clarkson Plc, the world’s largest shipbroker, cut its 2025 profit outlook on Thursday, saying uncertainty from the potential of a trade war has escalated. A cruise shipping line warned Wednesday of softer forward bookings.