Some more good news for the airlines as oil prices have tumbled to their lowest levels in 18 months. This comes as a mild winter has spread across the United States and a growing supplies are outpacing demand. Helping grow inventories is reduced demand for heating oil in the largest market, the Northeast.
If OPEC announced another production cut — on top of the 1.2 million barrel-a-day reduction that began in November, and the 500,000 barrel-a-day cut set to begin Feb. 1 — analysts say prices would likely rise. Still, OPEC’s previous cuts haven’t been able to keep crude prices above $60 a barrel for long, largely because many traders doubt that the cuts are fully enforced.
Shares of the major airlines were up in morning trading as outlooks for 2007 seem to be good and the prices of oil have remained fairly low. The lower oil prices are a good thing for the airlines as many of them have not had the cash on hand to hedge fuel prices, unlike Southwest Airlines which has been hedging fuel even during the height of prices in the summer of 2006.
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