Last Friday, Prime Minister Scott Morrison announced that international borders will reopen in November for states that reach the 80% vaccination milestone. This should be good news for the Qantas Airways Limited (ASX: QAN) share price, but it just logged a three-day losing streak on Thursday.
Why is the Qantas share price struggling to make headway?
US-listed airlines including American Airlines and JetBlue Airways tumbled 4.3% and 2.7% respectively overnight after Goldman Sachs downgraded their ratings for both stocks, according to Wall Street Journal.
The broker flagged concerns about the surging oil prices and slowing economic growth weighing on the airlines’ profits.
US crude oil prices jumped to a seven-year high of US$79.76 a barrel on Wednesday. Similarly, the global benchmark, Brent crude, pushed above US$80 a barrel for the first time in three years.
The jump in oil prices could be a factor dampening the prospects of the Qantas share price.
In 2018, Brent crude prices rallied 20% between mid-August and October to a 4-year high of US$86.6 a barrel. During this time, the Qantas share price tanked almost 25% from around $6.90 to $5.20.
During Qantas’ FY19 results, the company flagged that Qantas International faced a significant impact from “high fuel costs because of flight distance”.
From a financial perspective, FY19 fuel costs came in at $3,846 million, a $614 million or 19% increase compared to FY18.
In a note from 26 September, the broker said:
While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts.
The Qantas share price has been breaking to the upside as the prospect of reopening international borders gathers momentum.
Qantas shares briefly hit a high of $5.92 on Monday, its highest since February 2020.
Despite the bullish tailwinds for the travel industry, it might be worth keeping a tab on oil prices.
The post International borders will reopen soon. Why is the Qantas (ASX:QAN) share price stalling? appeared first on The Motley Fool Australia.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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