Resource shortage in Cuba has some Islanders cancelling Caribbean travel plans

On Feb. 3 the Canadian government warned of worsening electricity, fuel and basic-goods shortages in Cuba, prompting several Canadian airlines to wind down flights as Havana’s José Martí airport faces a jet-fuel shortfall. The shortages follow a halt in Venezuelan crude and refined product shipments since mid-December after U.S. actions limiting exports; demand from Canadian travellers has fallen with many rebooking elsewhere, creating refund and commission pressures for travel agents and posing a sharp near-term shock to Cuba’s tourism-dependent economy that some locals compare to the impact of COVID-19.

Analysis

Market structure: Short-term demand destruction for Cuba travel reallocates leisure spend to alternate Caribbean destinations (Dominican Republic, Mexico) and travel intermediaries (OTAs). Localized jet-fuel shortages create a regional positive shock to jet/diesel cracks on the Gulf Coast for weeks–months rather than global crude prices; airlines with flexible route networks gain pricing power while Cuba-focused tour operators and local Cuban FX/sovereign credit suffer immediate revenue stress.

Risk assessment: Tail risks include escalation of U.S. sanctions on Venezuela (further cutting refined-product exports) or Cuban domestic instability that disrupts wider regional tourism; both would widen refined-product margins and spike regional travel insurance claims. Immediate (days–weeks) effects are cancellations and rebookings; short-term (1–3 months) sees revenue shifts across carriers/OTAs; long-term (quarters+) depends on sanctions policy and supply-chain reconfiguration.

trade implications: Favor commodity/refining exposure to capture widened jet-fuel cracks and platforms that capture rebooking flow; underweight Cuba-exposed leisure operators and buy short-duration protection on carriers concentrated in Caribbean routes. Use options to express directional but capped-risk views (call spreads on refiners, puts on carriers) and rotate into majors if sanctions materially tighten crude flows.

contrarian: Consensus focuses on humanitarian/near-term travel declines but underestimates beneficiaries — large OTAs (BKNG/EXPE) and Gulf-Refiners (VLO/PSX) will capture most rebookings and spot-fuel sales. The knee-jerk hit to airline sentiment is likely overdone vs. actual revenue exposure (Cuba typically <1–3% of big carriers), creating transient mispricings in short-dated options.

Key Decisions for Investors

• Establish a 2% NAV tactical long in Valero Energy (VLO) via a 3-month call spread (buy 1 3-month 5% OTM call, sell 1 3-month 15% OTM call) to capture expected +$2–$6/bbl jet-fuel crack widening; take profits at +15% P&L or time stop at 3 months.
• Initiate a 2% NAV long in Booking Holdings (BKNG) (or 3-month call spread if preferred) to capture rebooking volume; target +8–12% upside over 1–3 months and re-evaluate into Q2 2026 results.
• Buy protective 3-month 10% OTM puts on Air Canada (AC.TO) sized 0.5% NAV to hedge localized Caribbean cancellation risk; trim if implied volatility rises >30% or if carrier announces routings/resumption of fuel contracts.
• Set a conditional 1–2% overweight to ExxonMobil (XOM) and Chevron (CVX) if U.S. sanctions reduce Venezuelan exports by >50% vs. baseline within 30 days (trigger: official U.S. sanction notice or >50% drop in PDVSA tanker departures) — reprice after 6–12 weeks.