Middle East carriers post slowest regional cargo traffic growth in January

Middle East carriers’ freight volumes increased 4.4 percent in January, the slowest posted for just the third time in the past decade. (Courtesy Etihad Airways)
Updated 08 March 2018
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Middle East carriers post slowest regional cargo traffic growth in January

DUBAI: Middle East airlines posted the slowest regional cargo traffic growth in January, weighed by the challenging political environment in the Middle East, the International Air Transport Association (IATA) said.
Freight volumes increased 4.4 percent during the month, while capacity increased 6.3 percent, the slowest freight ton kilometers (FTKs) posted by regional airlines posted for just the third time in the past decade. FTK is an industry bellwether that measures how much freight business an airline gets.
Meanwhile, on a global scale, freight demand rose 8 percent in January compared with the year-earlier period, and was up from the 5.8 percent growth posted in December 2017.
“We expect demand for air cargo to taper to a more normal 4.5 percent growth rate for 2018. But there are potential headwinds. If President Trump follows through on his promise to impose sanctions on aluminum and steel imports, there is a very real risk of a trade war. Nobody wins when protectionist measures escalate,” Alexandre de Juniac, IATA’s Director General and CEO, said in a statement.
Carriers from the Asia-Pacific reported a 7.7 percent increase in freight volumes during the said month, driven by strong demand from the region’s major exporters China and Japan, which reported more active shipping activities to Europe.
North American airlines’ freight volumes meanwhile expanded 7.5 percent in January, and capacity increased 4.2 percent.
The strength of the US economy and the US dollar have improved the inbound freight market in recent years, IATA said.
European carriers posted a 10.5 percent increase in freight volumes, thanks to brisk demand for new export for new export orders among the region’s manufacturers.
Latin American airlines reported an 8 percent uptick in freight volumes, which coincided with signs of economic recovery in the region’s largest economy, Brazil. In Africa, carriers from the region reported that freight demand went up by 12.9 percent in January, boosted ‘by very strong growth on the trade lanes to and from Asia.’


Iran looms large over OPEC summit

Updated 47 min 8 sec ago
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Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”