Oil prices steady near year lows ahead of G20 and OPEC meetings

Saudi Arabia raised oil production to an all-time high in November, pumping between 11.1 million and 11.3 million barrels per day. (Reuters file photo)
Updated 28 November 2018
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Oil prices steady near year lows ahead of G20 and OPEC meetings

  • Oil prices are down by almost a third since early October, weighed down by an emerging supply overhang and widespread financial market weakness
  • OPEC meets in Vienna on Dec. 6 to discuss output policy together with some non-OPEC producers, including Russia

LONDON: Oil prices steadied on Tuesday, depressed by record Saudi production but supported by expectations that oil exporters would agree to cut output at an OPEC meeting next week.

Brent crude oil was up 10 cents a barrel at $60.58 by 2.45 p.m., not far above a 13-month low of $58.41 reached on Friday. US light crude was up 10 cents at $51.73.

Oil prices are down by almost a third since early October, weighed down by an emerging supply overhang and widespread financial market weakness.

Prices rallied sharply on Monday, with Brent rising almost 2.9 percent, but the market has struggled to stay positive.

“The energy complex is making a half-hearted attempt to extend gains,” said Stephen Brennock, an analyst at London brokerage PVM Oil. 

“However, upside potential is being capped by two upcoming risk events, namely the G20 summit and next week’s OPEC meeting.

“A wait-and-see approach is therefore likely to prevail, which in turn will act as a damper on any looming price swings.”

Leaders of the Group of 20 nations (G20), the world’s biggest economies, will meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda. With the top three crude producers — Russia, the US and Saudi Arabia — all present, oil policy is expected to be discussed.

OPEC meets in Vienna on Dec. 6 to discuss output policy together with some non-OPEC producers, including Russia.

Fereidun Fesharaki, chairman of energy consultancy FGE, said that a failure by OPEC and Russia to cut supply significantly would mean crude prices would “fall further, perhaps (with) Brent at $50 per barrel and WTI of $40 per barrel or less”.


Lufthansa profit warning spooks European airline sector

Updated 17 June 2019
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Lufthansa profit warning spooks European airline sector

  • Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called ‘attritional fare wars’

FRANKFURT: Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between €2 billion and €2.4 billion, down from the previously targeted €2.4 billion to €3 billion.
“Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning.
“The group expects the European market to remain challenging at least for the remainder of 2019,” it said.
It also pointed to high jet fuel costs, which it said could exceed last year’s figure by €550 million, despite a recent fall in crude oil prices.
Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called “attritional fare wars” and said four or five European airlines were likely to emerge as the winners in the sector.
“No signs that anyone is prepared to reduce capacity, therefore we would anticipate the wave of consolidation in European short haul is not over,” said analyst Neil Wilson, analyst at London-based broker market.com.
Earlier this month global airlines slashed a widely watched industry profit forecast by 21 percent as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
Lufthansa’s problems are centered on its European business, with a more positive outlook for its long-haul operations, especially on transatlantic and Asian routes.
Eurowings management is due to implement turnaround measures to be presented shortly, Lufthansa said, adding that efforts to reduce costs had so far been slower than expected.
Lufthansa’s adjusted margin for earnings before interest and tax (EBIT) was forecast between 5.5 percent and 6.5 percent, down from 6.5 percent to 8 percent previously, it said in a statement.
Lufthansa also said it would make a €340 million provision for in its first-half accounts, relating to a tax matter in Germany originating in the years between 2001 and 2005.