Question marks over Russia’s compliance to OPEC+ cuts

The latest OPEC Monthly Oil Market Report (MOMR) forecasted that Russia will not fully comply with the cuts agreement during the first half of 2019. (AFP)
Updated 27 January 2019
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Question marks over Russia’s compliance to OPEC+ cuts

RIYADH: The Brent crude oil price fell slightly to $61.64 per barrel at the end of last week, amid perceptions that Russia might not be able to promptly comply with OPEC+ output cuts agreed in December.
As part of the deal, Russia agreed to cut its production by 230,000 million barrels per day (bpd) from the 11.41 bpd touched in October.
But the latest OPEC Monthly Oil Market Report (MOMR) forecasted that Russia will not fully comply with the cuts agreement during the first half of 2019.
Due to its old oil infrastructure and mature oil fields, Russia cannot promptly decrease oil production — and the market is waiting to see where its output level for the first quarter of 2019 stands.
Unlike in Saudi Arabia — where Aramco is the only state oil producer — Russia has many major oil companies. These include the largest oil producer Rosneft — which produces over 4 million bpd — along with Lukoil, Surgutneftegaz, Gazprom and others.
During the OPEC meeting in Vienna in December 2018, Rosneft announced that its oil output forecasts for the the first six months of 2019 remain unchanged. That is mainly because Rosneft aims to increase production from three new fields it launched in Siberia in 2018. This led some market participants to question not only Russia’s compliance with the new OPEC+ agreement, but also that of other non-OPEC producers.
Market participants are confused by some of the statements from Russia with regard to energy policy and compliance with OPEC+ output cuts. Unlike what is seen with OPEC producers, statements by Russia’s energy minister sometimes vary from those made by executives of the country’s oil companies.
The compliance with the agreed output cuts — in which OPEC members and other large oil producers including Russia agreed to cut their combined crude production by 1.2 million bpd from January to halt a decline in oil prices — will be key to balancing the market in 2019.
Despite question marks over Russia’s compliance with the deal, OPEC in 2018 managed the various challenges successfully and was, as a whole, able to alter its output strategy based on the market needs.


Paris Air Show: After Boeing showstopper, Airbus seeks order bounce

Updated 19 June 2019
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Paris Air Show: After Boeing showstopper, Airbus seeks order bounce

  • British Airways owner IAG signs letter of intent to buy 200 of its 737 MAX jets
  • Airbus is looking for up to 200 orders for the A321XLR, which is designed to open up new routes

PARIS: Airbus, reeling from the potential loss of a major customer for its best-selling A320neo as British Airways owner IAG placed a lifeline order for the grounded 737 MAX, prepared to hit back with more orders for its A321XLR on Wednesday.
The planemaker has been negotiating with US airlines investor Bill Franke whose Indigo Partners has also been known to place orders for multiple airlines within its portfolio and could reel it in for the Paris Air Show, industry sources said.
Airbus declined to comment.
After weathering intense scrutiny over safety and its public image, Boeing won a vote of confidence on Tuesday as IAG signed a letter of intent to buy 200 of its 737 MAX jets that have been grounded since March after two deadly crashes.
The surprise order lifted the energy of a previously subdued Paris Airshow, where the talk had been of the possible end of the aerospace cycle, given the issues at both Boeing and Airbus as well as geopolitical and trade tensions around the world.
Australia’s Qantas Airways said on Tuesday it would order 10 Airbus new A321XLR jets and convert a further 26 from existing orders already on the Airbus books.
Airbus is also in talks with leasing company GECAS and has been trying to secure an eye-catching order for the A321XLR from American Airlines, though the world’s largest carrier does not typically make announcements at air shows.
Airbus is looking for up to 200 orders for the A321XLR, which is designed to open up new routes.