Saudi Arabia to keep central role in maintaining oil market stability: Energy Minister Khalid Al-Falih

Saudi Arabia’s Energy Minister Khalid Al-Falih said that ‘the effectiveness of OPEC+ efforts have been well-proven over the course of almost 30 months.’ AFP)
Updated 04 June 2019
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Saudi Arabia to keep central role in maintaining oil market stability: Energy Minister Khalid Al-Falih

  • ‘We will deliberate the best course of action, and work on reaching a consensus’

Saudi oil minister Khalid Al-Falih pledged “to do what is needed” to sustain oil market stability amid rising global trade tensions in a wide-ranging interview ahead of a key meeting of producers later this month.

After an initial positive reaction to the outcome of the recent meeting in Jeddah of the OPEC-Non-OPEC Joint Ministerial Monitoring Committee, which the Kingdom co-chairs with Russia, prices took a negative turn.  Is this a sign that market fundamentals are weakening or that the effectiveness of the OPEC+ deal is gradually eroding?  And if so, what are you doing about this, if anything?

Of course, the Kingdom is closely monitoring recent developments in the oil market, which exhibited an elevated level of volatility in recent weeks.  And these levels are totally unwarranted in light of both the current market fundamentals, which remain healthy, and the high levels of discipline by OPEC+ producers.

I would point out that the effectiveness of OPEC+ efforts has been well-proven over the course of almost 30 months, despite facing skepticism from the onset, which gradually gave way to credibility.

And I can tell you, from consultations with my colleagues, that the 24 countries in the group remain committed to the shared objective of balancing the oil market for the benefit of producers and consumers everywhere.

In fact, there’s an emerging consensus among OPEC+ countries, to continue their work towards market stability in the second half of the year, and Saudi Arabia will surely continue to play its central role alongside its OPEC+ partners in this endeavor.

We have previously stated our commitment to do whatever it takes to stabilize markets and we have delivered on those promises.

And I am making that commitment again.

The OPEC+ Ministerial Meetings are around the corner.  Given the recent price drop, will the current agreement be extended?

First, we do not target specific prices. … Prices are determined by the dynamic interaction of multiple forces, some of which are not even fundamental – such as geopolitical headlines and financial speculation.

As you can appreciate, there is a thorough process of analysis and consultation through which we make such crucial decisions.

So, when we meet in Vienna, we will review current and prospective economic and oil market conditions, and their implications for supply and demand balances, and inventory trends.

Guided by this review, we will deliberate the best course of action, and work on reaching a consensus.

And I would like to reiterate my confidence, based on my discussions with several key producers, and on our track record, that we will do what is needed to sustain market stability beyond June.

To me, that means drawing down inventories from their currently elevated levels.

How do you plan to deal with the specter of a potential full-blown trade war between the US and China threatening oil demand?

Increasing trade friction and potential barriers would certainly have a negative impact on the global economy and oil demand growth.

But the direction of the negotiations is hard to predict.

So, we intend to make our decisions based on thorough and holistic analyses. …

This includes the impact of the trade conflict on oil demand, as well as a multitude of other factors, some of which I have referred to earlier.

Ultimately, we will make our best judgment, in consultation with our partners, about the need for production changes, their magnitude, pace and timing.

But you can be sure that we will be responsive.

You will be heading to Russia in the next few days. Is the purpose of the visit to agree on actions in the upcoming OPEC+ meeting?

The collaboration between the Kingdom and Russia in our mutual efforts to stabilize global oil markets is no doubt a cornerstone of this important oil relationship.

But the Kingdom’s relationship with Russia extends beyond oil and OPEC+.

From the PIF’s collaboration with the Russian Direct Investment Fund … to industrial investments in petrochemicals in Russia and the Kingdom … to joint research in the energy field, manifested in the establishment of the Saudi Aramco research center in Moscow University … to potential wheat imports to the Kingdom. 

In fact, I would emphasize that some of the premier Russian companies are considering investments in the Kingdom, as well as Aramco and SABIC are considering investments in promising gas and petrochemical projects in Russia.

For example, Russia’s largest integrated petrochemicals company, SIBUR, is exploring the construction of a $1 billion natural rubber and specialty rubber joint-venture plant in Saudi Arabia, together with Saudi Aramco and Total of France.

Also, some leading Russian energy services companies are looking to invest in the Kingdom to reach growing oil and gas markets in the region.

So, this is a relationship that has both breadth and depth and one with tremendous potential.


Lufthansa announces overhaul of budget carrier Eurowings

Updated 24 June 2019
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Lufthansa announces overhaul of budget carrier Eurowings

  • Lufthansa cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16
  • Eurowings’ long-haul business would be managed by Lufthansa in the future

BERLIN: Lufthansa on Monday announced a turnaround plan for Eurowings in which the budget carrier will focus on short-haul flights and seek a 15 percent cut in costs by 2022 in the hope of returning to profit.
The German airline cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16. Eurowings’ revenue was also forecast to fall sharply in the second quarter.
Lufthansa said its Eurowings fleet would be standardized on the Airbus A320 family and it would seek to boost productivity at Eurowings by limiting itself in Germany to one air operator’s certificate.
Brussels Airlines — the Belgian national flag carrier which Lufthansa took control of in 2016 — would not be integrated into Eurowings, Lufthansa said. A turnaround plan for Brussels Airlines will be announced in the third quarter.
Lufthansa also said it would start pegging its dividend payout ratio to net profit in the future to give the group more flexibility. It would pay out a regular dividend of 20 percent-40 percent of net profit, adjusted for one-off gains and losses.
Lufthansa said Eurowings’ long-haul business would be managed by Lufthansa in the future.
Carsten Spohr, Chief Executive Officer of Lufthansa, said Monday’s announcements sent “a clear signal that this company cares about its shareholders and tries to create value for them.”
Lufthansa said its Network Airlines — made up of Lufthansa, Swiss and Austrian Airlines — would aim to use innovations in sales and distribution to make a contribution to increasing unit revenues by 3 percent by 2022.
Network Airlines will aim to reduce unit costs continuously by 1 to 2 percent annually, the airline said.