Saudi oil minister sees growing producer consensus to stabilize market

Greater cooperation between Russia and Saudi Arabia as part of OPEC+ policy could lead to greater investment opportunities and trade between Riyadh and Moscow. (Shutterstock photo)
Updated 04 June 2019

Saudi oil minister sees growing producer consensus to stabilize market

  • Kingdom’s oil ministry ‘closely monitoring’ series of global situations that have led to volatility in the market
  • 3% Oil prices retreated more than 3 percent on Friday, with May seeing the biggest monthly loss in six months

LONDON: The Saudi oil minister, Khalid Al-Falih, claimed there was an emerging consensus among OPEC+ oil producers over a need to ensure market stability, in an exclusive interview with Arab News.

The disclosure comes ahead of a key meeting of oil producers later this month which is set to deter- mine whether existing produc- tion cuts will be extended beyond June.

“We will do what is needed to sustain market stability beyond June,” said Al-Falih. “To me, that means drawing down inventories from their currently elevated levels.”

Oil prices had their worst monthly fall in the last six months in May as mounting global trade tensions weighed on prices and offset the upward pressure on crude created by supply disrup- tions and sanctions on Venezuela and Iran.

“Increasing trade friction and potential barriers would certainly have a negative impact on the global economy and oil demand growth,” said Al-Falih.

“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 funda- mentals, which remain healthy, and the high levels of discipline by OPEC+ producers,” he added.

The minister emphasized the importance of the Saudi- Russia relationship in achieving a balanced global oil market, and said that ties between the two countries went beyond the energy sector.

“The Kingdom’s relationship with Russia extends beyond oil and OPEC+,” he said. “From the Public Investment Fund’s collab- oration 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 at 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, and in addition to this, Aramco and SABIC are considering investments in promising gas and petrochemical projects in Russia.”

One such potential investment involves Russia’s largest integrated petrochemicals company, SIBUR, exploring the construction of a $1 billion natural rubber and specialty rubber joint-venture plant in Saudi Arabia, together with Saudi Aramco and French firm Total.


Lufthansa announces overhaul of budget carrier Eurowings

Updated 24 June 2019

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.