Saudi Arabia: All options open to OPEC+ as China virus weighs on price

Saudi Arabia’s minister of energy, Prince Abdul Aziz bin Salman Al-Saud, pictured here at the World Economic Forum at Davos, Switzerland, warned it was too early for OPEC+ to make a decision on oil supply. (Reuters)
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Updated 26 January 2020

Saudi Arabia: All options open to OPEC+ as China virus weighs on price

  • Group will meet in Vienna in March to set policy, with the possibility of further oil production cuts firmly on the table

DUBAI: Saudi Arabia’s Minister of Energy Prince Abdul Aziz bin Salman Al-Saud said all options were open at an OPEC+ meeting in early March, including further cuts in oil production, Al Arabiya reported. But he added it was too early to make a call on the need for more cuts.
“I can’t judge now if the market needs additional cuts because I haven’t seen the balances for January and February,” he said.
He added that when the Organization of Petroleum Exporting Countries and its allies led by Russia convened for an emergency meeting in March, the grouping would study where the market is and “objectively decide” if more cuts are needed.
OPEC+ agreed in December to widen supply cuts by 500,000 barrels per day (bpd) to 1.7 million bpd until the end of March.
Prince Abdul Aziz said the aim of OPEC+ was to reduce the size of the seasonal inventory build that takes place in the first half of the year.
OPEC+ is due to meet in Vienna on March 5 and 6 to set their policy. A ministerial monitoring committee for the deal will meet in Vienna on March 4.
Oil slipped below $62 a barrel on Friday and was heading for a weekly decline as concern that a virus in China may spread, curbing travel and oil demand, overshadowed supply cuts.




Saudi Arabia’s Prince Abdul Aziz bin Salman Al-Saud. (Reuters)

The virus has prompted the suspension of public transport in 10 Chinese cities. Health authorities fear the infection rate could accelerate over the Lunar New Year holiday this weekend, when millions of Chinese travel.
Global benchmark Brent is down almost 5 percent this week, its third consecutive weekly drop. US crude was also on course for a weekly decline.

FASTFACT

2nd - China is the world’s second largest oil consumer.

“One should be prepared for negative surprises when it comes to Chinese demand,” said Eugen Weinberg, analyst at Commerzbank. “The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”
China is the world’s second-largest oil consumer so any slowdown in travel would show up on demand forecasts.
Offering some support for prices was the US Energy Information Administration’s latest weekly supply report, which showed crude inventories fell 405,000 barrels in the week to Jan. 17.
Nonetheless, the upside for prices was limited. Oil inventories in the wider industrialized world are above the five-year average according to OPEC figures, which analysts say is limiting the impact on prices of supply losses.
“Such is the bearish pressure that a raft of ongoing crude supply outages are not gaining much traction,” said analysts at JBC Energy in a report.


Lufthansa vows extensive revamp as losses balloon

Updated 2 min 26 sec ago

Lufthansa vows extensive revamp as losses balloon

  • Embattled German carrier looks to cut costs after posting $2.3bn 1Q loss

FRANKFURT: Lufthansa has pledged a wide-ranging restructuring, from job cuts to sales of non-core assets, as it seeks to repay a €9 billion ($10.1 billion) state bailout and navigate deepening losses in the face of the coronavirus pandemic.

The pledged cost cuts came as the German carrier posted a first-quarter net loss of €2.1 billion on Wednesday, only days after securing the bailout that is intended to help the airline ride out the crisis but will require it to cede some of its prized landing slots to rivals.

“In view of the very slow recovery in demand, we must now take far-reaching restructuring measures,” said CEOCarsten Spohr.

The group, which includes Swiss, Austrian Airlines and Brussels Airlines, is bracing for a significant decline in 2020 earnings and has begun talks with labor representatives over cutbacks, the company added.

Brussels Airlines will reduce its fleet by 30 percent and its workforce by 25 percent while Austrian Airlines’ fleet and personnel costs are to be cut by 20 percent.

The sale of non-core operations is also on the cards in the medium term, the group said, having postponed the planned sale of parts of airline caterer LSG in March.

The first-quarter loss, which widened from €342 million a year earlier, was driven by writedowns of €266 million on its fleet. There were also writedowns on the book value of LSG North America and budget carrier Eurowings, of €100 million and €57 million, respectively.

A slump in fuel hedging contracts was another €950 million burden on the bottom line.

Shares in the group were up 3 percent in early trade, though analysts expect the national carrier to be removed from Germany’s benchmark blue-chip DAX for the first time since the index was launched in 1988.

Lufthansa’s April passenger numbers slumped 98 percent year on year to 241,000, but it laid out plans on Wednesday to increase capacity in September to reach 40 percent of what it had scheduled before the pandemic.