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Airlines Decry Low Passenger Traffic, High Cost of Fuel

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Airlines in Nigeria
  • Airlines Decry Low Passenger Traffic, High Cost of Fuel

Some domestic airlines in Nigeria have decried “continuous decline in passenger traffic’’ and increasing cost of aviation fuel also known as Jet A1.

Speaking with the News Agency of Nigeria (NAN) on Wednesday in Abuja, Mr Abdullahi Saroke, Deputy Station Manager, Azman Air, said that many airlines were currently not having good in the business.

Saroke said that the price of fuel had increased by 100 per cent while the patronage had decreased by 30 per cent in recent time.

He added that the airlines that usually had its seats fully occupied in flight were now struggling to have up to 75 per cent of their seats booked and boarded.

According to him, it has not been easy for most airlines to cope with this situation occasioned by the current recession, including scarcity of dollar and high cost of fuel.

“As at January/ February, we were buying fuel at the rate of N115 and N120 per litre but as it stands today, a litre is sold at N220 in Lagos and N230 in Abuja.

“In places like far North such as Yola and Maiduguri, it sold at N250 per litre if you are able to get it.

“This has made it extremely difficult for the airlines to cope but for now, we will continue to manage the situation and fly because you cannot park the aircraft on ground.

“This is because in airline business it is only when you take off and land that you make money.

“What we simply do in Azman is to cancel some flights or try to reduce those frequencies, especially for Mondays and Tuesdays out of Abuja because those are low traffic days.

“So we try to see how we can merge flights to remain afloat to be able to break even,’’ Saroke said.

He said that the situation was also part of the reasons for the suspension of flight by Aero Contractor and the temporal shut down of operation by First Nation airline in September.

He added that if the situation lingered further, it could lead to loss of jobs in the industry, stressing that no airline would continue to pay salaries if they were not making profit.

According to the manager, no airline can continue to manage its entire work force for too long if the situation persists as they may look for a way to cut cost which may affect jobs in the long run.

He urged the Federal Government to take urgent steps towards addressing the challenges confronting airlines in the country, especially the domestic ones.

Sareko explained that the increase in the cost of ticket by the airlines did not commensurate with cost of operation, saying that the increment was about 30 per cent.

He said that the airlines feared a situation where too much increment in the cost of ticket could drive the bulk of passengers back to road transport.

“The lowest ticket before in any airline was N15, 000 and N16, 000 but now the lowest anyone can get is N22, 000 and N23, 000 if you book ahead.

Also, a staff of a charter flight operator in Abuja, Mr Yahaya Atabo, told NAN that air transport in Nigeria was facing a tough challenge owing to the current economic challenges.

Atabo said that airlines incurred more cost by the day without flying as result of poor patronage.

He explained that many of their clients now preferred to travel by commercial flights to save cost instead of travelling by charter flight.

NAN reports that the nation’s aviation sector has been facing challenges which range from scarcity of foreign currency to fuel scarcity and the cost of the fuel.

International airlines had recently decried difficulty in operating profitably in Nigeria due to their inability to repatriate their funds.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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