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Boeing Wins $22 Billion Plane Order From India’s SpiceJet

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  • Boeing Wins $22 Billion Plane Order From India’s SpiceJet

Boeing Co. won an order for 205 planes from SpiceJet Ltd., marking the biggest expansion plan by the Indian budget carrier that is seeking to claw back market share from leader IndiGo.

The deal, which includes 100 firm 737 Max 8 jets, builds on an existing order for 55 aircraft, SpiceJet said in a statement Friday. The airline also has the option to buy 50 more, including widebodies. All combined, the order is worth $22 billion at list prices, the airline said, before discounts that are customary for large orders.

The order, the largest ever placed by an Indian airline for Boeing aircraft, signals the resurgence of SpiceJet as it competes against IndiGo, which has some 400-odd aircraft pending delivery from Airbus SE and controls the world’s fastest-growing major aviation market with a 42 percent share. For Boeing, it marks the widening of its footprint in the South Asian country, where its European rival dominates narrow-body fleets.

“We spent a considerable amount of time negotiating and finalizing the commercial terms, including maintenance of the aircraft,” Chairman Ajay Singh said in an interview. “It was important for us to get all the commercial terms right.”

Delivery Schedule

The planes are for delivery between next year and 2024, he told reporters separately in New Delhi. The deal adds to the 348 jetliner sales garnered by the Chicago-based planemaker in India.

The purchase commitment comes at a time when both Airbus and Boeing are facing slowing jet sales and the highest level of airplane-delivery deferrals in at least 15 years after a decade-long jetliner shopping spree globally.

SpiceJet’s order includes a previously unfulfilled and renegotiated deal for 42 jets and an earlier undisclosed order for 13 planes. The airline currently operates a fleet of 32 Boeing 737 jets and 17 Bombardier Q400 turboprops, according to the company. It controls 13 percent of a market that has seen local carriers almost double to 11 in the past five years.

SpiceJet shares have more than tripled since December 2014, when it ran out of cash and grounded its fleet for a day after oil companies refused fuel credit. The stock rose 3.5 percent to 66.15 rupees as of 12:38 p.m. in Mumbai, giving the airline a market value of 39.7 billion rupees ($582 million).

The airline was profitable in each of the past seven quarters and had cash and near-cash items totaling 1.97 billion rupees as of Sept. 30, according to data compiled by Bloomberg.

Slowdown Risk

“The bigger concern we believe will be with SpiceJet’s financial backing and the willingness of banks to fund this growth,” Mark D. Martin, founder of Dubai-based Martin Consulting LLC, said by phone. “The bigger concern for aviation in India is on account of the economic slowdown caused by the recent step to demonetize the most popular denominations in use.”

Add to that the rise in fuel prices, the net effect on the cost of travel will be at least 20 percent, he said.

SpiceJet does not need to dilute any equity to pay for the order, Singh said. The carrier has sufficient resources within the company, and has already received interest from lessors and lenders to finance the deal, he said. SpiceJet will expand its international operations after the new planes with a longer range come in.

India, where an emerging middle-class is flying for the first time and passenger traffic is growing at double the pace of nearest rival China, is a crucial market for Boeing and Airbus. In 2015, IndiGo, operated by InterGlobe Aviation Ltd., ordered 250 planes from Airbus valued at $27 billion. That followed a 2006 deal for 100 A320 planes and 180 A320neos in 2011.

The South Asian country needs 1,850 new aircraft worth $265 billion in 20 years, with single-aisle planes making up a bulk of the new deliveries, according to Boeing forecasts. Airbus dominates the budget airline market in India, with IndiGo, Go Airlines India Pvt. and the local unit of AirAsia Bhd. all flying its jets.

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.

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Crude Oil

Crude Oil Rises to $72 a Barrel on Strong Demand Recovery

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Brent crude oil - Investors King

Oil prices rose on Friday to fresh multi-year highs and were set for their third weekly jump on expectations of a recovery in fuel demand in the United States, Europe and China as rising vaccination rates lead to an easing of pandemic curbs.

Brent crude futures edged up 13 cents to $72.65 a barrel to 1145 GMT, a day after closing at their highest since May 2019.

U.S. West Texas Intermediate (WTI) crude futures were up 14 cents to $70.43 a barrel, a day after their highest close since October 2018.

U.S. investment bank Goldman Sachs expects Brent crude prices to reach $80 per barrel this summer as vaccination rollouts boost global economic activity.

The International Energy Agency said in its monthly report that OPEC+ oil producers would need to boost output to meet demand set to recover to pre-pandemic levels by the end of 2022.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy watchdog said.

It said that rising demand and countries’ short-term policies were at odds with the IEA’s call to end new oil, gas and coal funding.

“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target,” the IEA said.

Data showing road traffic returning to pre-COVID-19 levels in North America and most of Europe was encouraging, ANZ Research analysts said in a note.

“Even the jet fuel market is showing signs of improvement, with flights in Europe rising 17% over the past two weeks, according to Eurocontrol,” ANZ analysts said.

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Energy

Africa Oil Week Remains Force of Good for Africa

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Crude oil - Investors King

Hyve Group Plc, organisers of Africa Oil Week have confirmed that business opportunities and discussions at the 2021 edition will remain focused on driving investment into Africa for its sustainable socio-economic development, as it has done for the past 27 years.

The event which will temporarily move to Dubai for 2021 due to COVID-19 restrictions in South Africa will take place on 8-11 November 2021 and has support from key African stakeholders.

Atty. Saifuah-Mai Gray, CEO of National Oil Company of Liberia said “As an oil and gas hub, Dubai represents a huge opportunity for Governments to meet a high concentration of investors with the financial and technical capability to partner in our national upstream”

Africa Oil Week is known for driving deals and transaction across the African oil and gas sector, and after being forced to host the 2020 edition virtually, confirmation that a live event will take place in 2021 has delighted clients.

Miriam Seleoane, Assistant Director at the Department of Trade and Industry and Competition said

“The DTIC has supported the Africa Oil Week for many years. For 2021 we will be taking a delegation of 20+ companies to the Oil Week to advance partnership and investment dialogue between our South African businesses and international partners. Africa Oil Week remains a huge platform for the DTIC and our South African private sector”.

The event will run under the theme “succeeding in a changed market”, and it will be the only large-scale oil and gas event focused solely on Africa to run in person in 2021.

In a previous statement, the organiser cited Dubai as the “next best location” after Cape Town due to the exceptional progress made in the UAE’s vaccination programme. Dubai is also the leading financial centre in the Middle East, Africa and South Asia and presents an opportunity for attendees to meet with new capital holders, further driving investment into Africa.

The 2022 event will return to Cape Town, where organises have said it is the event’s “natural home” and to which they are strongly committed for the long-term.

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Crude Oil

Crude Oil Rebounds on Thursday After Slipping on U.S Weak Demand

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Crude Oil - Investors King

Oil prices rose on Thursday a day after slipping on data indicating weak U.S. driving season fuel demand as investors eyed upcoming U.S. economic data.

Brent crude oil futures were up 18 cents, or 0.25%, at $72.40 a barrel, holding just shy of a high not seen since May 2019.

U.S. West Texas Intermediate oil futures rose 11 cents, or 0.16%, to $70.07 a barrel, staying near its highest since Oct. 2018.

“The market is recovering impressively from yesterday’s dismal weekly EIA report, the drop in weekly gasoline demand was particularly disappointing,” said Tamas Varga, analyst at PVM Oil Associates.

“It will interesting to see whether the monthly OPEC report due out later will confirm last month’s upbeat demand assessment for the second half the year. If it does, as expected, it should support oil prices.”

Varga added that U.S. inflation data and jobless claims would provide more direction on the health of world’s biggest economy and clues as to whether the Federal Reserve might start tapering stimulus.

U.S. crude oil stockpiles that include the Strategic Petroleum Reserve (SPR) fell for the 11th straight week as refiners ramped up output, but fuel inventories grew sharply due to weak consumer demand, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories that exclude the SPR fell by 5.2 million barrels in the week to June 4 to 474 million barrels, the third consecutive weekly drop. But fuel stocks were up sharply, with product supplied falling to 17.7 million barrels per day (bpd) versus 19.1 million the week before.

Implied gasoline demand fell to 8.48 million bpd in the week to June 4, down from 9.15 million bpd from the week before, but up from 7.9 million bpd a year ago, EIA data showed.

Weighing on prices, India’s fuel demand slumped in May to its lowest since August last year, with a second COVID-19 wave stalling mobility and muting economic activity in the world’s third largest oil consumer.

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