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Qatar Air Headed for Annual Loss Amid Saudi Blockade, CEO Warns

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  • Qatar Air Headed for Annual Loss Amid Saudi Blockade, CEO Warns

Qatar Airways is headed for an annual loss after a Saudi-led blockade of its home nation forced the scrapping of some routes and the diversion of others.

The second-biggest Persian Gulf carrier expects to post a loss this year, though it’s too early to say how big the deficit will be, Chief Executive Officer Akbar Al Baker said in an interview Tuesday. Net income at the Doha-based group rose 22 percent to 1.97 billion riyals ($525 million) in the year through March.

“It is painful because there are many routes that slide as much as 2 1/2 longer, and there are routes that are narrow-body routes where we had to convert to wide-body in order carry enough fuel to go the longer distance,” the CEO said in Singapore. All told, Qatar Air has lost almost 11 percent of its network and 20 percent of revenue, he added.

Al Baker’s comments are his frankest yet following the imposition of trade and transport barriers by Saudi Arabia, Bahrain, Egypt and the United Arab Emirates in June. The blockade has led to the scrapping of several short-haul flights, while many intercontinental services have been diverted because of airspace closures, making flying times less competitive and increasing fuel burn.

Qatar Air is working on substituting the 20 or so lost flights for roughly the same number of viable new routes, and should then return to profitability, the CEO said.

Al Baker has previously insisted that the measures against Qatar have had a minimal impact on his company. He continued to strike a defiant tone over the embargo, saying that the Gulf state will “stand up” to the pressure and “not sacrifice our sovereignty and our dignity,” while calling on President Donald Trump to intervene on behalf of one of the U.S.’s “main allies in the region.”

Cathay Plans

Isolated in the Middle East and snubbed by American Airlines Group after bidding for a stake in the U.S. giant earlier this year, Qatar Airways on Monday revealed a surprise investment in Cathay Pacific Airways Ltd., extending a policy of taking minority holdings in blue-chip global carriers and giving it a first foothold in East Asia.

Qatar Air won’t seek a seat on that Cathay board, in line with its approach after investing in British Airways owner IAG SA and Latam Airlines Group SA, the biggest South American carrier, but aims to pursue opportunities for joint purchasing in areas such as ground handling, maintenance, components and fuel, Al Baker said on Bloomberg TV. The companies are also likely to code-share on flights beyond their Dubai and Hong Kong hubs.

Prior to the blockade Qatar Airways had been expanding at break-neck speed as it and Gulf rivals Emirates of Dubai and Abu Dhabi-based Etihad Airways PJSC established huge transfer hubs at a natural crossroads for global travel.

The carrier’s sales surged 10 percent to 38.9 billion riyals in fiscal 2017 as it added 10 destinations and carried 32 million passengers, up from 26.6 million a year earlier. Following the airspace restrictions Qatari flights have restricted to north- and east-bound routes via Iran and Kuwait. That’s been hugely disruptive for services to Africa and has lengthened trips to parts of Europe and across the Atlantic.

Al Baker said he’s “very satisfied” with his company’s U.S. exposure and isn’t looking for any major expansion there beyond adding up to four additional destinations. American Airlines rejected the proposed investment from Qatar Air after previously criticizing the rapid growth of Gulf carriers amid claims that they’ve had $50 billion in illegal state aid.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

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Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

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Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

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Aliko Dangote - Investors King

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

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Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

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Crude Oil

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

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