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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

IOCs Stick to Dollar Dominance in Crude Oil Transactions with Modular Refineries

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Crude Oil - Investors King

International Oil Companies (IOCs) are standing firm on their stance regarding the currency denomination for crude oil transactions with modular refineries.

Despite earlier indications suggesting a potential shift towards naira payments, IOCs have asserted their preference for dollar dominance in these transactions.

The decision, communicated during a meeting involving indigenous modular refineries and crude oil producers, shows the complex dynamics shaping Nigeria’s energy landscape.

While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had previously hinted at the possibility of allowing indigenous refineries to purchase crude oil in either naira or dollars, IOCs have maintained a firm stance favoring the latter.

Under this framework, modular refineries would be required to pay 80% of the crude oil purchase amount in US dollars, with the remaining 20% to be settled in naira.

This arrangement, although subject to ongoing discussions, signals a significant departure from initial expectations of a more balanced currency allocation.

Representatives from the Crude Oil Refinery Owners Association of Nigeria (CORAN) said the decision was not unilaterally imposed but rather reached through deliberations with relevant stakeholders, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

While there were initial hopes of broader flexibility in currency options, the dominant position of IOCs has steered discussions towards a more dollar-centric model.

Despite reservations expressed by some participants, including modular refinery operators, the consensus appears to lean towards accommodating the preferences of major crude oil suppliers.

The development underscores the intricate negotiations and power dynamics shaping Nigeria’s energy sector, with implications for both domestic and international stakeholders.

As discussions continue, attention remains focused on how this decision will impact the operations and financial viability of modular refineries in Nigeria’s evolving oil landscape.

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Energy

Nigeria’s Dangote Refinery Overtakes European Giants in Capacity, Bloomberg Reports

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Aliko Dangote - Investors King

The Dangote Refinery has surpassed some of Europe’s largest refineries in terms of capacity, according to a recent report by Bloomberg.

The $20 billion Dangote refinery, located in Lagos, boasts a refining capacity of 650,000 barrels of petroleum products per day, positioning it as a formidable player in the global refining industry.

Bloomberg’s data highlighted that the Dangote refinery’s capacity exceeds that of Shell’s Pernis refinery in the Netherlands by over 246,000 barrels per day. Making Dangote’s facility a significant contender in the refining industry.

The report also underscored the scale of Dangote’s refinery compared to other prominent European refineries.

For instance, the TotalEnergies Antwerp refining facility in Belgium can refine 338,000 barrels per day, while the GOI Energy ISAB refinery in Italy was built with a refining capacity of 360,000 barrels per day.

Describing the Dangote refinery as a ‘game changer,’ Bloomberg emphasized its strategic advantage of leveraging cheaper U.S. oil imports for a substantial portion of its feedstock.

Analysts anticipate that the refinery’s operations will have a transformative impact on Nigeria’s fuel market and the broader region.

The refinery has already commenced shipping products in recent weeks while preparing to ramp up petrol output.

Analysts predict that Dangote’s refinery will influence Atlantic Basin gasoline markets and significantly alter the dynamics of the petroleum trade in West Africa.

Reuters recently reported that the Dangote refinery has the potential to disrupt the decades-long petrol trade from Europe to Africa, worth an estimated $17 billion annually.

With a configured capacity to produce up to 53 million liters of petrol per day, the refinery is poised to meet a significant portion of Nigeria’s fuel demand and reduce the country’s dependence on imported petroleum products.

Aliko Dangote, Africa’s richest man and the visionary behind the refinery, has demonstrated his commitment to revolutionizing Nigeria’s energy landscape. As the Dangote refinery continues to scale up its operations, it is poised to not only bolster Nigeria’s energy security but also emerge as a key player in the global refining industry.

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Crude Oil

Brent Crude Hits $88.42, WTI Climbs to $83.36 on Dollar Index Dip

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Brent crude oil - Investors King

Oil prices surged as Brent crude oil appreciated to $88.42 a barrel while U.S. West Texas Intermediate (WTI) crude climbed to $83.36 a barrel.

The uptick in prices comes as the U.S. dollar index dipped to its lowest level in over a week, prompting investors to shift their focus from geopolitical tensions to global economic conditions.

The weakening of the U.S. dollar, a key factor influencing oil prices, provided a boost to dollar-denominated commodities like oil. As the dollar index fell, demand for oil from investors holding other currencies increased, leading to the rise in prices.

Investors also found support in euro zone data indicating a robust expansion in business activity, with April witnessing the fastest pace of growth in nearly a year.

Andrew Lipow, president of Lipow Oil Associates, noted that the market had been under pressure due to sluggish growth in the euro zone, making any signs of improvement supportive for oil prices.

Market participants are increasingly looking beyond geopolitical tensions and focusing on economic indicators and supply-and-demand dynamics.

Despite initial concerns regarding tensions between Israel and Iran and uncertainties surrounding China’s economic performance, the market sentiment remained optimistic, buoyed by expectations of steady oil demand.

Analysts anticipate the release of key economic data later in the week, including U.S. first-quarter gross domestic product (GDP) figures and March’s personal consumption expenditures, which serve as the Federal Reserve’s preferred inflation gauge.

These data points are expected to provide further insights into the health of the economy and potentially impact oil prices.

Also, anticipation builds around the release of U.S. crude oil inventory data by the Energy Information Administration, scheduled for Wednesday.

Preliminary reports suggest an increase in crude oil inventories alongside a decrease in refined product stockpiles, reflecting ongoing dynamics in the oil market.

As oil prices continue their upward trajectory, investors remain vigilant, monitoring economic indicators and geopolitical developments for further cues on the future direction of the market.

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