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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.

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

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

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

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

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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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