OPEC+ allies were locked in a tense diplomatic standoff on Friday after a dispute that threatens to send oil prices sharply higher.
As of Friday afternoon in London, the group had failed to find a way out of the impasse, with both sides entrenched in their demands, delegates said. If the negotiations fail, the fallback position is that there’ll be no increase in output, one of them said. That would squeeze an already tight market, risking a further inflationary price spike.
“If OPEC+ fails to reach a compromise, the automatic fallback will be to roll over current quotas into August and beyond,” said Matthew Holland, a geopolitical analyst at consultant Energy Aspects Ltd. “That would lead to sharply higher prices, something most OPEC+ members want to avoid.”
Ministers reconvened on Friday after the meeting was halted the evening before because of the dispute. It’s not the first time the group has faced such crises, and more often than not it has been able to fudge a diplomatic solution.
The disagreement centers on how the group measures its production cuts, with the United Arab Emirates refusing to back a deal to raise output unless the baseline for its own curbs is increased, according to delegates. The UAE is ready to accept no change in output for August if an agreement can’t be reached, one delegate said. It’s not clear if that stance would be acceptable to Russia, however.
On Thursday, the Organization of Petroleum Exporting Countries and its allies had appeared to be heading for a deal to add about 400,000 barrels a day of crude to the market each month from August to December. But the UAE put up objections at the last minute and the online meeting was paused.
Resolution may not be easy, because giving the UAE what it wants — essentially a much higher production limit — could upend the entire OPEC+ deal that’s buttressed oil prices since the start of the COVID-19 pandemic.
“Any request to adjust the production quota would be like opening Pandora’s box,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. That could allow an output increase of about 700,000 barrels a day for the UAE alone, and “other OPEC+ states might also request an adjustment.”
Several delegates said the issue was so serious that it could only be resolved by talks at the highest level of government.
The standoff leaves the market unsure whether it will be grappling with a huge supply deficit in the second half of the year, with crude this week rising above US$75 a barrel in New York for the first time since 2018. It also tarnishes the cartel’s carefully reconstructed reputation, raising the specter of another destructive internal dispute — the Saudi-Russia price war that helped to crash the oil market last year.
The UAE’s ambitions have upset negotiations before. Late last year, Abu Dhabi even floated the idea of leaving the cartel as it pressed to raise production. An OPEC meeting was postponed then too amid fraught negotiations, though a deal was ultimately struck.
The problem is a consequence of the UAE’s heavy investment in new additional capacity. The country’s cuts are measured from a starting point in 2018, setting its maximum capacity at about 3.2 million barrels a day. Expansion projects have since raised that number and the country wants its baseline reset to about 3.8 million barrels a day so it can use its new fields, delegates said.
The UAE argues that the change is necessary because, under the current terms of the OPEC+ deal, it is making proportionally deeper cuts than other members. The proposal on Thursday to delay the expiry of the output curbs from April to December 2022 exacerbated the issue.
“Clearly, the UAE is playing hardball and has signaled previously its frustration with production levels,” said Neil Quilliam, associate fellow in the Middle East and North Africa program at the Chatham House think tank. “It is unlikely that the UAE is willing to derail negotiations, this time around, though its appetite for doing so is growing, and future rounds are likely to be spikier.”
For the UAE, the baseline is a very significant issue and it will reject the OPEC+ deal until there’s a change, a delegate said after the meeting was adjourned. The Saudis are equally insistent that the extension of the agreement until December 2022 is vital for market stability next year.
Failure to bridge the gap would leave the existing OPEC+ deal in place, keeping as much as 5.8 million barrels a day off the market until April 2022.
Oil has risen around 50 per cent this year, with the recovery in demand from the pandemic outpacing the revival of OPEC+ supplies after last year’s deep cuts. Crude’s surge, combined with a rally in other commodities, has central banks fretting about inflation again. Brent was broadly flat on Friday.
OPEC+ is already in the process of reviving crude supplies halted last year in the initial stages of the pandemic. The 23-nation coalition decided to add about 2 million barrels a day to the market from May to July. But there was a growing clamor for the group to keep going.
The cartel’s own data show that once-bloated oil inventories are back down to average levels as a strong revival in fuel consumption continues. Demand in the second half will be 5 million barrels a day higher than in the first six months of the year, OPEC Secretary-General Mohammad Barkindo said on Tuesday.
“You still need around 2 million barrels a day at least for the second half of the year to just keep the market in a reasonable sense of supply and demand balance,” Neil Beveridge, a senior analyst at Bernstein Research, said on Bloomberg TV.
96% of COVID-19 cases are among those not fully vaccinated, B.C. health officials say – Global News
Ninety-six per cent of the COVID-19 cases recorded from June 15 to July 15 were among people who were either only partially vaccinated or not vaccinated at all, B.C.’s health minister says.
“If you take all the cases from June 15 to July 15, 78 per cent of those cases are among those who are unvaccinated,” Adrian Dix said.
“I think the evidence will encourage more people to get vaccinated. That tells you people should need to get vaccinated. We are seeing new cases and they are largely in unvaccinated people.”
The B.C. government will not require people to get the vaccine, but will not stop private businesses from doing so.
The seven-day rolling average for new cases rose from 42 new cases a day one week ago, to 73 new cases a day on Friday.
Most of the new cases are linked to indoor social gatherings at people’s homes, Dix said.
COVID-19: B.C. reports 89 new cases of virus, highest daily total in more than a month
“We are not going to deny access to services. Based on your vaccinated. That is our position. It will not be mandatory in that sense. There will be requirements in certain sense if people are not vaccinated,” Dix said.
“I think if you are going to have someone over to your house for dinner, you should ask them if they have been vaccinated, and it’s ok to tell them not to come if they haven’t been.”
COVID-19: B.C. government provides $36.5M to 83 anchor tourist attractions, higher vaccination rates mean lower cases
As of Friday, 80.3 per cent of eligible people 12 and older in B.C. have received at least one vaccine.
The province is hoping to hit 85 per cent immunization.
All five health authorities have been adopting additional strategies to supplement the mass immunization clinics, including pop-up clinics for first doses at parks, amusement parks, and beaches.
Dr. Navdeep Grewal of the South Asian COVID-19 Task Force said the province or private businesses should consider vouchers for food or sports tickets to encourage immunization.
“I think it is that final 10 per cent (of the population) we need to get vaccinated, so we can avoid the fourth wave in the fall and winter,” Grewal said.
“We need to find out where they are gathering, give them the information they need, and then give them that first dose that is so needed.”
© 2021 Global News, a division of Corus Entertainment Inc.
Run, don't walk, to the nearest clinic to get vaccinated before September, families told – CBC.ca
Kids who are going back to local elementary and high schools in September must get their first COVID-19 shot by Saturday to ensure they’re eligible for their second dose and be fully vaccinated by Labour Day, according to the health unit.
The Middlesex-London Health Unit (MLHU) says 73 per cent of those aged 12 to 17 in Middlesex-London already have their first shot, and just over a quarter have two doses.
“The uptake among this age group has been tremendous, right on board with some of our older population who was really eager to get vaccinated,” said Dr. Alex Summers, the associate medical officer of health for the MLHU.
“We see eagerness for people to get vaccinated and we’re just delighted by that. 12 to 17-year-olds will be back in in-person activities, and that’s where they flourish, that’s where they want to be, and we want to be able to support them to do so in a way that COVID isn’t transmitting.”
Vaccination is the “key ingredient” to maximizing the coming school year and making sure there are few disruptions.
COVID-19 vaccines have yet to be approved for those under 12.
“That’s why it’s really important to be gathering outdoors and making sure that everybody who is older than the age of 12 who is interacting with kids is vaccinated,” Summers said. “We can limit transmission among those who just can’t get the vaccine because they’re not old enough as we approach the school year.”
What exactly school will look like in September isn’t quite clear, but screening for symptoms, staying home when exhibiting symptoms, and wearing masks in classrooms are likely.
No appointments are required for COVID-19 vaccinations for anyone 12 or older for first or second doses at walk-in and mass vaccination sites. For more information on vaccinations and locations, visit the health unit’s website here.
Air Canada anticipating recovery in demand as travel restrictions are eased – Yahoo Canada Finance
Air Canada is anticipating a recovery in demand in the coming months as travel restrictions are eased and leisure passengers look to get away after being grounded by COVID-19.
Although overall bookings remain below pre-pandemic levels, customer interest began to increase in June with the elimination of quarantines for fully vaccinated returning Canadians and the removal of other travel restrictions.
“We can now optimistically say that we are turning a corner, and we expect to soon see correlated financial improvements,” CEO Michael Rousseau said Friday during a conference call.
“Indications are that the worst effects of the COVID-19 pandemic may now be behind us. Based on what we are seeing in other markets that are further along in reopening in Canada, we anticipate travel will resume at a quickening pace.”
Rousseau said bookings are steadily increasing for domestic, transborder and Atlantic markets as well as to sun destinations for the coming winter. Future bookings In some weeks of June were ahead of the same period in 2019.
“We expect the most recent announcements of the Government of Canada relaxing existing measures will further help strengthen the interest of our customers in flying again.”
Current demand is largely for leisure and visiting friends and family, but Air Canada expects to see a progressive return of corporate demand in September and October, added chief commercial officer Lucie Guillemette.
That could be aided by the ability of Canadian passengers to rely on COVID tests taken in Canada for trips of less than 72 hours.
“We are encouraged by some of the commentary from our peers in the United States with regards to overall business travel recovery,” she told analysts.
Guillemette said that rebuilding its U.S. operations as the largest foreign carrier is key to its recovery. That will also expedite the recovery of international long-haul operations as it seeks to achieve or exceed its share of the U.S. long-haul global market.
The Atlantic business will recover quicker than the Pacific or Latin America because of high vaccination rates, strong cultural and business connections with Europe and strong leisure interest from Canadians.
“We are already observing healthy demand signals for Europe into 2022,” she added.
The Montreal-based company says it lost $1.17 billion or $3.31 per diluted share, compared with a loss of $1.75 billion or $6.44 per share a year earlier.
Adjusted profits were $1.08 billion or $3.03 per share.
Revenues during the three months ended June 30 surged 58.8 per cent to $837 million from $527 million in the second quarter of 2020. Passenger revenues more than doubled to $426 million from a year ago which marked the first full quarter to be impacted by the pandemic. Cargo revenues increased 33 per cent to a record $358 million.
Air Canada was expected to post $2.76 per share in adjusted profits on $848.2 million of revenues, according to financial data firm Refitinitv.
The country’s largest airline increased its seat capacity by 78 per cent compared to the same time last year, and was down 86 per cent from the second quarter of 2019. It plans to increase available seat miles in the third quarter so capacity will be 65 per cent below the same period in 2019.
In August, its domestic capacity is expected to be about two-thirds of what it was in 2019.
“The third-quarter outlook pointed to healthy demand recovery and a significant improvement in daily cash burn,” Walter Spracklin of RBC Dominion Securities wrote in a report.
Air Canada says it has refunded about $1 billion for non-refundable tickets and expects to pay an additional $200 million in the third quarter, which will be covered by the federal government’s $1.4 billion refund credit facility.
The airline says it has recalled about 2,900 employees in June and July as it restores service this summer to destinations, particularly in Canada and the U.S. More workers will be called back for the fall season.
Air Canada has retained about half of its workforce, including the vast majority of pilots who have remained current and ready to fly when conditions warrant.
While it works to rebuild operations, the airline said it is also preparing to meet the challenges from increased competition stemming from expansion plans for Porter Airlines and Flair Airlines. Porter plans to add jet service from several gateways, including Toronto’s Pearson airport, in the second half of next year, while Flair is adding aircraft and routes.
“We certainly welcome healthy competition. but suffice to say, we will be ready to deal with that situation,” Rousseau said of Porter.
He also said the failed purchased of Transat may have been beneficial long-term, but it would have been very difficult to integrate while also focusing on the post-COVID recovery.
This report by The Canadian Press was first published July 23, 2021.
Companies in this story: (TSX:AC)
Ross Marowits, The Canadian Press
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