OPEC chief says oil market may have upside potential in 2020

OPEC’s production of crude oil and other liquids is expected to decline to 32.8 million barrels per day by 2024. (AFP)
Updated 06 November 2019

OPEC chief says oil market may have upside potential in 2020

  • Mohammed Barkindo appears to downplay the need to cut output more deeply

VIENNA: The oil market outlook for next year may have upside potential, the secretary-general of producer group OPEC said on Tuesday, appearing to downplay any need to cut output more deeply.

The Organization of the Petroleum Exporting Countries and its allies led by Russia will meet in December. The so-called OPEC+ alliance, seeking to boost oil prices, has since January implemented a deal to cut output by 1.2 million barrels per day until March 2020.

OPEC’s Mohammed Barkindo said he was more optimistic about the market outlook for next year than he had been in October, when he had said all options were open including a deeper cut to oil output amid forecasts of oversupply.

“Based on the preliminary numbers, 2020 looks like it will have upside potential,” he told a briefing on Tuesday. “There are definitely brighter spots. The numbers are looking more refined and the picture is looking brighter.”

“The other nonfundamental factors like trade issues that have been impacting negatively on the global economy, the news coming out is more optimistic. We have seen the biggest economy in the world, the US, continuing to defy projections, racing ahead.”

OPEC’s figures suggest there will be excess supply next year due to rising production outside the group. This prospect and issues such as the US-China trade dispute have weighed on oil prices, which at around $62.70 a barrel are down from a 2019 high above $75.

On whether the market looked oversupplied for next year, Barkindo said: “We are not there yet. We will not be able to at this point preempt all the steps that we are working through.”

Those steps, he said, include upcoming meetings of OPEC technical committees, such as its Economic Commission Board, and the next OPEC monthly oil market report, which looks at global demand and supply, due on Nov. 14.

Earlier, Barkindo also said Brazil would be welcome to join the 14-country oil producer group but had not yet made an official request to do so.

“They would be most welcome to join,” he told reporters, adding that consultations had taken place in Riyadh.

Brazilian President Jair Bolsonaro said last month that he wants his country to join OPEC, a move that would add the most significant new producer to the oil cartel for years but met with skepticism in Brazil’s energy industry.

OPEC on Tuesday released its 2019 World Oil Outlook, in which the producer group said it would supply a diminishing amount of oil in the next 5 years as output of US shale and other rival sources expanded. 


LG Chem separates battery business as electric cars take off

Updated 18 September 2020

LG Chem separates battery business as electric cars take off

SEOUL: South Korea’s LG Chem, an electric car battery supplier for Tesla and GM, said that it plans to separate its battery business into a new company as the electric vehicle market takes off.

The move came after LG Chem swung to a profit in its car battery business in the latest quarter. It expects further profitability thanks to growing demand from European car makers and more sales of cylindrical batteries used in Tesla cars.

LG Chem, South Korea’s top petrochemicals maker, has long bet on car batteries as a new growth engine, but it has never made an annual profit in the business since it started making them about a decade ago.

But expectations are growing for its car battery business as automakers push for more electric vehicles, fueled by Tesla’s rise and tougher emissions regulations in Europe.

LG Chem said the timing was right to separate the business, which competes with China’s CATL and Japan’s Panasonic, as it has started to make “structural profits” in its car battery business.

LG Chem said the new business, to be launched in December, aims to achieve a revenue of 30 trillion won ($25.5 billion) or more in 2024, from an expected revenue of 13 trillion won this year.

The new wholly owned subsidiary, tentatively named “LG Energy Solutions,” will include LG Chem’s small batteries used in smartphones and laptops and its energy storage systems, as well as its car batteries. LG Chem shares slumped 5.4 percent.

“Many LG Chem investors will only indirectly hold the battery business, which will be separated into a unit,” Daeshin Securities analyst Han Sang-won said.

He also said that investors are also taking profits ahead of Tesla’s battery day, in which Tesla may unveil its advanced battery technologies.

LG Chem said it will consider a stock market listing of the battery unit, without elaborating further.

Making the unit an independent company would also help to attract investments to the business, which requires heavy capital expenditure to expand production capacity as orders pile up, LG Chem said.