Support grows for deeper OPEC+ oil output cuts

Azerbaijan’s energy minister said coronavirus concerns are excessive, adding to a growing group of officials who believe that markets are overreacting. (AFP)
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Updated 10 February 2020

Support grows for deeper OPEC+ oil output cuts

  • Azerbaijan is likely to support a provisional cut of 600,000 barrels per day, says country’s energy minister

BAKU: Azerbaijan is likely to support further oil output cuts by OPEC and its allies, the ex-Soviet country’s energy minister said, should the move be necessary to balance demand fears after a coronavirus outbreak in China.

A technical panel that advises the Organization of the Petroleum Exporting Countries and its allies led by Russia, the group known as OPEC+, proposed this week a provisional cut of around 600,000 barrels per day (bpd).

“Azerbaijan is likely to support this,” Parviz Shahbazov told Reuters in an interview. Azerbaijan is not an OPEC member but is part of the OPEC+ group informally established in 2016.

Although Azerbaijan is not a big contributor to the overall cuts by OPEC+, its position may shed light on Russia’s thinking as non-OPEC members of the group usually take a unanimous decision. Moscow is yet to give its nod to the further cuts.

Producers in the OPEC+ group are scheduled to meet in Vienna on March 5-6, although the meeting could be brought forward depending on how the coronavirus outbreak affects oil prices going forward. Brent dropped below $55 a barrel on Friday.

However, Shahbazov said he believed that the impact of the coronavirus might be short-lived, adding to a small number of other officials and market players who believe that markets are overreacting.

“At this stage, the effect of coronavirus is temporary and I do not see global threats, but I do not rule out that there may be further (oil output) cuts,” he said. “We can meet earlier than March if necessary although there is no such need so far.”

The death toll from the coronavirus outbreak in China rose above 800 on Sunday, surpassing the number killed globally by Severe Acute Respiratory Syndrome across 2002 and 2003.

Shahbazov said that oil output in Azerbaijan was around 770,000 bpd last month, in line with its OPEC+ quota.

The country has a balanced budget based on an oil price of $55 per barrel but can withstand a temporary dip to $40, Shahbazov said.

Baku, which plans to start gas exports to Europe, has also signed deals with Saudi Arabian energy company ACWA Power and United Arab Emirates’ Masdar to expand in renewable energy.

Shahbazov said the firms would invest around $400 million to build wind and solar power plants with a total capacity of 440 megawatts. Construction is due to start in September and last two years.

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Furniture giant IKEA making masks to help fight coronavirus

Updated 31 March 2020

Furniture giant IKEA making masks to help fight coronavirus

  • The first batches for European health care facilities are in transit
  • Several other companies are also working to help address an acute shortage of medical supplies

STOCKHOLM, March 31 : Furniture giant IKEA is producing face masks and other protective gear for hospitals, joining a growing list of companies branching out of their normal business areas to help meet equipment shortages in the fight against coronavirus.
Having started off with masks for staff in China in early stages of the pandemic, the Swedish group is working with several suppliers to ramp up output of masks for health workers, as well as hand sanitisers, visors and single-use aprons.
The first batches for European health care facilities are in transit, Henrik Elm, global supply manager at brand owner Inter IKEA Group, which is in charge of supply, told Reuters.
Several other companies are also working to help address an acute shortage of medical supplies, with vacuum cleaner company Dyson making ventilators, fashion group Armani producing medical overalls and spirits brand Ricard donating alcohol for sanitisers.
Working from home
IKEA has reopened all but one store in China, where the virus emerged, but across markets a majority of the 436 stores are temporarily closed.
Demand for office furniture is holding up as many people are working from home in the health crisis, Elm said.
“The sales pattern is changing. One area where we are selling pretty well compared to others is office furniture. People are working from home and they have identified needs in their homes for it,” he said in an interview.
“So, it (demand) is distributed differently — in some areas we keep it up well, in some we have a major impact.”
Well-prepared’
Elm said supply chain disruptions had increased with the spread of the virus to Europe and America, with closed borders or restricted movement a key bottleneck.
IKEA has managed to cope, however, partly by spreading inventories to warehouses in several locations, he said.
“So far, we have seen a limited effect on the availability of our offer,” he said.
Elm said he expected no shortages of wood or other materials, such as plastics and textiles, as global demand for such materials was in decline.
One area of concern, however, is finding room to store goods already in transit to markets where IKEA has temporarily closed many of its stores.
“There will be constraints in coming weeks in harboring these goods. Warehouses will be a bottleneck,” he said. “Things that were on their way we are either re-steering or storing.”
IKEA produces a tenth of products itself and sources the rest from suppliers, mostly in Asia and Europe.
As IKEA and other retailers adapt to slowing consumer demand, many suppliers and service partners are struggling.
Elm said IKEA was assisting them with loans, swift invoice payments and help accessing government support packages.