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According to the International Energy Agency (IEA), these two Asian giants accounted for 80 percent of Russia’s crude oil exports in May. This trend highlights the growing reliance of India and China on Russian oil and the changing patterns of global energy trade.

The Paris-based energy agency’s latest Oil Market Report reveals that India has significantly ramped up its purchases, from virtually nothing to nearly 2 million barrels daily. Meanwhile, China has increased its liftings by an additional 500,000 barrels per day, reaching 2.2 million barrels per day. Together, these two nations have become the primary destination for Russian crude oil exports, reflecting the favorable economics of heavily discounted Russian oil.

Amid geopolitical developments and trade restrictions, Russia has pivoted toward the East, redirecting over 90 percent of its seaborne crude exports to Asia. This dramatic shift marks a substantial increase from the pre-war levels of 34 percent. Europe, once the main market for Russian crude, has witnessed import bans, while the Group of Seven (G7) nations have imposed shipping restrictions. As a result, the focus has turned to India and China’s dynamic and rapidly growing markets.

The surge in India’s imports of Russian oil is particularly noteworthy, with volumes rising by 14 percent compared to April, reaching a record high. The attraction of cheap Russian crude remains strong due to substantial discounts. The Urals crude grade, Russia’s primary export, maintained an average discount of $26 per barrel to Dated Brent in the first three weeks of May. This starkly contrasts the $3.70 per barrel discount observed in January 2022.

The IEA’s projections for the Indian economy further reinforce the importance of these developments. The agency predicts Indian GDP to grow by 4.8 percent in 2023, with the growth rate accelerating to 6.3 percent in 2024 and a robust 7 percent from 2025 to 2028. Favorable demographics and an expanding middle class will bolster this growth. India is poised to surpass China’s global year-on-year oil demand growth by 2027.

As the world’s fastest-growing economy, India surpassed China to become the most populous country in 2023. Despite a slowing expansion rate, India’s population is expected to grow until 2065, propelled by urbanization, industrialization, and a rising middle class seeking mobility and tourism. The IEA predicts that Indian oil demand will increase by over 1 million barrels per day between 2022 and 2028, with diesel comprising a growing share of the product mix, climbing from 32 percent to 35 percent during the forecast period.

The shifting trade patterns in the oil market have not been limited to Russia alone. Since early 2023, increased exports from India, the Middle East, and China have been redirected westward to European and G7 buyers in the Atlantic Basin, helping to offset the Russian cargoes now being diverted to buyers east of the Suez Canal.

The emergence of India and China as major buyers of Russian crude oil underscores the evolving dynamics in global energy markets. The reliance on heavily discounted Russian oil reflects the economic advantage of these countries as they seek to meet their growing energy demands. As geopolitical and trade dynamics evolve, observing how these trends shape the global oil market in the coming years will be interesting.

In conclusion, the rise of India and China as dominant buyers of Russian crude oil is reshaping the global energy landscape. With significant purchases and heavily discounted prices, these two Asian giants are capitalizing on the changing dynamics of the oil market. As India’s GDP continues to grow and its population expands, the nation’s oil demand is set to outpace even that of China. This trend presents challenges and opportunities for the global energy sector as Russia’s oil export focus shifts to the East. The world eagerly watches these developments as they unfold, anticipating the future implications for the global oil trade.

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Exclusive: Airbus roiled by poor start to 2023 as industrial pressure grows https://worldecomag.com/exclusive-airbus-roiled-by-poor-start-to-2023-as-industrial-pressure-grows-2/ Tue, 14 Feb 2023 11:54:34 +0000 https://worldecomag.com/?p=25027 PARIS, Feb 13 (Reuters) – The boss of European planemaker Airbus has read the riot act to executives about disappointing deliveries in January and warned them that in 2023 Airbus cannot deliver fewer jets than its now-abandoned target for 2022, industry sources said.

Until now, Airbus has blamed mounting delays on suppliers led by engine makers. But the structure, operational controls and performance inside Airbus are increasingly in the spotlight as several suppliers predict more aircraft delays, they said.

Angered by the abrupt emergence of the last set of delays in late 2022, which derailed 2022 delivery targets, Chief Executive Guillaume Faury told managers last month’s 33% drop in deliveries to 20 jets was another “wake-up call”, they said.

“He made it clear this cannot happen twice,” said one person briefed on the remarks in a Feb. 8 executive webcast. Another described the usually measured French engineer as “furious”.

Airbus declined to comment on internal meetings. Shares in the planemaker were up about 1.6% in late trading.

The showdown came amid supplier speculation of a possible new wave of delays from Airbus after a first round in mid-2022 prompted it to cut its 2022 delivery goal to 700 jets from 720, followed by the November setback which saw the goal abandoned.

All eyes are on Feb. 16 earnings when the world’s largest jetmaker is expected to outline cautious 2023 targets.

So far, sources have said they expect a delivery goal not far above the original 720 for 2022, though Faury’s remarks do not exclude a pain threshold as low as 700. Many analysts nonetheless expect a goal closer to 750, up from 661 in 2022.

The first major test will be the first quarter for which suppliers say Airbus seeks close to 140 deliveries. After a weak January, that requires a steeper curve than in recent years.

Facing markets during that quarter may be an interim finance chief as Airbus struggles to agree a permanent one – a politically sensitive topic which, along with a legal feud with Qatar, has distracted attention from day-to-day operations.

Analysts say Faury will want to avoid spooking investors while insuring against the risk of more downgrades to guidance on deliveries from setting expectations too high. Airbus wants to understand any risks to guidance much earlier, by mid-year.

Airbus declined any comment on numbers ahead of earnings.

Its output woes have marred what should have been a celebration of resurgent demand with a record Air India order.

It is producing 45 best-selling A320neo-family jets a month and is expected to seek rates of 65 by end-2024 and 75 in 2026 – months later than previously planned. With more potential delays in the pipeline, some suppliers say even that looks ambitious.

On larger A350s, Faury said in October Airbus would lift monthly output to six from five in early 2023 and then explore more. But industry sources said Airbus throttled back to 4.5 a month in late 2022 and is now producing 5.6 on its way to six a month in 2024, where it may stay through 2025.

While Airbus shapes 2023, the fortunes of 12,000 suppliers remain mixed. There has been an improvement in supplies of electronic chips as well as computers for production tests.

Airbus has said it is close to weaning itself off Russian titanium, though some A350 supply risks remain.

On the other hand, sources say steel capacity has moved up the list of concerns amid pressures including debt restructuring at supplier Liberty Steel, which had no immediate comment.

Cabins are once again on the watch list with items as mundane as connecting rails for overhead “passenger service units” – containing light, fan and call button – running short.

Last week, Airbus urged suppliers to hold more stocks.

INTERNAL TASK FORCE

Yet despite hot spots, sources say several key yardsticks of supplier performance like missing-parts-per-million are steadily improving. As they do, internal pressures are coming into greater focus and forcing Airbus to set up a special task force.

Supplies of A320 fuselage shells from Nordenham, Germany, have been disrupted following tensions over a reorganisation. The result is work being done out of sequence which needs more time and labour. A220 cockpits are seen as similarly affected.

Airbus declined detailed comment on operations and referred back to Faury’s comments in January that it faced a “complex environment” as well as a fragile supply chain.

Although many companies are struggling to stay abreast of disruption following COVID-19, some in the industry note a decision by Faury in 2019 to downgrade the top supply chain leadership post, which no longer reports to him directly.

In 2021, Faury also appointed an operations chief well respected for running military aircraft activities but with limited experience of higher civil volumes.

When snags do arise, many question whether they are cutting through layers of internal reporting as quickly as they should, especially following a slew of senior departures or retirements.

“There is a loss of control of the production process. It is more important to fix internal problems and not point fingers at the supply chain,” a person familiar with the procedures said.

Some see signs of message fatigue. Following Faury’s Feb. 8 web event, executives were told too few, or 57%, had logged in.

Faury has, however, insisted that bringing the supply chain back to health and modernising Airbus’ industrial fabric, as well as preparing for decarbonisation, are critical priorities.

He told journalists in December that Airbus was investing in the next generation of digital factory production systems.

Reporting by Tim Hepher, Additional reporting by Eric Onstad Editing by Mark Potter

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Analysis: Ready to pounce: Investors prepare for swings, opportunities as Omicron variant spreads https://worldecomag.com/analysis-ready-to-pounce-investors-prepare-for-swings-opportunities-as-omicron-variant-spreads/ Tue, 30 Nov 2021 11:22:47 +0000 http://demo.akaybee.com/?p=12614 Nov 30 (Reuters) – The latest COVID-19 virus variant has sparked a wild ride in markets.

Investors say the volatility probably isn’t over yet, as they look for selective opportunities to pounce on while protecting their portfolios as the year-end nears.

The emergence of the Omicron variant saw the S&P 500 notch its worst one-day percentage loss in nine months on Friday – only to rebound on Monday as hopes grew that the variant might be milder than first feared. While the World Health Organization (WHO) cautioned of a very high risk of infection surges, U.S. President Joe Biden said America would not go back to lockdowns. read more

Some investors saw opportunity in those swings.

“We have been endeavoring to take advantage of sharp sudden concerns (such as Omicron) to add to positions where we believe the value more than outweighs any new/incremental risk,” Shawn Kravetz, founder of Esplanade Capital, told Reuters by email. He is looking to swoop in if markets take another dive.

London-based hedge fund Westbeck Capital Management took advantage of Friday’s sharp drop in oil to take a position in Brent crude. The fund is waiting for more details on the Omicron variant to become clear before making a bigger bet on a bounce in oil prices.

“We need to wait to see how this new variant develops. My gut feel is that this is a big buying opportunity,” said Jean-Louis Le Mee, the firm’s co-founder.

Still, not everyone is sanguine. Tim Pickering, chief investment officer at Auspice Capital, a Canadian computer-driven commodities-focused fund, reduced equity exposure on Friday.

“I think the biggest takeaway is the market is fragile and we should expect volatility,” he said.

The Cboe Volatility Index (.VIX), Wall Street’s most widely followed fear gauge, was down on Monday but still elevated from its range over the last couple of months.

Steven Oh, head of credit at PineBridge Investments, said the Omicron variant has introduced more risks to the downside on the heels of the market’s sharp rally.

“If you have less confidence in the base case you may get a bit more defensive in positioning,” he said.

While there may be hopes that the virus may not be severe as initially thought, it shouldn’t be dismissed, others warned.

Omicron “definitely has the potential to change the game globally,” said Grant Wilson, head of Asia Pacific at Exante Data, who said other factors such as transmissibility and vaccine evasiveness needed to be taken into account.

Indeed, the Financial Times on Tuesday quoted the chief executive of Moderna as saying existing vaccines would be less effective at fighting Omicron. S&P 500 e-mini futures were trading lower. [nL4N2SL1R3]

Wilson said large asset managers take time to make decisions and he expected a lot of investment committee meetings would be scheduled where a key question would be if the outlook for 2022 has changed.

How central banks respond to the threat is also key. U.S. Federal Reserve Chair Jerome Powell on Monday warned that the new strain muddies the outlook. read more

“The question now is does the Omicron variant mean that the Federal Reserve won’t hike rates next year?” said Troy Gayeski, chief market strategist for FS Investments, who still sees rate hikes on the horizon and thinks there will be a near-term peak to the market sometime between mid-January and April.

YEAR END NEARS

Despite the concerns, big Wall Street firms including BlackRock and Citi advised clients to stay invested or buy on weakness.

BlackRock’s analysts on Monday said if vaccines prove effective “the strain only delays the restart of economic activity,” while Citi analysts said while “a market sell-off seems logical” it “would buy into any dip.”

Others have noted that stocks managed to move higher in the face of the Delta variant this year. The S&P 500 is up about 10% since early May, when the WHO designated the variant now known as Delta a “variant of concern.” read more

S&P 500 timeline chart
S&P 500 timeline chart

However, a strong year in markets may mean some investors will look to protect their profits as year-end nears, rather than assume more risk.

The average hedge fund, for example, ended October up 11.4% for the first 10 months of the year, according to data from Hedge Fund Research, compared to an 11.8% gain for all of 2020. The S&P is up 24% year-to-date.

Marc LoPresti, co-managing director of alternative investment management firm The Strategic Funds, said hedge funds had already taken off some riskier positions as the COVID-19 situation deteriorated last week in Europe to protect gains going into year-end.

“They did the majority of the derisking, (but) they may do some more,” LoPresti said.

Source: https://www.reuters.com/markets/europe/ready-pounce-investors-prepare-swings-opportunities-omicron-variant-spreads-2021-11-30/

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