Oil market looked to Vienna this week where the Opec met on Thursday. There was no surprise which could have given the trade a direction. Opec decided to leave the current quotas unchanged. The organization reported to be puzzled by the high prices at the moment and blamed them on speculation, as the market would basically be well-supplied. The Iraqi oil minister Thamer al-Ghadban announced this week that Iraq has boosted its oil output to 1.7 million barrels per day. This however did not have significant impact on the market as the country is still far away from the 2.8 million barrels per day of prewar production.
The Russian stock market was tending sideward and volatility has been decreasing this week. Market participants are waiting anxiously how the legal battle between Yukos and its head Mikhail Khodorkovsky will end. The investor community is also still waiting for a strong comment of Vladimir Putin on the whole issue. Sibneft was the flavour of the week as the company surprised investors with the announced that it will pay over $1 billion as a half-year dividend. Around 92 percent of the company belongs to Roman Abramovich, who controls its through Millhouse Capital. The payment was also interpreted as a clear sign that the Russian government will not obstruct the Yukos-Sibneft merger.
Sars, which has almost been forgotten, has come back to light with the presentation of Asian companies earnings reports. Singapore Airline, which is one of the most profitable airlines worldwide had to announce its first quarterly loss of US$177 million, due to Sars breakout which cut passenger demand significantly. However, analysts expected even a bigger loss of up to US$ 300 million. Although the worst should be over, the outlook for the rest of the year is not too bright. The passenger increase in June was also due to heavy discounts in fare prices which will show its effect in future profit statements. Furthermore, demand for business travel is still not back to old levels. Singapore Airlines has used to troubled times to further restructure and sacked 600 workers and cut wages. This trend will continue as SIA is, like established European carriers, confronted with new low-cost competitors. The company is therefore considering to launch an own budge airline to counter the possible threat.
Another carrier which was in focus this week was British Airways. The company announced a first quarter loss of ё45 million and warned that it expects a further decline of revenues in the second quarter. BA has suffered from a weak demand caused by an economic downturn, the low-price competition in Europe, the outbreak of SARS and the war in Iraq. Additionally, it was hit by a two-day strike of its personnel at the Heathrow Airport in London. Check-in stuff protested against a new swipe card system. About 500 flights were cancelled and thousands of passengers stranded. This strike is expected to cost the company over $56 million. The new uncertainty is also likely to have a negative impact on forward booking and will reduce revenues of the struggling company further. As a reaction to the problems, British Airways cut over 11?000 jobs since summer 2001. However, it is expected that in this challenging environment it will not be possible for BA to reach the results of 2002.
This week, the problem of the European Union to achieve sufficient growth has been intensely discussed. In the last three decades, the EU gross domestic product per capita has been stagnating at around 70 percent of America?s. However, to achieve further cohesion among the different member states and retain political stability, new recipes for growth are required. A recent analysis mandated by the European Union showed clearly that the EU has to set new priorities for its budget. More expenditure on research, as well as higher education and infrastructure could have growth-enhancing effects. But therefore, expenditure on agricultural and regional aid has to be cut. The report also proposed to change tax and fiscal system to better facilitate investments in innovative projects. There is a need for higher and more flexible state-investments in leading research and universities should better support skills and capabilities which are required in a knowledge economy. Taken the current situation into account where every member tries to defend its benefices, the report can at best be a start of a new debate about the future function of the European Union.