Oil showing positive bias, but attempt to freeze output may hit Iran, Iraq roadblock
WTI and Brent crude traded with a positive bias in the past fortnight, rising around 7.5 and 6.5 per cent, while MCX oil prices gained around 8 per cent in the same time frame. Comments from the Saudi Energy Minister about possible action to stabilise prices triggered a round of buying and the International Energy Agency forecast crude markets to tighten in the second half of 2016. Saudi Energy Minister Khalid al-Falihsaid Opec members and non-members would discuss the market situation, including any action that may be required to stabilise prices, during an informal meeting on September 26-28 in Algeria. Oil rallied with few stops over the past two weeks, going from a bear to bull market, as it reversed a loss of more than 20 per cent in early August on speculation that Saudi Arabia and the rest of the Opec nations will agree to a production freeze with Russia and other non-Opec members. However, Iran, the third-largest producer in the Opec, had earlier this year refused to join such an attempt by the group and non-Opec members led by Russia to stabilise production. Tehran has been boosting oil output since the lifting of the western sanctions in January. News of its potential support for a production freeze helped halt an abrupt slump in crude prices. Iraq’s Prime Minister said the country had not yet reached its full oil market share, suggesting his government would not restrain crude output as part of any possible Opec agreement to lift prices. Despite rebounding this year, oil still trades at less than half of mid-2014 levels, with the market still worried about a glut that spurred the biggest price rout in a generation. The selloff has battered the economies of Venezuela, Iraq and Nigeria, which are more anxious to boost crude prices than major Opec producers. On the other side of the globe, China’s July diesel and gasoline exports soared 181.8 per cent and 145.2 per cent, respectively, from the levels reported for the same month last year, putting pressure on refined product margins. Iraq planned to increase exports of Kirkuk crude by 150,000 bpd from its northern fields while Nigerian rebels who regularly attacked oil facilities in the country earlier this year said they were ready for a ceasefire. US drillers added 10 oil rigs in the week to August 19, the eighth straight week of rig additions, as crude rebounded toward the $50 a barrel mark that makes drilling viable. Johnny Oduya Authentic Jersey
RIL focuses on domestic market for refined products
Mukesh Ambani-led Reliance Industries (RIL) is looking to increase focus on the domestic market for its refined products, a company official said on Friday. “We will focus more on India, where we see scope for growth. We will also focus on the East for exports,” said an RIL official, who did not wish to be named. On July 15, in its results press statement, RIL said its exports of refined products from India were at Rs 286.10 billion during the April-June 2016 quarter, compared to Rs 323.52 billion in the same period a year ago. In terms of volume, exports of refined products were at 9.8 million metric tons (MMT) during the April-June 2016 quarter, compared to 8.5 MMT in the corresponding period a year ago. RIL expects growth in India’s diesel and gasoline consumption for the next 10-15 years, as the country’s economy and disposable income increase. For the financial year 2015-2016, India’s industry sales for petrol rose 15 per cent, to 21.84 million tons (MT), and sales for diesel rose eight per cent to 74.63 MT, according to data available with the Petroleum Planning and Analysis Cell. Ratings agency India Ratings & Research (Ind-Ra), in its outlook for FY17, said, “Growth was driven by strong pick-up in automobile sales, particularly passenger vehicles. Ind-Ra expects petrol consumption to further increase by eight to 10 per cent in FY17, driven by strong passenger vehicle sales.” Diesel consumption, the rating agency said, is likely to grow by five to six per cent on improved sales of commercial vehicles, however, offset to some extent by lower consumption of diesel in power backup. RIL is also in the process of reopening its 1,400 retail outlets, which were earlier mothballed. So far, the company has restarted operations at more than 1,000 such outlets. The company official added the expected growth will help support the company’s gross refining margins (GRMs). In the April-June 2016 quarter, RIL reported GRMs of $11.5 per barrel, higher than the $10.4 per barrel seen in the same period a year ago. For its liquefied petroleum gas (LPG) business, the official said, “We are looking at all options in India, including LPG. Our market is small, as our customers do not get subsidised. We reach areas where the public sector companies do not reach, and with subsidy coming down, our products will become more economical.” FUEL PROSPECTS • In 2015-16, India’s industry sales for petrol rose 15 per cent to 21.84 MT, and sales for diesel rose eight per cent to 74.63 MT • Ratings agency Ind-Ra expects petrol consumption to increase by eight-10 per cent in FY17 • Diesel consumption set to grow five-six per cent, says Ind-Ra Joshua Garnett Authentic Jersey
CBM pricing tweak
The government plans to come out with a new pricing formula for coal bed methane as part of the Hydrocarbon Exploration Licensing Policy (HELP). “A new pricing and marketing policy for the CBM would soon be made to make it attractive for investors,” a senior oil ministry official said. In 2014, the new domestic natural gas pricing guidelines also covered CBM blocks. This resulted in CBM gas beyond this date to be priced at natural gas rates, which is now about $3.06 per mBtu on gross calorific value (GCV) basis. According to latest estimates by the ministry the gas price could drop to a low of about $2.25 or $2.50 per mmBtu from October 1. CBM is natural gas trapped within coal formations and commercially unviable for mining. It is extracted by drilling holes into the seams. Officials said the ministry plans to hold consultations with stakeholder on pricing and marketing of CBM before coming out with a specific policy as part of HELP. The government is still in the process of working out the nuances of HELP contracts, and a fresh round of hydrocarbons auctions will be conducted under this regime. The sector also has differential pricing, which would be addressed, officials said. The existing pricing regime has created a divide in the industry with two firms – Essar Oil and GEECL – being able to sell CBM gas at pre-approved (high) prices of $6 and $15/mBtu, respectively. However, RIL and ONGC, which are gearing up to start production, would have to follow the natural gas pricing formula. Phillip Danault Authentic Jersey
Government may advance Parliament session to get GST laws approved
Eager to meet the April 1 target to roll out the landmark Goods and Services Tax (GST), the government may advance Winter Session of Parliament by a fortnight to get supporting legislations passed, leaving sufficient time for implementation of the new indirect tax regime. Winter Session of Parliament is normally convened in the third or fourth week of November but this year the government is looking at starting the month-long session immediately after the end of festive season. An early Winter Session would help get the Central GST (CGST) and Integrated GST(IGST) legislations, that will pave way for the Goods and Services Tax (GST), to be approved within November or latest by early December, government officials said. The two are supporting legislations to the Constitutional Amendment Bill approved in the Monsoon Session of Parliament. Requiring ratification by half of the 31 states for it to become a law, the Constitution Amendment Bill has already been ratified by 8 state assemblies including Assam, Bihar, Chhattisgarh, Jharkhand, Himachal Pradesh, Gujarat, Delhi and Madhya Pradesh. Maharashtra and Haryana are likely to follow suit soon and the requisite numbers may be in place by September, an official said. “With required number of states ratifying the Bill, there is a thinking that the Winter Session should be advanced to around November 9 or 10, after the festivities, including Chhath Puja,” he said. “In doing that, a consensus with all the political parties will be needed.” The government is of the view that once half of the state legislatures approve the new national sales tax regime, the GST Council – comprising Union finance minister and state finance ministers, can be nudged to quickly approve the tax rate, slabs and exemptions for it to be incorporated in the supporting legislations. Parliament nod to the legislations in the Winter Session would give enough time to prepare for the rollout of GST from April 1, 2017. The new regime will subsume excise, service tax and other local levies including VAT, octroi. Government is of the view that an early Winter Session will also be beneficial as the Budget Session is planned to be convened in the last week of January. “Presentation of Budget around end-January is under consideration and hence an early Winter Session also paves way for an early Budget Session,” the official said. Ed Dickson Jersey