India looks at non-Opec options to tame oil prices
Unreasonable output curbs by oil producers’ cartel, the Organization of the Petroleum Exporting Countries (Opec), have forced India to negotiate alternative long-term supplies from outside the grouping such as the US and Russia amid soaring petrol and diesel rates in the country, two officials familiar with the matter said. India is the world’s third largest crude oil importer after the US and China. Hence oil producers cannot ignore India for long without losing their market share to other competing countries, the officials said, requesting anonymity. “Interestingly, even Russia (which is an outside ally of Opec in the cartel’s recent production cuts) is in touch with us for long-term crude supply contracts at concessional terms. We are actively considering the proposal,” said one of the officials, a key decision-maker on this matter. He, however, declined to disclose the commercial details. Some other Opec members, including one from Africa, are also willing for long-term contracts, he said. India is witnessing a spike in auto fuel rates due to rising international oil prices. Petrol on Sunday became costlier by ₹6.82 per litre and diesel by ₹7.24 a litre as their pump prices jumped for the 27th time in 48 days. One of the key reasons for high domestic fuel rates is production curbs by the oil cartel, a second official said. Opec and its allies, including Russia (together known as Opec+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output, a 10th of the global output, from May 1, 2020, but did not adhere to the planned supply restoration. The output cut was initiated when international oil rates fell below $20 a barrel in April last year. Benchmark Brent crude on April 21, 2020 fell to $19.33 a barrel. It, however, rose to over $50 per barrel in early 2021. With rising demand and supply constraints, oil prices have now hit $74.39 a barrel on Wednesday (June 16, 2021), the highest since April 2019.
India’s LNG imports continue to drop in May
The country received 2.59bn m³ of pipeline gas equivalent (2.06mn t of LNG) last month, down from 2.66bn m³ in April and 2.97bn m³ in March but up from 2.37bn m³ in May 2020. A national lockdown was imposed at the end of March 2020 to curb the spread of the virus, curbing LNG demand in May. LNG imports in pre-pandemic May 2019 totalled 2.52bn m³, according to oil ministry data. India’s gross gas production reached 2.74bn m³ last month, up by 19pc from 2.3bn m³ a year earlier. Gas production has risen this year because of new output from private-sector refiner Reliance Industries and BP’s deepwater areas in the Krishna Godavari basin. Total gas consumption fell to 5.25bn m³ in May, flat from April but up from 5.03bn m³ a year earlier and 5.18bn m³ in May 2019. LNG import dependency was at 49pc last month, down from 51pc in April. High spot LNG rates of $12/mn Btu has also hurt demand for the fuel in India, an official from state-controlled importer Petronet LNG said. A resurgence of Covid-19 cases in the country has affected demand for city gas and LNG use by refineries and industries. But demand for gas and LNG should increase this month as lockdowns ease. India is expected to rely more on LNG this decade, but it will need to substantially increase its import capacity to meet its target of gas taking a 15pc share of the energy mix, according to Petronet LNG. The country will have to boost its LNG import dependency to 70pc by 2030, despite increasing domestic production, if it is to meet its target of raising gas’ share of the energy mix to 15pc from 6.3pc at present, chief executive AK Singh said. LNG use is set to increase sharply as the country plans to boost gas consumption to 650mn m³/d by 2030, from 155mn m³/d no
Oil steady on summer demand hopes but Iranian supply looms
Oil prices were largely steady on Monday on rising demand in the northern hemisphere’s summer driving season, but traders braced for a return of Iranian crude supplies despite a pause in talks to end U.S. sanctions. Brent crude for August lost 24 cents, or 0.3%, to $73.27 a barrel by 1255 GMT. U.S. West Texas Intermediate (WTI) crude for July was down 17 cents, or 0.2%, at $71.47. Both benchmarks have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel. The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs. “Oil’s underlying physical demand picture remains positive,” said OANDA analyst Jeffrey Halley. “Despite the noise in financial markets, the real world is on the right track and will require increasing amounts of energy as it reopens.” Bank of America on Monday said that Brent crude was likely to average $68 a barrel this year but could hit $100 next year on unleashed pent-up demand and more private car usage. Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country’s presidential election. Iranian and Western officials say Raisi’s rise is unlikely to alter Iran’s negotiating position. Two diplomats said they expected a break of about 10 days. “It is likely to delay the return of Iranian oil to the market, but it is unlikely to derail the path to a deal,” said SEB chief commodity analyst Bjarne Schieldrop. A deal could lead to Iran exporting an extra 1 million barrels per day, or 1% of global supply, for more than six months from its storage facilities. Iran has boosted the volume of crude it has stored on oil tankers in recent months, data intelligence firm Kpler said, in what may be preparation for a resumption in exports. However, oil prices have drawn support from forecasts of limited growth in U.S. oil output, giving the Organization of the Petroleum Exporting Countries (OPEC) more power to manage the market in the short term before a potentially strong rise in shale oil output in 2022.
India’s return to LNG spot market hints at post-virus recovery
India started buying prompt shipments of liquefied natural gas from the spot market after a two-month absence, indicating a rebound in demand as the nation exits a deadly phase of the Covid-19 pandemic. Petronet LNG Ltd. and Indian Oil Corp. awarded tenders for delivery over the next few months, the first spot purchases since March, according to traders with knowledge of the matter. Both cargoes cost more than $11 per million British thermal units, an unusually high level for Indian buyers able to turn to alternatives such as fuel oil and liquefied petroleum gas. Global energy use is quickly recovering from the devastation wrought by the pandemic, and the positive signal from India will help to push natural gas prices higher, though the nation’s demand recovery is still uneven and not all buyers there are eager to boost purchases. LNG spot prices for North Asia have rallied due to robust Chinese demand and supply issues, and been further bolstered by a surge in European gas benchmarks to near their highest in almost 13 years help. India is emerging from the Covid-19 wave that overwhelmed healthcare infrastructure and triggered localized lockdowns, causing a slump in natural gas consumption in the transport, commercial and industrial sectors. Now, daily cases have sunk back below 60,000 from more than 400,000 at the outbreak’s peak, and curbs are being eased. India’s return to the spot market is in stark contrast to just last month, when companies were seeking to cancel and divert shipments due to a glut at import facilities.
Mukesh Ambani says no option but to make businesses green
Asia’s richest man Mukesh Ambani on Monday said there is no option for businesses but to go green and every unit of Reliance Industries would have to pivot as the conglomerate moves towards net-zero. “We have no option as a society, as a business but to really adopt a sustainable business model,” he said speaking at the Qatar Economic Forum. And embracing a model of clean energy is a pre-requisite. Every unit making up the oil-to-telecom conglomerate Reliance would have to pivot as the conglomerate moves toward net-zero, he said. “We at Reliance have adopted this wholeheartedly and transforming each one of our business lines to be sustainable, circular, recyclable and fully transparent environment, social, and governance standards,” he said. When asked if this green push will require dialling back on some of Reliance’s businesses, Ambani said “it means transforming our businesses and integrating that with the future,” without sharing more details. In July last year, Ambani, who is the chairman and managing director of Reliance Industries Ltd, had set a 2035 deadline for his company to turn net carbon zero, echoing views of his global peers in fighting climate change. While RIL will remain a user of crude oil and natural gas, it is committed to embracing new technologies to convert its carbon dioxide emissions into useful products and chemicals. “Achieving a cleaner planet can be done by making CO2 as a recyclable resource, rather than treating it as an emitted waste. We have already made substantial progress on photosynthetic biological pathways to convert our CO2 emissions at Jamnagar into high-value proteins, nutraceuticals, advanced materials and fuels,” he had said. RIL also plans to develop next-gen carbon capture and storage technologies. It is evaluating novel catalytic and electrochemical transformations to use CO2 as a valuable feedstock.