India Sends 40,000 Metric Tonnes Of Diesel To Crisis-Hit Sri Lanka
A consignment of 40,000 metric tonnes of diesel from India reached Sri Lanka on Saturday, the fourth such assistance from New Delhi, to mitigate the spike in power cuts in the island nation, which is facing an unprecedented economic and energy crisis caused due to shortage of foreign exchange. Power cuts lasting over 13 hours were imposed on Thursday, the longest cut since 1996 when a strike by the state power entity employees caused a 72-hour black out. Officials of the state fuel entity, Ceylon Electricity Board (CEB), said the Indian diesel supplies would ease the ongoing power cuts. The power cuts effective Saturday are over 8.5 hours. “More fuel supplies delivered by #India to #SriLanka! A consignment of 40,000 MT of diesel under #Indian assistance through Line of Credit of $500 mn was handed over by (the) High Commissioner to Hon’ble Energy Minister Gamini Lokuge in #Colombo today,” the Indian High Commission here tweeted. India recently announced that it will extend a USD 1 billion line of credit to Sri Lanka as part of its financial assistance to the country to deal with the economic crisis following a previous USD 500 billion line of credit (LoC) in February to help it purchase petroleum products.
Indian gasoil, gasoline sales surge as dealers top up
Indian state refiners’ gasoil and gasoline sales surged to a three-month high in March on increased demand from dealers and consumers ahead of an expected sharp rise in retail prices after elections in key states. State refiners’ average daily sales of gasoline and gasoil were 86,850 tonnes and 227,650 tonnes respectively, 14.2% and 5% higher than the pre-pandemic levels of March 2019, preliminary sales data shows. India’s overall fuel sales during the month will be higher because some industrial clients bought from retail stations of private refiners. Reliance Industries, operator of the world’s biggest refining complex in India, last month said that bulk diesel buyers are snapping up fuel from retail stations because pump prices were cheaper than bulk contract prices. State-run Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which together own about 90% of the country’s retail fuel outlets, kept pump prices steady for more than four months despite a surge in global prices. However, they continued to raise diesel prices for industrial or bulk customers. The state fuel retailers began a gradual increase in pump prices from March 22 after elections concluded on March 10, leading to a continued stocking up by dealers. Sales of gasoil, which accounts for about two fifths of India’s overall refined fuel consumption, are also directly linked to industrial activity in Asia’s third-largest economy. India’s gasoline sales have been rising since the country eased its pandemic lockdown, with people preferring to use their own vehicles rather than public transport for safety reasons.
GAIL commences supplying CNG from Walayar to Coimbatore
The Gas Authority of India Ltd’s (GAIL) Kochi-Koottanad-Bengaluru-Mangaluru natural gas pipeline project (KKBMPL) commenced supplying CNG to Indian Oil Corporation’s City Gas Distribution (CGD) system from Walayar to Coimbatore. The project is part of the second phase of the KKBMPL project from Kochi to Koottanad, Bengaluru and Mangaluru, officials said. Gas supply at GAIL station in Pichanur village, Madukkarai taluk, Coimbatore district, was inaugurated by George Antony, DGM (constructions), along with P Saseendranath, DGM (operations), early this week. The first stretch of 96km from Kochi to Koottanad was commissioned in June 2019 and Prime Minister Narendra Modi inaugurated the 450-km natural gas pipeline between Kochi and Mangaluru in January 2021. Koottanad is the point from where the pipeline bifurcates to Mangaluru (via Malappuram, Kozhikode, Kannur and Kasaragod) and to Bengaluru (via Palakkad, Coimbatore, Erode, Salem, Dharmapuri and Krishnagiri). George Antony said the pipe will have 30-inch width from Kochi to Koottanad. The pipeline which bifurcates from Koottanad will have 24-inch width each to Bengaluru and to Mangaluru, he said.
How Biden’s Huge Strategic Oil Release Could Backfire
This week, the Biden administration revealed that it will release as much as 180 million barrels of crude oil in a bid to calm oil prices, which have remained above $100 per barrel for an extended period of time. The International Energy Agency, meanwhile, is coordinating a smaller but international reserve release of some 60 million barrels and has called an emergency meeting to discuss how exactly to go about it. It remains unclear whether part of the 180 SPR release in the United States will be a completely separate endeavor or if some of these barrels will be part of the IEA release. Earlier this year, the U.S. had agreed to release 30 million barrels as part of the IEA push. What is clear is that the success of these releases in calming down oil prices is quite unlikely. The United States last year announced the release of 50 million barrels in an effort to bring down prices t the pump, which were eroding Americans’ purchasing power and weighing on the President’s approval ratings. This pressured prices for a few days before they rebounded, driven by continued discipline among U.S. producers, equal discipline in OPEC+, and a relentless increase in demand for the commodity. Then Russia invaded Ukraine, and the U.S. banned imports of Russian crude and fuels. It also sanctioned the country’s financial system heavily, making paying for Russian crude and fuels too much of a headache for the dollar-based international industry. Prices soared again before retreating some, but remain firmly in three-digit territory. As of mid-March, the Department of Energy said, some 30 million barrels of crude from the strategic petroleum reserve had been sold or leased. That’s more than half of the 50 million barrels announced in November, and it appears to have had zero effect on price movements. But the new reserve release is a lot bigger, so it should make a difference, shouldn’t it? It amounts to some 1 million bpd over several months, per reports about White House plans in this respect. Unfortunately, but importantly, oil’s fundamentals have not changed much since November. U.S. shale oil producers, the companies that a few years ago prompted talk among analysts that OPEC was becoming increasingly irrelevant, have rearranged their priorities. They no longer strive for growth at all costs. Now they strive for happy shareholders. This has given more opportunities to smaller independent drillers with no shareholders to keep happy. Yet these have also run into challenges, mainly in the form of insufficient funding because the energy transition has had banks worrying about their reputations and their own shareholders. Pandemic-related supply disruptions have also affected the U.S. oil industry’s ability to expand output. Frac sand, cement, and equipment are among the things that have been reported to be in short supply in the shale patch. Now, there’s a shortage of steel tubing, too. Meanwhile, OPEC is doing business as usual, sticking to its commitment to add some 400,000 bpd to oil markets every month until its combined output recovers to pre-pandemic levels. Just this week, the cartel approved another monthly addition of 432,000 bpd to its combined output despite increasingly desperate calls from the U.S. and the IEA for more barrels. OPEC has been demonstrating increasingly bluntly that its interests and the interests of some of its biggest clients may not be in alignment right now. It has refused to openly condemn Russia for its actions in Ukraine and has not joined the Western sanction push. On the contrary, OPEC is gladly doing business with Russia. And Saudi Arabia and the UAE, the two OPEC members that actually have the capacity to boost production beyond their quotas, have deemed it unwise to undermine their partnership with Russia by acquiescing to the West’s request for more oil. In this environment, releasing whatever number of barrels from strategic reserves could only provide a very short relief at the pump. Then, it may make matters even worse. As one oil market commentator on Twitter said about the SPR release news, the White House will be selling these barrels at $100 and then may have to buy them at $150. Indeed, one thing that tends to get overlooked during turbulent times is that the strategic petroleum reserve of any country needs to be replenished. It’s not called strategic for laughs. And a 180-million-barrel reserve release will be quite a draw on the U.S. SPR, which currently stands at over 580 million barrels. If oil’s fundamentals remain the same, prices will not be lower when the time to replenish the SPR comes. This seems the most likely development. The EU, the UK, and the United States have stated sanctions against Russia will not be lifted even if Moscow strikes a peace deal with the Ukraine government. This means Russian oil will continue to be hard to come by for those dealing in dollars or euros. According to the IEA, the shortfall could be 3 million barrels daily, to be felt this quarter. OPEC+ is not straying from its course. In some good news, at least, U.S. oil production rose last week for the first time in more than two months, by a modest 100,000 bpd.
There’s no reason why India should turn down Russian oil discounts
India is buying Russian crude in defiance of Western, especially US pressure, to isolate the country economically and financially. India could be buying Russia’s flagship Urals grade at discounts of as much as $35 a barrel on prices before the war. Given that Brent prices have risen more than that since the war began, substantial savings can accrue from the deep discounts. Indian producers are confident of their capacity for refining increasing quantities. Reuters has reported that India has already bought at least 13 million barrels in the weeks since Russia invaded Ukraine compared with some 16 million barrels for the whole of last year. The US isn’t pleased, going by the noises that came out of a press meet in New Delhi called by the deputy national security adviser for international economics in the Biden Administration, Daleep Singh. The Western sanctions seeking to isolate Russia in international trade and finance are his work mostly. For which, the western media has given him the sobriquet, ‘Mr. Sanctions’. Singh made three main points in the press meet: None of the Western sanctions prohibits at present energy imports from Russia; The US stands ready to provide alternative sources for oil imports, much like is the case for defence resources, over a period of time; The Biden Administration would not like to see a rapid acceleration of India’s energy imports from Russia or trade in non-Western currencies, for that will help in resurrecting the ruble, which sank considerably on the initial impact of the sanctions but is slowly correcting. Should India pay heed? Not really. India should go ahead and buy all the discounted Russian oil it can, paying in the national currency, the rupee. First, as Singh said, the sanctions do not cover Russia’s energy trade. There’s a reason, and that is Europe’s dependence on Russian gas. Europe will take more than a year to replace the volume of energy imports it receives from Russia and in the meantime households and businesses will pay a lot more for fuel, electricity and heating. The US has completely banned all Russian oil; its shale production becomes viable at higher prices. But Britain says it will phase out in a year’s time. Germany has said that it will reduce its dependence on Russian gas over time; it isn’t in a position to turn off the supplies immediately. And so, even as the war is on, Europe is buying oil and gas from Russia at rising prices, paying for Putin’s war. There’s no move to cut back consumption. In fact, Europe has forgotten all about the anti-fossil fuel slogans and climate change and is beginning to subsidize consumption. Country after country is introducing blanket fuel tax cuts and subsidies, something that wasn’t done when global crude prices were at all-time high a few years ago. If Kremlin insists on ruble-denominated payments rather than euros, as some of its recent statements suggest, will Europe stop buying? And if it doesn’t, will we see Singh tell Berlin publicly to refrain from challenging the dollar’s hegemony? Similarly, India can trade in its national currency, the rupee.