Crude one-upmanship: G7 oil price cap on Russia turns on the US tap
Crude oil shipments from the US to India rose to the highest levels in November since the conflict began in Ukraine in late February, sparking hopes of a resurgence in oil flows from the US to the subcontinent, reveals shipping data. Shipments from the US have surged as Western nations prepare to impose additional sanctions on Russian crude flows. The US shipped around 450,000 barrels per day of crude last month to India, over twice that of shipments in September and October, according to data from London-based commodity intelligence provider Vortexa. That compares with around 200,000 barrels per day in October and September, shows data. The February volumes were over 500,000 barrels per day, says Vortexa, which calculates crude flows using the ship-tracking software. Delivered volumes of the US crude were as high as 700,000 barrels per day in February, shows Indian Customs data, which reports delivered cargo. Their data tends to differ from the ship-tracking data offered by commodity data analytics companies. The US volumes plunged in May to as low as 101,000 barrels per day – the lowest this year. “While Russian volumes are still strong, there is a marked increase in barrels from the US in November to India – likely a result of the wide Brent-West Texas Intermediate (WTI) spread,” says Matt Smith, a senior analyst at Paris-based commodity data provider Kpler. The spread was as high as $9.3 in mid-November, meaning the US benchmark was much cheaper last month. Washington has been concerned over losing billions of dollars in oil export revenues to Russia after Moscow became the biggest supply source for India since September, partly displacing US oil. It expects flows into India to stabilise after the Group of Seven nations and Australia agreed on a $60-per-barrel price cap on exports of Russian oil from December 5. The cap is close to the $67-per-barrel price of the Russian Urals blend, which itself is at a discount of about 20 per cent to the Brent – a pricing benchmark for the Atlantic Basin oil – and at a 16 per cent discount to the WTI – a US oil benchmark. The delivered cost of the US crude to India in September was $104 per barrel, while Russian grades were cheaper at $90 per barrel.
Kirit Parekh Panel Recommends 20% Premium For New Gas Production By ONGC, OIL
The Kirit Parikh committee which recommended a floor and ceiling price for natural gas produced from legacy fields of state-owned producers to moderate input price for CNG and fertilizer, has favoured paying ONGC and OIL a premium of 20 per cent over such price for any new gas production they add from old fields. The panel, which submitted its report to the oil ministry last week, has recommended benchmarking price of natural gas produced from ONGC and OIL’s legacy or old fields, called APM gas, at 10 per cent of cost of crude oil imported into India, according to a copy of the report seen by PTI. This rate would however be subject to a ceiling or cap price of $6.5 per million British thermal unit, until a full deregulation of prices is implemented in 2027. There would also be a floor of $4 with a view to cover for cost of production and at the same time keeping cost for fertilizer, power and CNG, which use gas as input raw material, at manageable levels. The basket of crude averaged about $83 per barrel in December. Going by recommendation of the committee, the price for APM gas, which makes up for 60 per cent of all gas produced in the country, should be $8.3 per mmBtu (10 per cent of imported oil price). But Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will be paid only $6.5 in case the recommendation for ceiling and cap price of the committee is accepted by the Cabinet headed by Prime Minister Narendra Modi.
India To Keep Purchasing Russian Oil After Sanctions Go Into Effect
India said that it would continue to purchase Russian crude oil even after the embargo and price cap go into effect on December 5, an official in the Indian Oil Ministry said on Friday. India has consistently stated its intention to continue to purchase whatever crude oil makes the most financial sense for the import-heavy country. The Indian Oil Ministry official, cited by Attaqa, said that the sanctions placed on Russian oil—specifically on Western shipping and insurance services—won’t apply to India because they intend to use non-Western services to transport seaborne Russian crude oil into India. With Poland finally on board, the EU agreed to cap the price of Russian crude oil at $60 per barrel—higher than the levels at which Russia’s Urals are currently trading. Russia has promised to stop shipments to any country employing the price cap. But the price cap only applies to countries hoping to use Western ships and Western insurers—which means it won’t apply to India. The $60 per barrel G7 price cap and EU embargo on Russian crude oil will go into effect on Monday, December 5. An embargo on crude oil products will follow in February. Analysts are mixed in their forecasts on how the crude oil price cap and embargo will affect the oil markets. With India and possibly China continuing to purchase Russian crude without the help of Western services, it will water down the effect of the sanctions. But industry insiders have also noted that there are a limited number of non-Western ships and insurers that can bring Russian oil to markets. Last week, both China and India were purchasing crude oil from Russia at a massive $33.28 discount to Brent, meaning they are already purchasing well underneath the price cap.