The Global Gas Crunch Is Set To Worsen As China Reopens
China’s natural gas imports are set for a 7-percent rise next year as the country reopens after Covid lockdowns, which could aggravate an already tight supply situation globally. The 7-percent import increase forecast was made by state-owned energy major CNOOC, which said, as quoted by Bloomberg, that it was already looking for LNG cargoes for next year. The report notes that gas inventories at ports in the northern part of the country are depleting at a faster rate than usual because the weather is colder, pushing consumption higher, and this will, too, have an effect on future demand for imports. What’s more, pipeline supply of natural gas from Central Asia is in decline, which means China will need to rely more on LNG in its gas import mix to make up the difference. And this means more intense competition for a limited number of cargoes between Asia and Europe next year as well. This year, Chinese gas demand has been trending lower for most of the year, with imports declining consistently over the first ten months of the year, per a report by Energy Intelligence. LNG imports were down by a sizeable 21.6 percent over the ten-month period, reflecting the effects of lockdowns and other restrictions under the country’s zero-Covid policy. Yet now this policy is being reversed, mass mandatory testing is being dropped and analysts expect a rebound in economic activity before too long. This will drive higher demand for energy and contribute to higher prices due to the tight supply situation in both oil and gas. This reversal of Beijing’s Covid policy surprised many, who expected tepid demand for energy to continue in one of the world’s largest consumers. If activity rebounds fast, securing sufficient gas supply for the next heating season will likely become a major problem for most importers.
Russia’s oil exports to India rise fourteen fold
Russia’s crude oil exports to India have increased 14-fold and doubled to China since the start of the Ukraine conflict, with Russia finding new buyers to compensate for the void left by European buyers, according to data compiled by Anadolu Agency from real-time energy cargo tracker Vortexa. Because of the Russia-Ukraine war that started on Feb. 24, the US and the UK committed to ending crude imports from Russia. The European Union (EU) agreed to impose an embargo on seaborne imports of Russian crude oil beginning Dec. 5, the same day that the EU and G7 agreed to place an oil price cap of $60 per barrel of Russian crude. The ban on petroleum products will come into effect beginning Feb. 5 next year, corresponding to 90% of Russia’s current oil imports. Bulgaria, however, was excluded from the sanctions until the end of 2024. With the EU’s move to cut Russian oil exports, Russia has sought customers elsewhere, offering lower prices in a bid to sell its crude. India has emerged as one of the beneficiaries of the Kremlin’s cheap crude. India’s crude imports from Russia reached their highest volume of 35,000 barrels per day on average in 2021. Despite almost zero imports from Russia in January and February of 2022, India’s Russian crude imports stood at 68,000 barrels per day on average in March 2022. During the war, India’s seaborne crude exports from Russia increased steadily, reaching 959,000 barrels per day by November 2022, a 14-fold increase. “Even without joining the G7 price cap, India’s refining sector benefits greatly from the heavily discounted Russian Urals crude oil as there are now fewer buyers left,” TankerTrackers.com said in a Twitter post. The price of Urals was trading at nearly one third less than the Brent benchmark after the price cap
When will gas prices go down to pre-Ukraine war levels?
Nine months after Russian President Vladimir Putin launched his invasion of Ukraine, Britain is preparing for a long recession on the back of sky-high energy prices. France, where President Emmanuel Macron warned in August that the era of “abundance” was over, has witnessed fuel shortages and long queues at petrol stations in recent weeks. Germany’s government has decided to pay energy bills for all citizens and small and medium-sized businesses in December. As Europe and other parts of the northern hemisphere brace for a difficult winter, there’s one central question on the minds of people around the world: When, if at all, will gas and petrol prices return to pre-war levels? It’s a question that Al Jazeera posed to leading energy economists and analysts. The short answer: Probably not for the next two years, at the very least.
Need to promote flex-fuel vehicles to deal with crude oil prices: Gadkari
Addressing an event organised by the Society of Indian Automobile Manufacturers (SIAM), Union Road, Transport and Highways Minister Nitin Gadkari has said that the country needs to promote vehicles running on more than one fuel (flex-fuel vehicles) and e-vehicles to tide over the problems created by wide fluctuations in crude oil prices in the international market. The SIAM in New Delhi on Monday organised a technology demonstration conceptualised on adoption of ethanol and use of flex-fuel vehicles in India. Gadkari added that the aviation sector is also facing problems due to the high cost of aviation fuel. Vehicles suitable for flex-fuel may use more than one fuel or a mixture of two fuels. Usually a mixture of petrol and ethanol/methanol is used as fuel in flex-fuel vehicles. The Union Minister said, “India is the largest user of fossil fuels in the world. That is why it is our responsibility to spread awareness and provide education about ethanol blended with petrol and its benefits as compared to conventional fuel.” Gadkari added that use of flex-fuel vehicles would help reduce India’s fuel import cost by a huge margin. Thus there will be saving of foreign exchange fund and will also serve as a strategic advantage of being ‘Atmanirbhar’ or ‘self-reliant’. He also said that the automobile industry would benefit the most from the roads developed by his Ministry, adding that his Ministry is building 27 new expressways and has received 260 projects for building ropeways and funicular railway systems. Gadkari added that the automobile industry has created 40 million jobs, which is the highest in India. Apart from this, use of flex-fuel vehicles is currently a Rs 7500 billion industry and is expected to reach Rs 15000 billion in the next five years. The Minister also spoke about making bio-CNG and LNG from stubble acquired by burning crops. He added that the Indian Oil Corporation Ltd. has built a major project in Panipat, Haryana, where 0.5 million litre of ethanol and 150 tonne of Bio-Bitumen are being made daily from stubble.
Grounded Before Take-off: PNGRB’s proposal to develop gas pipeline upto Jammu only
The Gas Authority of India Limited (GAIL) has submitted to the Petroleum and Natural Gas Regulatory Board (PNGRB) that there may not be sufficient gas volumes/ capacity available at Jammu for future onward transportation to Srinagar in case of present bidding of a proposed pipeline to Jammu only. In its views on the PNGRB proposal for development of the natural gas pipeline from Gurdaspur to Jammu, the GAIL has submitted that the gas pipeline to Kashmir may be affected by capacity/volume constraints. “As per extant regulations, while inviting bids, the bid document indicates only the minimum capacity of pipeline and entities/bidders are free to identify/ prepare demand profiles as per their own respective assessments of the market/ volume requirements along the pipeline to its termination point. In case the present bidding of a proposed pipeline upto Jammu only, there may not be sufficient gas volumes/ capacity at Jammu for future onward transportation to Srinagar. So in case of a decision to develop a pipeline to Srinagar in future (i.e. for achieving the purpose of GoI vision to develop gas-based economy in hilly region of Kashmir), then the same may be affected by capacity/volume constraints,” reads the letter written by Kumar Shanker, Chief General Manager (Marketing, Regulatory Affairs & Transmission), GAIL to PNGRB authorities on October 30, 2022. A copy of the communique also reveals that the GAIL has submitted that as per a policy directive issued by the Ministry of Petroleum and Natural Gas (MoPNG) under section 42 of PNGRB Act, Srinagar was kept as the termination point but now a pipeline has been proposed upto Jammu only. The GAIL submitted its views after the PNGRB invited views/comments from stakeholders/entities on the proposed Gurdaspur-Jammu gas pipeline. The PNGRB said it is of the view to develop a natural gas pipeline from Gurdaspur to Jammu to cater the natural gas requirement in the Union Territory of Jammu & Kashmir. So it decided to initiate a suo-motu proposal for the development of the natural gas pipeline from Gurdaspur to Jammu under Regulation 4(2) read with Regulation 6 of PNGRB NGPL Authorization Regulations—(KNO)
Why Oil Traders Are Wary Of Buying Crude
The past couple of weeks have seen some good news for oil prices: China is relaxing its zero-Covid rules, the G7 and the European Union launched their price cap and embargo against Russia, and OPEC+ once again undershot its production target by a hefty 2 million bpd. Yet none of this has been enough to stimulate institutional traders to start buying oil. On the contrary, large traders continue to be net sellers, according to Reuters’ John Kemp who follows trading balances in the six most traded crude and fuel contracts on a weekly basis. They just seem to be too afraid of a looming recession to turn into buyers. A recent survey by Boston Consulting Group found that the overwhelming majority of bankers, like institutional traders, expect a recession next year in the United States and Canada. Not only will there be a recession, but it will also be a prolonged one, according to the survey cited by American Banker. On the silver linings side, however, expectations are for a mild recession, the survey also found. Yet mild or severe, a recession invariably means negative things for oil demand, which could provide one explanation for traders’ attitudes and the resulting price moves. Among these things are lower purchasing power, resulting in lower spending and, therefore, lower demand for oil. Yet China is reopening and this is a strong bullish factor for that demand, with or without a recession in most of North America. In fact, according to Bank of America, if China reopens its economy as it hints it would, oil prices could increase considerably. If the Chinese reopening is coupled with a change of tack by the Fed in its struggle to contain inflation, the price rise would be higher. BoFA analysts said in a note Monday that Brent crude could gain 23 percent if China continues returning to normal but “With the interest rate curve now fully inverted, Brent may need a Fed pivot to turn the corner.” The U.S. central bank has been aggressive in its handling of runaway inflation, which the Fed initially dismissed as transitory, only to admit later it higher prices were here to stay unless the Fed itself did something about it. So the Fed began raising interest rates, which immediately sparked concerns about a slowdown and even stagflation. Indeed, the Fed has raised interest rates six times so far this year, and not by a little: 0.75 basis points has been its go-to hike pace but, according to the FT, the last rate hike for the year, to be announced this week, would likely be lower, signaling a certain degree of relaxation although not an end to the fight with inflation. By the way, the FT also did a survey about recession expectations among economists, and a whopping 85 percent said they did indeed expect an economic slowdown next year in more evidence that most market watchers and participants are not exactly optimistic about the immediate future. Yet as the recession unfolds, oil’s fundamentals remain rather bullish, as JP Morgan’s Jamie Dimon noted in a recent interview with CBS. He pointed to chronic underinvestment in new oil production, which “will hurt you two or three years out. It’s quite predictable, but it’s not today.” In the current economic environment, then, caution is certainly warranted. The BofA forecast for oil prices is based on two big “ifs” and while the signs coming from China are encouraging, the signs coming from the Fed—more rate hikes—serve to moderate any oil price optimism over the near term. Barring a Russian decision to start cutting production in response to the price cap or another outage like the Keystone shutdown, oil is likely to remain relatively stable as 2022 draws to a close.