U.S. Gasoline Prices Continue To Climb
Gasoline prices continue to climb for the fourth straight week, rising 32.7 cents over the last month as crude oil prices rise, data from AAA showed on Monday. Gasoline prices are up 11.8 cents over a week ago, and are 9.4 cents higher than they were a year ago, before Russia’s “special military operation” in Ukraine. Gasoline prices are rising along with the rise in WTI crude oil prices, which are up $3 per barrel from a week ago, and up $2 per barrel from a month ago. In addition to rising crude oil prices, gasoline prices are rising as “continued refinery challenges kept supply of gasoline from rising more substantially,” Patrick DeHaan, head of petroleum analysis at GasBuddy said in a Monday note. “Macroeconomic factors have continued to weigh on oil and refined products, as strong demand in China hasn’t been slowed much by a surge in new Covid cases. In addition, releases of crude oil from the Strategic Petroleum Reserve have wrapped up. Concerns are increasing that without additional oil, supply will tighten in the weeks ahead, especially as the nation starts to move away from softer demand in the height of winter. Moving forward, it doesn’t look good for motorists, with prices likely to continue accelerating,” DeHaan added. U.S. crude oil inventories have risen over the last two weeks by leaps and bounds, while gasoline inventories also grew, but by a lesser amount. Still, gasoline inventories are below the five-year average for this time of year. GasBuddy on Monday said that its demand data shows that U.S. retail gasoline demand fell 1.4% in the last week ending on Saturday, with demand falling sharply in the Rockies. The national average for a gallon of gasoline is $3.423 per gallon as of Monday, according to AAA data.
EU Gas Price Cap Could Trigger Significant Changes In Markets
The upcoming price cap on the benchmark European gas contract could abruptly change the gas market and impact the functioning of other markets as well as financial stability, according to the European Securities and Markets Authority (ESMA). ESMA was expected to announce on Monday the assessment of the consequences of the gas price cap on the markets. “It could trigger significant and abrupt changes of the broader market environment, which could impact the orderly functioning of markets, and ultimately financial stability,” ESMA was expected to say, according to the opinion seen by Bloomberg ahead of its publication. After months of negotiations, the EU finally agreed in December to set a price cap on natural gas to protect consumers from excessive price spikes and limit inflationary pressure and industrial damage to European economies. EU energy ministers reached a political agreement on a regulation that sets a so-called “market correction mechanism,” which would come into force on February 15, 2023. The market correction mechanism will be triggered if the month-ahead price on the Title Transfer Facility (TTF), Europe’s key benchmark, exceeds $196 (180 euros) per MWh for three working days, and the month-ahead TTF price is $38 (35 euros) higher than a reference price for LNG on global markets for the same three working days. However, if risks to the security of supply occur, the European Commission will suspend the price cap rule, the EU agreed last month. “The Commission stands ready to suspend ex ante the activation of the mechanism, if an analysis from ECB, ESMA and ACER shows that the risks outweigh the benefits,” EU Energy Commissioner Kadri Simson said. Some effects could be seen only after the activation of the gas price cap, and it’s difficult to predict, ESMA says in today’s opinion, according to the draft Bloomberg has seen. “It is entirely possible that some of the potential effects in the trading and clearing environment might only unfold” after the price cap activation. Market liquidity could be reduced, says the EU authority, although significant effects could not be identified so far. In the first assessment on the EU gas price cap rule and the positions limit on the futures contracts in December, ESMA said that “Overall, the position limits set for the spot month and the other months appear to achieve a reasonable balance between the need to prevent market abuse and to ensure an orderly market and orderly settlement, while ensuring that the development of commercial activities in the underlying market and the liquidity of the Dutch TTF Gas commodity contracts are not hampered.” “ESMA however notes that setting position limits in the uncertain geopolitical environment created by the Russian invasion of Ukraine and Russia’s decision to significantly reduce delivery of natural gas to the EU may prove challenging, especially in relation to the calculation of deliverable supply,” the authority said. “ESMA also notes that the Dutch TTF Gas contracts may be impacted by the measures that may potentially be taken by the Council and the European Commission regarding the operation of the EU energy spot and derivatives markets.” The European Union Agency for the Cooperation of Energy Regulators (ACER) said last month that the EU’s price cap on natural gas is an untested tool that may not work as intended to prevent gas price spikes for European households and businesses. The gas price cap is “a difficult creature. It’s unprecedented, it’s untested,” ACER’s director Christian Zinglersen told the Financial Times in December. Zinglersen also noted that he would be “reluctant to rely on this gas price cap” to protect EU consumers from price spikes. The benchmark EU gas price at the Dutch TTF is currently well below the price level at which the cap would be activated, trading below $76 (70 euros) per MWh on Friday. Prices slumped last week to levels last seen before the Russian invasion of Ukraine due to milder weather at the start of the year, LNG inflows, and still comfortable EU gas storage levels. Yet, analysts say the market is ripe for further volatility in the coming months.
Record oil supply will not meet 2023 demand surge: IEA
Oil prices continued to remain volatile at the start of 2023 and went below the $80 per barrel mark after steep declines on the first two consecutive days at the start of the year. Record oil supply of 101.1 million barrels per day in 2023 will not meet surging global demand, leading to a significant shortfall in availability by the end of 2023, according to the International Energy agency. In its latest forecast, the IEA has projected demand to rise by 1.9 million barrels per day to 101.7 million barrels per day (bpd) this year, an upgrade from its previous forecast for a 1.7 million bpd increase, and supply to increase by one million bpd to 101.1 million bpd. These compare with respective forecasts of 101.6 million bpd and 100.8 million bpd made in December. The Paris-based EIA significantly lowered its price forecast for Brent crude oil for 2023 and 2024. The agency in its short term energy outlook lowered Brent price forecast to $83.1 per barrel for 2023 versus its previous forecast of $92.3 per barrel. This compares to the 2022 average price of $100.94 per barrel i.e. a decline of 18 per cent in 2023. The forecast for 2024 was further lower at $77.57, a y-o-y decline of 6.6 per cent. In terms of monthly trend, Brent crude averaged at $80.4 during December-2022 after witnessing a monthly decline of 11.8 per cent, the biggest decline since April-2020. The decline in Opec crude basket was similar at 11.2 per cent to average at $79.7 per barrel. According to Kamco Invest, oil prices continued to remain volatile at the start of 2023 and went below the $80 mark after steep declines on the first two consecutive days at the start of the year that resulted in a weekly decline of 8.5 per cent during the first week of the year. The decline was led by fears of an economic slowdown after several warnings of a recession in 2023 due to a slowdown in the US, the EU and China. The IEA’s monthly Oil Market Report (OMR) forecast shows supply outstripping demand by nearly one million bpd in the current quarter and in the second quarter again marginally, before a flip. Demand in the third and fourth quarters will be 1.6 million bpd and 2.4 million bpd, respectively, above supply, it said. The IEA cautioned that the timing and pace of a Chinese demand recovery and of Russian supply resilience will affect its forecasts. The former is surrounded by even more uncertainty than usual but the IEA doubts there will be a big upward revision given a “persistently dim macroeconomic outlook” in the country. But China will overtake India to become the leader in oil demand growth, the IEA added, slightly raising its full-year forecast for that to 850,000 b/d. Around 75 per cent of the rise in 2023 demand comes from non-OECD regions. Growth in developed regions will be just 470,000bpd, down from 1.1 million bpd in 2022. The IEA said OECD demand in the final three months of last year fell by 910,000bpd on the year. The IEA upgraded its projection for supply growth by 230,000 bpd from its December OMR, fuelled by producing regions outside the Opec+ group. The US, Brazil, Norway, Canada and Guyana will all contribute to a 1.9 million bpd rise in supply from outside the producer alliance. Opec+ supply will fall by 870,000 bpd because of restrictions on Russia. Excluding that country, Opec+ supply will rise by 460,000 bpd. The IEA called Russia a wild card, noting that production merely dipped in December when the EU import ban and G7-led price cap came into force. But it said this will change after the EU bans imports of Russian refined products in early February, when Moscow’s apparent move to increase refinery throughput and store significant amounts of oil will be challenged. The IEA forecasts that around 1.6 million bpd of Russian production will be shut in by the end of the first quarter, compared with pre-war levels, and this will reduce output to 9.7 million bpd in 2023, down by 1.3 million bpd from 2022. According to the IEA, global stocks rose sharply by 79.1 million barrels in November to the highest in 13 months buoyed by the amount of oil on the water as Russian exports were diverted further afield.
ONGC, TotalEnergies plan joint venture
State-run energy major ONGC plans to tie up with French giant TotalEnergies for exploration and production of oil and gas in the Andaman islands, said Sushma Rawat, director, exploration at ONGC Ltd. In an interview, Rawat said that prospective hydrocarbon blocks are expected to be auctioned at the next round of auctions under the Open Acreage Licensing Programme for which both companies may bid as a joint venture. “For deepwater, talks are underway with Total. Andamans, which is coming up, is mostly deepwater. The government has an Island Exploration Project, a lot of seismic data is being acquired in the Andamans which will be processed and analysed. Within a month we will know whether Total would be coming there with us and in what way. With Total we still have to sign an MoU. The talks are in the final stages,” she added.
India gas imports to rise on lower global prices – Petronet
India’s liquefied natural gas (LNG) imports are set to recover as global prices ease, the chief executive of the country’s top gas importer Petronet LNG Ltd said. Asian spot LNG prices have fallen due to mild weather in Europe and ample inventories, from an average of $30-$35 per million British thermal units (mmBtu) in the December quarter to around $17/mmBtus, A.K. Singh said. India wants to raise the share of gas in its energy mix to 15% by 2030 from 6.2% at present. However, a spike in global gas prices last year, triggered by the Russia-Ukraine conflict, cut demand for cleaner fuel from price-sensitive Indian customers. “Now the export cargoes are hovering at $17 (million British thermal units). We definitely expect that we will get the movement of more cargoes coming to our country.” Singh said at the company’s earnings press conference. “In previous months it was a lot of volatility,” he added. India’s gas imports in October and November declined by about a fifth to about 1.8 million tonnes from this fiscal year’s peak of 2.2 million tonnes in May, according to government data. Data for December has not yet been released. Due to low local demand, Petronet operated its 17.5 million tonnes a year Dahej LNG terminal on the west coast at 68% capacity in the December quarter. The capacity use has improved to 81% and is expected to rise further as global prices ease, Singh said. Petronet supplies gas, mostly procured under long-term deals with Qatar and Australia, to Indian energy companies for sale to end-users. These companies have also booked capacity at Dahej to import gas directly. In the previous quarter, Petronet levied an 8.5 billion rupee ($104.80 million) penalty on Indian companies for not taking the committed volumes of gas from its Dahej import facility, Singh said.