The EU Moves Toward Forming A Natural Gas Buyers’ Cartel
The European Union will make its first move as a buyers’ group on the international gas market next month as it launches the first tender for suppliers. The tender follows months of discussions on how best to secure natural gas supplies for the 27-member bloc in such a way as to avoid some member states outbid other member states because of their deeper pockets. The solution was found in what would effectively be a buyers’ cartel, shopping for gas as one. According to Bloomberg, the first offers, from gas suppliers in the United States, the Middle East, and Africa are to be signed in June. Price will be the sticking point in that joint buying exercise. One of the purposes of the whole endeavor was to keep gas prices low by buying in larger volumes. Besides, natural gas prices are currently a lot lower than they were a year ago. Yet the EU needs to buy a lot of gas and such bulk buying may very well push prices higher. The total gas needs of the EU plus four neighboring countries amount to 24 billion cubic meters over the next three years, according to European Commission Vice President Maros Sefcovic. This is a lot of gas to be sourced on the global spot market. “We clearly need to turn the economic tide in Europe,” Sefcovic told Bloomberg in an interview. “I believe we’re creating a new system that will increase competition and bring in new suppliers and push energy prices down. Since we started this exercise, there’s enormous interest from international suppliers.” According to him, some 50 gas suppliers have expressed interest in participating in the EU’s joint gas buying. There is also interest in joint buying from large industrial gas consumers in the EU, Sefcovic also said. Price, however, remains of crucial importance. Europe has been paying a lot more for its gas than the U.S., for instance, and China, according to Sefcovic. This needs to change if the bloc is to remain competitive on the world stage. “What is increasingly important is that we have to deal with prices. We can’t power our economy at such a huge price differential compared with the US or China,” the official told Bloomberg.
Iran Claims To Have Found World’s Second-Largest Lithium Deposit
A major lithium deposit that rises to the level of the world’s second-largest has been found in Iran, the country’s Ministry of Industry, Mines, and Trade said on Iranian state television on Saturday. “For the first time in Iran, a lithium reserve has been discovered in Hamedan,” the Ministry said, adding that it believes the deposit holds 8.5 million tons of lithium. Only Chile holds more lithium, with 9.2 million metric tons, according to the U.S. Geological Survey. Lithium is a critical part of electric vehicle batteries. Lithium carbonate prices soared last year to all-time highs of $86,170 per tonne, but that huge rally seems to be behind us, with prices sinking this month to $52,500 per tonne. Behind the recent price slump is—to some degree–a slowdown in China’s EV demand, in part due to the country putting an end to its EV subsidies. But the larger price pressure comes from an increase in lithium supplies from China, Australia, and Chile—and now, Iran. “Supply is coming on stream faster than you can say ‘boo’.Demand remains strong but prices have been unsustainable for some time now,” analyst Dylan Kelly of Ord Minnett told Mining.com. Rystad had previously warned that the global market deficit of lithium would shrink from 76,000 tonnes LCE last year, to somewhere between 20,000 and 30,000 tonnes LCE this year—and that was before Iran’s most recent discovery. Goldman Sachs concurred, forecasting that supply would grow at a faster clip than demand, depressing market prices. While the analysts seem to agree that the lithium carbonate market is set for continued correction this year, Rystad energy sees the price correction as temporary, with demand still healthy. The question now is how big of an impact Western sanctions will have on Iran’s ability to sell whatever lithium it uncovers.
City gas distributors to gain as spot LNG prices decline
A steep drop in spot liquefied natural gas (LNG) rates has come as a major respite for city gas distributors in India. Spot LNG prices have fallen to about $14-15 per metric million British thermal units (mmBtu) from average of over $45 per mmBtu in the fiscal second quarter, and average of slightly above $30 per mmBtu in the third quarter. Persistently high gas prices have continued to weigh on the earnings of city gas distributors, squeezing their margins. Although these companies raised prices, this has narrowed the gap between compressed natural gas (CNG), piped natural gas (PNG), and other fuel options such as diesel, prompting concerns about volume growth. The near-term outlook for spot gas prices remains favourable. Ayush Agarwal, an analyst at S&P Global Commodities Insights, expects Platts JKM (Japan Korea Marker) and WIM (West India Marker) to average below $15/mmBtu in Summer 2023 and below $20/mmBtu for 2023. With gas prices declining, city gas distributors are poised to reap benefits, which could be further enhanced by the anticipated cap on administered pricing mechanism (APM) prices in the upcoming fiscal year. The Kirit Parikh panel has recommended a floor of $4 per mmBtu and a ceiling price of $6.5 per mmBtu for APM gas. Analysts expect benefits to accrue in FY24.
Little gains: India saved just $2 per barrel even after Russia’s deep discounts
An increase in India’s subsidized purchases of Russian crude following Moscow’s invasion of Ukraine a year ago is likely to save around $2.5 billion in the first three quarters of the current fiscal year, an analysis by IndiaTrade for the period shows. data shows. However, the savings, while substantial for India, are far less than many expected amid reports of huge discounts being offered by Russia. According to the analysis, cheap Russian oil brought down the average landed price of imported crude oil for India, the world’s third-biggest consumer of crude, by about $2 a barrel during the nine-month period. The average landed price of imported crude oil for April-December was $99.2 per barrel. If Russian barrels are taken out of the math, the average price rises marginally to $101.2 per bbl. The total value of India’s oil imports for the period under consideration stood at $126.51 billion. The analysis shows that if Indian refiners had paid for Russian oil the average price paid for crude from other suppliers, the oil import bill would have been around $129 billion, or about 2 per cent higher. The value of oil imports from Russia for this period was approximately $22 billion. The average landed price of Russian crude oil for India in April-December was $90.9 a barrel, about $10.3 lower than the average non-Russian barrel price. This translates into an effective discount of 10.1% on the average landed price of crude oil imported from other countries. Though substantial, this discount is much less than what has been claimed in various reports from India and abroad. According to industry insiders, the difference may be due to the relatively higher cost of freight and insurance for Russian oil compared to other traditional suppliers. With Moscow facing Western sanctions over the Ukraine war, freight and insurance costs for transporting Russian oil have reportedly skyrocketed. So, while the discount may be deeper on the price of the oil, the discount on the landed price – including freight and insurance costs – will be lower. Earlier in February, Reuters reported, quoting Goldman Sachs, that buyers in Asia may have paid more for Russian crude than quoted prices. “We argue that the flexibility in production so far may partly reflect that the effective price paid for Russian oil appears to be significantly higher than quoted price estimates,” Goldman Sachs said in a February 10 note cited by Reuters. Said. Indian refiners began buying subsidized Russian crude, upsetting many in the West, who wanted Russian oil to be sold by buyers to curb Moscow’s ability to finance the war in Ukraine through oil sales. Leave out the oil. So far, India has ensured that as one of the top importers of crude oil, it will buy oil from wherever it can get a good deal. Recently, Petroleum Minister Hardeep Singh Puri had said that India will play the market card to ensure supply of oil at a reasonable price. India is the world’s third largest consumer of crude oil and depends on imports to meet more than 85 per cent of its requirement. Trade data analysis shows that the effective discount on Russian crude during April-December varies significantly from month to month. The lowest discount was $0.6 a barrel in April and the highest was $15.1 a barrel in May, the average price of crude oil imported from the rest of the world in those months. In percentage terms, the discount ranged between 0.6 percent and nearly 14 percent.
India’s GAIL seeks two LNG cargoes for April-May delivery
India’s GAIL GAIL.NS has issued a tender seeking two liquefied natural gas (LNG) cargoes for delivery into India in April and May, two industry sources said on Monday. The country’s largest gas distributor is seeking the LNG cargoes on a delivered ex-ship (DES) basis into the Dahej terminal. The tender will close on March 7, said the sources.