Oil Prices Return To Recent Highs
The price of crude oil returned on Tuesday to the recent highs seen after OPEC+ announced it would cut production by another 1.6 million barrels per day. On April 2, OPEC+ announced that it would cut its crude oil production by another 1.66 million barrels per day (including the 500,000 bpd Russian production cut) on top of its 2 million bpd cut. Naturally, oil prices spiked following the news, reaching gains of 8% at the Monday open. Brent was trading at more than $86 per barrel, with WTI trading at nearly $81. Further gains were made after opening, with WTI reaching $81.69 Today, the price of WTI has climbed by more than 2% on the day to $81.37, with Brent climbing 1.50% to $85.44. And prices were still rising at the time of writing. A Tuesday report by Energy Intelligence showed that OPEC+’s total March production was 680,000 fewer barrels per day than the month prior, falling to 37.64 million bpd. Most of the production drop was attributed to Nigeria and Russia, which together accounted for 440,000 bpd of the production decline. Fears of tighter supply as a result of the ever-elusive but always-present China reopening schtick clashing with OPEC+’s supply decreases are most likely behind the Tuesday price moves. U.S. gasoline prices continue to tick upward as well, along with the price of oil. Tuesday’s national average gasoline prices were $3.608 per gallon, according to AAA—an increase of more than $0.10 from a week ago, accounting for most of the $0.134 per gallon rise over the last month. While Brent and WTI prices were climbing on Tuesday, WCS prices were falling, losing 1.61% and reaching $58.49. Citigroup said on Tuesday that it is estimating that prices will fall below $80 on China’s slower-than-expected recovery.
EIA Expects An Oil Market Surplus Despite OPEC+ Cuts
Despite OPEC+’s surprise production cut, the global oil market will remain in surplus this year and next as demand growth could be hurt by lower-than-expected economic growth in the coming months, the U.S. Energy Information Administration (EIA) said in its latest Short-Term Energy Outlook (STEO). The latest forecasts include declining production in OPEC and Russia, yet the EIA still expect global oil production to increase by 1.5 million barrels per day (bpd) in 2023, due to strong growth from non-OPEC countries excluding Russia. Non-OPEC+ production growth will largely be driven by North and South America, the administration said. This year, global oil production is set to average 101.3 million bpd, while global oil consumption is estimated at 100.87 million bpd. The surplus on the market will start to shrink this quarter, but even in Q3 the market will be in a slight surplus, the EIA forecasts. That’s contrary to some other projections that say the OPEC+ cuts will tighten the market so much later this year that prices could jump to $100 per barrel. If the current OPEC+ cuts expire at the end of 2023, global oil production is set to average 103.25 million bpd in 2024, while consumption is expected at 102.72 million bpd—with supply outstripping demand next year, too, according to the EIA. “Increasing risks in the U.S. and global banking sectors increases uncertainty about macroeconomic conditions and their potential effects on liquid fuels consumption, which increases the possibility of liquid fuels consumption being lower than our current forecast,” the EIA said. “We expect global oil markets will be in relative balance over the coming year.” Global oil inventories, which increased by 400,000 bpd in 2022 and by 1.1 million bpd in the first quarter of 2023, will be mostly unchanged during the second half of 2023, the EIA predicts. Inventory builds will average about 500,000 bpd beginning in 2024 if the OPEC+ cuts expire at the beginning of next year.
Iraqi oil to India gets cheaper as competition From Russia bites
The price of crude from Iraq averaged $76.19 a barrel, compared with $78.92 in January, according to data published by India’s ministry of commerce and industry. Russian supplies averaged $72.14, marginally lower than January. India and China emerged as a key consumers of Russian crude after many other buyers shunned its barrels due to the war in Ukraine. The OPEC+ producer has cemented itself as the South Asian nation’s biggest supplier of oil. Crude from Saudi Arabia was the most expensive for Indian buyers in February, averaging $87.66 a barrel. That compares with $85.84 in January. The data from the ministry is preliminary and represents oil delivered to the port.
Urja Ganga pipeline takes cheaper gas to hinterland
The ‘Urja Ganga’ pipeline, India’s most ambitious project taking environment-friendly gas to so-far untouched areas, has taken the benefit of lower natural gas prices to the hinterland, helping expand adoption of the cleaner fuel, official sources said. Traditionally, natural gas was available for use as fuel to generate electricity, make fertilizer or turn into CNG and cooking gas was available only in the Western and Northern parts of the country, as pipelines taking the fuel from source to users were limited to these parts. In October 2016, work on laying a 2,655-km pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal, Bokaro in Jharkhand and Dhamra in Odisha began. The line was extended to Guwahati in Assam from Barauni in Bihar, a length of 726 km, to take the fuel to hereto-unconnected states in the East. The Jagdishpur-Haldia-Bokaro-Dhamra Pipeline (JHBDPL), popularly called the Pradhan Mantri Urja Ganga pipeline, is now ready to supply gas to the eastern states of Bihar, Jharkhand, Odisha and West Bengal, official sources said. This has helped pass on the benefit of reduction in CNG and piped cooking gas prices to consumers in these regions following the government decision to cut input natural gas prices. About Rs 5-7 reduction in rates has now reached consumers in 20 towns and cities in the hinterland. Gas pipeline is the cheapest mode of transportation of gas. Sources said to carry gas to the eastern states of India, state-owned gas utility GAIL (India) Ltd was authorized to lay JHBDPL. The government provided 40 per cent viability gap funding amounting to Rs 5,176 crore for execution of JHBDPL. Further, as a part of JHBDPL, GAIL is also laying Barauni-Guwahati pipeline which shall act as a source for North East Gas Grid pipeline being executed with 60 per cent viability gap funding amounting to Rs 5,559 crore to connect all the North Eastern states to natural gas source and supply gas to all parts of the country. The Pradhan Mantri Urja Ganga pipeline will connect all the geographical areas (more than 90) spread over the states of Uttar Pradesh, Bihar, Orissa, West Bengal and further to the North Eastern Region of India. With the completion of this project, the North Eastern/ Eastern part of India becomes an integral part of the gas-based economy with twin benefits of cheapest transportation of gas through Urja Ganga and gas pricing reforms, they said. Under the unified tariff regulations recently notified by sector regulator Petroleum and Natural Gas Regulatory Board (PNGRB), transportation tariff has been cut by about 50 per cent to Rs 99.90 per million British thermal units for the eastern parts, helping make the clean fuel more affordable. Last week, the Cabinet Committee on Economic Affairs approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd. The price of such natural gas shall be 10 per cent of the monthly average of Indian crude basket and shall be notified on a monthly basis. The price for gas produced from nomination fields of ONGC/OIL shall have a floor and a ceiling. This has resulted in reduction of gas price from USD 8.57 per mmBtu to USD 6.5 per mmBtu. The reforms will lead to significant decrease in prices of piped cooking gas for households and compressed natural gas (CNG) for transport, they said adding the reduced prices shall also lower the fertilizer subsidy burden and help the domestic power sector.
LNG developer Tellurian seeks investors
The proposed Driftwood LNG terminal in the state of Louisiana is slated to begin production in 2027, with an annual capacity of roughly 11 million tonnes in the first phase. Japanese and Indian companies are showing interest, Simoes said, adding that Tellurian is also in contact with oil majors and upstream companies. Tellurian, which plans to retain a majority stake, seeks investments from two to three companies. Annual capacity of 11 million tonnes represents more than 10% of LNG demand in Japan, the world’s top importer of the fuel. Eventual expansion planned for Driftwood would boost capacity to about 28 million tonnes, or more than 30% of current U.S. production. Japanese companies were involved in the launch of three U.S.-based LNG projects. Increasing imports from the U.S. would help ensure a stable supply for Japan. U.S. engineering company Bechtel is handling Driftwood’s design, procurement and construction, with the design 80% complete. Tellurian is using revenue from shale gas production and sales for the plant construction. Simoes said the company had spent $1 billion by the end of February. But the project was dealt a major blow when two of its top customers, Shell and energy trader Vitol, canceled long-term deals last year totaling 6 million tonnes annually. Tellurian seeks to salvage the project under an arrangement that will let equity partners offtake LNG based on their stakes. “We continue to put together the pieces to have advanced discussions with potential equity partners,” Simoes said. “So it’s very attractive, which is why we’re quite busy.” Multiple LNG projects are underway in the U.S. South. Venture Global LNG said on March 13 that it was proceeding with an additional investment in its Louisiana plant, with plans to produce roughly 20 million tonnes — the production could start by 2025. Major energy company Sempra decided on March 20 to proceed with an investment in the Port Arthur LNG plant in Texas. The plant is slated to have a capacity of roughly 13 million tonnes a year and seeks to start PR
Oil and Natural Gas Co to bet on deepwater oil as India seeks to cut import
India, with a fast-growing appetite for crude, is eager to reduce its fuel import bill and bolster energy security, and has encouraged companies like state-controlled ONGC to do more India’s Oil and Natural Gas Corp. is preparing to bet billions of dollars on deepwater and ultra-deepwater exploration, boosting spending in a push that could help one of the world’s top oil importing nations reduce reliance on overseas supply. “Onshore we have more or less drilled, appraised or acquired data in most of the basins,” Sushma Rawat, director of exploration for the state-owned giant, said in an interview. “But there are still large tracts offshore where we have very sparse data, where almost no wells have been drilled.” India, with a fast-growing appetite for crude, is eager to reduce its fuel import bill and bolster energy security, and has encouraged companies like state-controlled ONGC to do more to tap domestic oil and gas reserves. It’s a gamble that, if successful, would yield rewards for producers and for a government looking to reduce its overseas dependence. Rawat said ONGC plans to bid aggressively in upcoming government auctions to increase its exploration acreage to 500,000 square kilometers (193,050 square miles) by March 2026, from around 163,000 square kilometers today. Annual spending will rise to 110 billion rupees ($1.3 billion) from an annual 70 billion to 80 billion rupees. Prime Minister Narendra Modi’s government had set a goal of cutting imports by 10% by 2022 and halve them by 2030, but missed the first target, with import dependence increasing instead. No fresh goals have been publicly announced, but India last year released nearly one million square kilometers of acreage previously closed to exploration for military, environmental and other reasons. Rawat and officials at ONGC want to leverage the opportunity, trying to speed up efforts by striking a string of partnerships with Exxon Mobil Corp., Chevron Corp. and TotalEnergies SE. ONGC holds just over half of the country’s leased exploration acreage, making it an appealing partner. Now the challenge for ONGC is to turn broad agreements into tangible exploration alliances, said Angus Rodger, upstream research director for Asia Pacific at Wood Mackenzie: “The Indian government wants to see new partnerships emerge, between Indian players and the best international explorers.” The global oil majors, wary of the risks associated with India’s offshore potential, are pushing for better conditions from the Indian government, Rawat said, including with the addition of clauses on arbitration, reassurance around the stability of the fiscal regime and on criminal liability.
India’s petroleum consumption broke all records in 2022-23
Indians are using more diesel, petrol, and liquefied petroleum gas (LPG) than ever. In the financial year that ended in March 2023, India consumed 222.30 million tonnes of petroleum products, up 10.2% from the previous year, according to the latest oil ministry data. This is the highest-ever in the history of the world’s third-largest oil consumer. Demand for fuel is deemed a proxy for manufacturing activity, a part of which may be driven by higher government capital spending, according to independent oil market analyst Sugandha Sachdeva. “That means huge demand for construction and infra(structure) leading to more demand for oil products, especially in a pre-election year,” Sachdeva told Reuters. The demand for fuel began recovering in 2021-22 from the hit it took in India during the covid-19 pandemic as industrial activity slowed significantly. India’s increasing demand for crude oil India imports more than 85% of its crude oil requirements, and oil demand is only expected to rise in the coming years. Paris-based International Energy Agency has projected it to increase from 4.7 million barrels per day (bpd) in 2021 to 6.7 million bpd by 2030. Currently, India has a refining capacity of around 250 million tonnes per annum. Plans are underway to notch it up to 450 million tonnes in the next few years. In March, India’s crude oil demand was driven by bitumen, used to build roads. Sales soared 16.5% to 933,000 tonnes from February. Transportation fuels like diesel, which account for 40% of the country’s total consumption, also jumped 11.6% in March to 7.87 million tonnes.