Russian oil to India may be hit by OPEC and drive for higher prices
The drive by OPEC and its allies to boost oil prices is lifting Russian crude along with it, prompting concerns from India’s banks that cargoes could breach the $60-a-barrel cap. State Bank of India and Bank of Baroda informed refiners they will not handle payments for oil bought above the limit, said a refinery executive involved in seeking financing for the company’s Russian oil purchases, who asked not to be identified as he isn’t authorized to speak publicly. Banks in the South Asian nation are keeping a closer watch on prices at loading ports, before shipping and logistics costs are added, executives said. Spokespeople at State Bank of India and Bank of Baroda didn’t immediately respond to requests for comment. India, along with China, emerged as key buyers of Russian crude after most others shunned its supplies following the invasion of Ukraine. The South Asian nation has taken advantage of cheaper barrels, purchasing record volumes and elevating Russia to its top supplier above Iraq and Saudi Arabia. While India imports Russian oil on a delivered basis that takes into account logistics and other costs, banks are demanding details on so-called free-on-board prices to ensure they fall at, or below $60 a barrel. That level exempts them from European Union sanctions which ban the use of shipping, banking and insurance from members of the bloc. Russia can still transport and sell oil at any price if it doesn’t use G-7 and EU services and vessels, though that provides fewer options. OPEC+ jolted markets earlier this month after announcing a surprise production cut. Brent — the international benchmark — surged as much as 8% following the move and has edged higher since, trading above $87 a barrel on Thursday. Russian crude trades below Brent, but should the benchmark rise above $95 a barrel, it will pull prices of oil from the OPEC+ producer above the cap, the refinery executive said. Another executive at a Mumbai-based refiner said companies could look to utilize other Indian banks that have little overseas exposure and are willing to process payments without fear of upsetting the US. The rise in oil prices may complicate the signing of long term supply deals with Russian suppliers. Indian Oil Corp., the nation’s largest state-run refiner, has already inked an agreement with Rosneft PJSC, but other smaller processors are finding contract negotiations hard going. Crude trading above the cap could lead to fewer tankers willing to transport cargoes, which would put a squeeze on Russian flows to India, said Serena Huang, an analyst at Vortexa Ltd. A smaller fleet would also raise freight costs and make the economics less attractive, according to Huang.
Russia’s flagship oil is moving ever closer to $60 per barrel cap
The price of Russia’s flagship Urals crude at the point of export is getting closer to the $60 limit, data from Argus Media Ltd. The price of Russian oil is nearing a threshold that could create complications for the country’s biggest buyers. The Group of Seven nations last year imposed a cap of $60 a barrel on crude shipped from Russia to limit the Kremlin’s profits amid the war in Ukraine. Buyers who pay above that level lose access to industry-standard insurance under the sanctions. The price of Russia’s flagship Urals crude at the point of export is getting closer to the $60 limit, data from Argus Media Ltd. show. The delivered price of the grade to India’s west coast — including shipping costs — was actually more than $73 a barrel as of April 6. It’s getting increasingly difficult to assess the actual price of Russian crude, due to the emergence of a shadow fleet of vessels and trading companies with unclear affiliations. However, oil prices soared following last week’s shock announcement by OPEC+ to cut output, and global demand is expected to increase later this year, adding further upward pressure. or much of the past year, Russian oil exports have surged, with much of it going to India and China. But increasingly tighter sanctions are starting to bite, and Russia has pledged to cut output through the end of the year. The country’s seaborne exports just saw their biggest weekly drop since December, tanker-tracking data compiled by Bloomberg show. A gap of about $18 a barrel exists between the point of shipping and delivery of Urals cargoes in Argus’s data. The Russian grade shipped from the Baltic port Primorsk and Novorossiysk on the Black Sea costs about $55 a barrel. The delivered price of Russian oil to India averaged $72.14 a barrel in February, the most recent month for available data, according to the South Asian nation’s ministry of commerce and industry. That’s marginally lower than in January. While Russian crude is getting pricier, there are signs that it’s still cheap enough to undercut other suppliers. The cost of Iraqi crude to India dropped to an average of $76.19 a barrel in February, compared with $78.92 in January, according to India’s ministry.
India’s revised gas pricing formula to aid demand, upstream profit stability: Fitch
India’s decision to limit prices of domestic natural gas from legacy fields to between $4 per million British Thermal Unit (mmbtu) and $6.5 will support margins for city gas distributors, encourage the use of gas, and reduce cash flow volatility for upstream producers, Fitch Ratings said on Wednesday. “We expect a partial pass-through of the lower administered price mechanism (APM) gas prices, at which domestic upstream producers supply gas to city gas distributors, in the prices of compressed natural gas (CNG) and domestic piped natural gas (PNG) to add to the distributors‘ margins in the near term,” it said.
India continues to waive transmission costs for green hydrogen plants
According to a government official, India has extended a waiver of transmission fees for renewable energy to hydrogen production plants that start up before January 2031 in order to become the world’s cheapest producer of the fuel. The move is intended to lower the cost of green hydrogen – hydrogen produced by splitting water with renewable electricity – by one-fifth. The shift will make more green hydrogen production facilities eligible for the 25-year remission of transmission rates, which was previously accessible for plants established before July 2025. Large-scale hydrogen and ammonia projects take three to four years to build, and many are unlikely to be operational by June 2025, according to a government official. The country’s goal is to manufacture green hydrogen at the world’s lowest cost, at $1-$1.50 per kilogram, down from $4-$5 per kilogram now. Reliance Industries and Adani Enterprises have established $1 per kg cost targets by 2030. Other significant Indian corporations that have declared intentions to produce green hydrogen include Larsen & Toubro, Indian Oil, NTPC, JSW Energy, ReNew Power, and Acme Solar. According to industry estimates, renewable energy, including transmission, accounts for 65%-70% of the cost of manufacturing green hydrogen. Inter-state transmission costs between 1-2 rupees every unit of power transmitted. According to the official, every rupee reduction in renewable energy costs reduces the cost of green hydrogen by 60 Indian rupees ($0.73). The hydrogen mission in India is anticipated to require 8 trillion Indian rupees ($98 billion) in investments by 2030, including 125 gigatonnes of non-fossil-based generation capacity and new transmission lines. India also intends to provide green hydrogen producers with incentives worth at least 10% of their costs as part of a $2 billion initiative that will commence before the end of the year. The government opposes broadening the concept of green hydrogen to include fuel derived from low-carbon energy sources, as some industrialized countries have requested at G20 meetings. See also: Indian Army & NTPC arm sign agreement to build green hydrogen plants Cabinet approves NHPC’s investment in India’s largest hydro project.
Cheaper spot LNG prices tempt some Asian buyers amid supply gains
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports in March. The spot price of LNG for delivery to north Asia was $12.50 per million British thermal units (mmBtu) in the week to April 6, steady from the previous week, which was the lowest level since June 2021. The price has dropped 67% from its northern winter peak of $38 per mmBtu, reached in mid-December and is also down 82.3% from its record high of $70.50 from August last year, hit when European demand for the super-chilled fuel surged during the energy crisis sparked by Russia’s invasion of Ukraine. China’s imports of LNG are estimated by commodity analysts Kpler at 5.55 million tonnes in March, up from February’s 4.95 million and also well above the 4.77 million from March last year. China lost its status as the world’s biggest importer of LNG back to Japan last year, largely because its utilities pulled back from the spot market as prices surged. India was another LNG importer stung by the record high spot prices last year, but is returning to the market as prices retreat India’s March imports are estimated at 1.84 million tonnes, up from February’s 1.27 million, which was the lowest monthly total since January 2017, according to Kpler data. India’s March imports were the most since June 2022, and also exceeded the 1.77 million tonnes from March last year. Other smaller Asian LNG importers, such as Pakistan, Bangladesh and Thailand also recorded higher arrivals in March from February. What’s worth noting is that Asia’s overall imports of LNG were largely steady in March, coming in at 22.35 million tonnes, up slightly from February’s 22.18 million, but down on a per day basis. This is largely because developed country importers such as Japan typically see lower imports as the peak winter demand season ends, with March arrivals pegged at 5.58 million tonnes, down from 6.54 million in February.
IEA Warns Saudi Arabia’s Oil Production Cut Plan To Tighten Indian Economy
The International Energy Agency (IEA) warns of a potential burden on the Indian economy due to Saudi Arabia’s oil production cut plan, predicting tight global markets in the second half of the year. In response to a question about the potential impact of Saudi Arabia’s oil production cut on countries like India, stated, Fatih Birol, Executive Director of, the International Energy Agency told ANI, “India is a country that imports energy and oil. The majority of the oil consumed in India is imported. Such a move could result in an increase in India’s oil import bill, posing a burden on the Indian economy and consumers.” On Saudi Arabia’s announcement of cutting oil production, Birol stressed, “Saudi Arabia, Russia and others- the OPEC plus producers decided to cut the oil production. And when we look at the International Energy Agency’s analysis and the analysis of almost every serious institution looking at the oil markets, the second half of this year markets would be all very tight. Birol added that he finds this decision risky for the global economy. Commenting on the effectiveness of the ban on Russian oil, Birol stated that it depends on the objective. “Since February 24, when the war started, today, the Russian oil and gas export revenues declined, dropped by 60 per cent. If we consider that the oil and gas export revenues are a very important input for the Russian budget, this is a major challenge for the Russian economy.” Fatih Birol acknowledged that India has been identified as a key country that imports crude oil and then re-exports refined oil to European countries. He stated that he considers this to be a legitimate action. When discussing the impact of Ukraine’s war on the energy sector, Birol emphasized that renewable energies promote peace. He further noted that Russia, which is currently the world’s largest natural gas exporter, is facing increasing competition as more countries are producing and exporting gas. Birol anticipated that the influx of liquefied natural gas (LNG) into the markets in the next few years would likely lower prices and alleviate concerns .