Oil Prices Unmoved Despite Large Crude Draw
Crude oil inventories in the United fell this week by 6.083 million barrels, the American Petroleum Institute (API) data showed on Tuesday, with analysts expecting a 1.667 million barrel draw. The total number of barrels of crude oil gained so far this year is still more than 38 million barrels. This week, SPR inventory dropped for the fourth week in a row losing 1.1 million barrels for the week to reach 366.9 million barrels—the lowest amount of crude oil in the SPR since October 1983. U.S. crude oil production held steady during the week ending April 14, at 12.3 million bpd. U.S. production is now 800,000 bpd lower than the peak production seen in March 2020, but 400,000 bpd higher than this time last year. The price of WTI was trading down on Tuesday in the run-up to the data release, well below $80 per barrel on renewed market fears over a possible bank collapse contagion after Q1 figures from First Republic bank showed deposits were down 40%. Brent crude was also trading down on the day. By 4:20 p.m. EST, WTI was trading down $1.67 (-2.12%) on the day at $77.09 per barrel, a loss of about $3.70 per barrel on the week. Brent crude was trading down $2.03 (-2.45%) on the day at $80.71—down roughly $4 per barrel from this same time last week. WTI was trading at $77.13 shortly after the data release. Gasoline inventories fell also, by 1.919 million barrels after falling in the week prior by 1 million barrels. Distillate inventories rose by 1.693 million barrels after decreasing by 1.9 million barrels in the week prior. Inventories at Cushing, Oklahoma, increased by 465,000 barrels—after falling by 600,000 barrels last week.
Russia on track for 2023 oil output of 9.6 mbpd in line with cuts
Russia’s oil output this year is on course to top 480 million tonnes, or about 9.6 million barrels per day (bpd), a Russian government source familiar with the data told Reuters. The figure, which excludes gas condensate, is in line with Russia’s pledge to cut production by 500,000 bpd to 9.5 million bpd from March until year-end, according to Reuters calculations and the source. “If you extrapolate for the whole year, production will be 480 million tonnes,” the source told Reuters on condition of anonymity due to the sensitivity of such data. Russia’s energy ministry did not reply to a request for comment. OIL AND CONDENSATE In 2022, Russia’s combined oil and gas condensate production rose to 535 million tonnes (10.7 million bpd). Condensate is excluded from the production quotas used by the OPEC+ producers group for Russia. Such production may reach around 520 million tonnes (10.4 million bpd) this year, according to the source, taking some 40 million tonnes of gas condensate into account. That is significantly higher than official forecasts which put Russia’s expected 2023 oil and gas condensate production at between 490 million and 500 million tonnes (9.8 million to 10 million bpd).
India to remain unaffected by Pakistan’s purchase of Russian oil: Experts
Pakistan placed its first order for discounted crude oil from Russia after the latter diverted most of its supply to Asian countries. India and China have emerged as the major consumers of Russian crude oil since the war broke out between Moscow and Ukraine In March, Russia supplied 1.64 million barrels per day (bpd) of crude to India — becoming the country’s largest supplier. Energy experts believe that India would be unaffected by Pakistan sourcing crude from Russia as India has a much bigger appetite than its neighbour. Hitesh Jain, Lead Analyst at Yes Securities, said, “Pakistan is a small economy. Its (crude oil) requirement is one-sixth of India’s, hence, Pakistan cannot cannibalise India’s share in Russian oil exports.” Pakistan is going through a serious economic crisis as the country’s currency has fallen to a record low. The country, which is highly dependent on imported fuel, is on the verge of economic collapse. Reuters reported that Pakistan will buy only crude oil from Russia, and not refined fuels. Imports are expected to reach 100,000 bpd if the first transaction goes through smoothly, a Reuters report said. Diverting oil to Asian countries Russia has been diverting the supply of its crude oil to Asian countries, especially India and China, at discounted rates as the European Union (EU) and the US have imposed a slew of sanctions on Moscow. “In the medium term, Europe does not seem likely to source crude from Russia. Therefore, Russia is building a relationship with countries in Asia to supply its oil to them. The deal with Pakistan is one such attempt,” said an analyst with a domestic brokerage firm who did not wish to be identified. Russia’s share in India’s import basket, which was less than 1 percent until January 2022, has now increased to over 30 percent. The Eurasian country has been the top supplier of crude to India for the last six consecutive months, from October 2022 to March 2023. Discounted Russian oil One of the major factors for Russia becoming India’s top crude oil supplier is the discounts offered by the country. Experts say that the discounts offered by Russia might go away with Moscow increasing the number of destination countries for its crude. Prashant Vasisht, VP and Co-head of Corporate Ratings, ICRA, said, “Though the availability of Russian crude oil would not be a problem, with more countries buying Russian oil the discounts may go away.” India has been enjoying discounts on Russian crude since February last year. Moneycontrol had reported in December 2022 that India is estimated to have saved over Rs 350 billion by importing cheap Russian crude since February 2022, when Russia sent troops into Ukraine.
Piped natural gas growth remains slow in India despite government push
The government has been pushing for the use of piped natural gas (PNG) in households, with the objective of increasing the share of natural gas in India’s energy basket. But most Indian kitchens still depend on the traditional energy source, liquefied petroleum gas (LPG) cylinders, as the PNG rollout continues to be slow due to infrastructure bottlenecks and even consumer hesitancy. According to government data, over 10 million PNG connections had been provided by city gas distribution (CGD) companies as of 31st January. Compared to this figure, LPG connections had soared to 313.6 million by the end of March. India aims to raise the share of natural gas in its energy mix to 15 percent in 2030 from a little over 6 percent now. Experts say that LPG and PNG have almost the same price in terms of energy units. PNG, however, is more convenient as consumers do not have to bother booking new cylinders “PNG connections are hassle-free compared to gas cylinders but the hesitance lies in giving the one-time security deposit of around Rs 6,000 while getting a new connection. Most people already have LPG connections, so they continue using that,” said Prashant Vasisht, VP and Co-head of Corporate Ratings, ICRA. Companies have lately been offering incentives such as EMIs for the deposit to promote PNG connections, Vasisht added. He, however, pointed out that at times consumers face billing-related issues with PNG connections as well. The Central government wants to provide 123.3 million PNG connections across the country by 2030. PNG price drop Major gas players have reduced prices of domestic PNG this month after the government accepted the Kirit Parikh committee’s recommendations on the gas pricing mechanism. In April, Indraprastha Gas Ltd (IGL) lowered the price of domestic PNG by Rs 5 per unit, bringing PNG prices in the national capital down to Rs 48.59 per SCM (standard cubic metre) from Rs 53.59. On the contrary, the price of a domestic LPG cylinder increased by Rs 50 per cylinder in March. A 14.2 kg domestic gas cylinder in Delhi now costs Rs 1,103, against Rs 1,053 earlier, an increase of 4.75 percent. The price was increased after eight months. Hurdles in PNG expansion Experts say that commercial viability is one of the biggest hurdles in expanding PNG infrastructure across the country. “Laying of pipelines is an expensive process as companies have to dig up roads and get official permissions for various procedures,” said Deepak Jasani, Head of Retail Research at HDFC Securities. Jasani added that in tier 2 and tier 3 cities, the return on pipelines is not assured as many areas in these cities are not densely populated and consumers may prefer to stick with gas cylinders.
Reliance and BP begin commissioning work on Indian flagship deep-water gas field
Indian private-sector giant Reliance Industries and UK supermajor BP have begun commissioning activities at a flagship deep-water asset in the Krishna Godavari basin offshore India’s east coast. Reliance has started testing the floating production, storage and offloading vessel and other subsea structures at the MJ gas in field in the KG-D6 block, with “commissioning activities” under way, according to its latest quarterly results. “As an essential part of the testing, one well has been opened to flow gas through the integrated production system,” it said Reliance noted that the incremental gas production from the MJ field, along with ongoing production from R Cluster and Satellite Cluster Reliance said that the “lower and upper completion campaign” for the MJ wells is progressing as planned Four wells have been completed, with “balance wells” expected to be completed by the third quarter of the 2023-2024 financial year, it added. The ceiling price applicable for gas produced from KG-D6 has been revised to $12.12 per million British thermal units for the first half of the financial year, it stated. Ruby on location The operator earlier said that the Ruby FPSO had arrived at the MJ field last year. Reliance and BP had previously hoped to commission the MJ field by the end of last year, but were delayed by a few months due to an accident involving the FPSO, and bad weather. Upstream reported in October that the Ruby FPSO was involved in a collision with an accommodation barge, causing minor damage to the floater.
India’s RIL ups O2C revenue in FY2022-23 on crude rally
Indian private-sector refiner Reliance Industries (RIL) posted higher revenue from its oil-to-chemicals (O2C) business during the April 2022-March 2023 fiscal year because of a rise in average crude prices and higher price realisation from transportation fuels. RIL’s revenue from the O2C business rose to 5.95 trillion rupees ($72.6bn) in 2022-23, up by nearly 19pc from Rs5.1 trillion a year earlier, the company said in a stock exchange filing. Revenue increased led by the rise in export profits because of higher prices for transportation fuels, despite lower production. RIL said its access to global markets and sourcing of cheaper crude and feedstock from outside India helped improve its O2C margins during 2022-23. But the government’s excise duty on fuel exports, imposed in July last year, trimmed profits by Rs 66.48 billion during 2022-23, the company said. India scrapped its export tax on diesel and reimposed a windfall tax on crude production, in the latest adjustment to its tax scheme on 19 April. Delhi reimposed a windfall tax on crude of about 6,400 rupees/t ($10.63/bl) after previously slashing it to zero. The government also scrapped a Rs0.50/litre export tax on diesel, according to a finance ministry notification. This is the first time that the diesel export duties have been scrapped since the tax scheme was introduced in July 2022, following the continued weakening of Asian gasoil margins. The rise in O2C revenue for 2022-23 came despite a decline during the January-March 2023 quarter. RIL’s O2C revenue during January-March fell by nearly 12pc from a year earlier to Rs1.28 trillion because of sharp falls in crude prices and a decline in realised prices for downstream products, the company said. The export duty on fuel reduced earnings by Rs7.11bn during the quarter, RIL said. RIL’s refinery throughput rose marginally to 77mn t/yr (1.55mn b/d) over 2022-23 from 1.54mn b/d in 2021-22. But throughput rose to 1.61mn b/d during January-March, up by 5.3pc from 1.53mn b/d a year earlier. RIL’s overall profit rose to Rs741bn in 2022-23, up from Rs650bn a year earlier. Profit also rose to Rs213bn during January-March, up by 20pc from Rs178bn in October-December and by 18pc from Rs180bn a year earlier. The company’s gross revenue rose by 23pc on the year to Rs9.77 trillion in 2022-23, driven by revenues from its oil and gas business more than doubling to Rs165bn, as well as gains in other business such as O2C and digital services. The company said its oil and gas segment is poised to make up 30pc of India’s domestic gas production. RIL is set to commission the MJ deepwater gas fields in the Krishna-Godavari (KG)-D6 basin during the April-June 2024 quarter, with production from the field aimed at 12mn m³/d during the April 2023-March 2024 fiscal year. With the commissioning of the MJ fields, gas output from RIL-BP’s KG-D6 block will rise to 30mn m³/d during 2023-24, accounting for 30pc of India’s overall gas production and 15pc of the country’s gas demand.