Oil Prices Start The Week Lower As Bearish Sentiment Builds
Crude oil prices fell earlier today, starting the week with a decline on expectations of another rate hike by the Fed that combined with weaker-than-expected economic data from China to erase previous gains. In morning trade in Asia Brent crude had fallen below $80, with West Texas Intermediate was down to a little over $76 per barrel. Both declines, however, were moderate, continuing a losing streak that began last week. The U.S. Federal Reserve is expected to announce a 25-basis-point rate hike later this week as it continues to try and tame inflation that left consumer spending in the U.S. flat in March, with spending on goods down, although spending on services rose. In news from China, the country’s purchasing managers’ index for March fell to 49.2 from 51.9 in March, sparking worry about the Asian powerhouse’s recovery. A reading of 50 separates growth from contraction. “Investors remain cautious amid mixed economic signals. Brent crude has been tracking broader markets in recent sessions, with a slew of economic data creating more uncertainty about the outlook,” ANZ analysts said in a note quoted by Reuters. “Oil markets have completely faded the boost from the surprise OPEC+ cut earlier this month, and we think this primarily reflects deep pessimism about the macro outlook, with little evidence of incremental weakness in demand so far,” Barclays said last week. The bank’s analysts, however, cautioned against underestimating OPEC+’s resolve to keep a tight grip on oil supply, suggesting that despite the recent slide, prices could yet live up to earlier forecasts that saw Brent breaching $100 again before this year’s end. For now, however, pessimism about economic growth appears to have gained the upper hand among oil traders, keeping a lid on prices and reversing the gains oil made at the end of last week on another strong round of Big Oil quarterly results.
India state retailers gasoil, gasoline sales rose in April
Indian state fuel retailers’ gasoline and gasoil sales rose in April from the previous month, preliminary sales data showed, indicating a pick up in economic activity. Daily sales of gasoil rose by 8.3% to 238,500 tonnes in April compared with March, the data showed. Gasoil accounts for about two-fifths of refined fuel consumption in India and is directly linked to industrial activity India’s factory activity expanded at its quickest pace in more than four months in April to 57.2, driven by solid growth in new orders and output, the Manufacturing Purchasing Managers’ Index compiled by S&P Global showed on Monday. Gasoil is mainly used by trucks, while gasoline is used in passenger vehicles. State fuel retailers’ daily gasoline sales rose 2.9% to 88,200 tonnes, the data showed. State-run retailers and refiners- Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum – own about 90% of India’s retail fuel outlets.
RIL-BP seeks bids for 6mmscmd of KG gas
The consortium of Reliance Industries and BP has sought bids for 6 million metric standard cubic meters a day (mmscmd) of natural gas from its KG D6 block off the eastern coast, according to the tender document. The electronic auction will be held on May 19 for the gas from the MJ field, which will begin supplying from June 1. Bidders are expected to quote a variable above the JKM price, the spot market benchmark for liquefied natural gas (LNG) delivered to Japan and South Korea. The variable can be a positive or negative number. The JKM price is around $11.55 per mmbtu at present. A minimum volume of 10,000 standard cubic meters per day can be bid while the maximum bid volume would depend on the bidders’ net worth and past gas consumption. For bids up to 1 mmscmd of gas, bidders don’t need to meet any minimum net worth or past gas consumption criteria. Bidders can seek volume for a tenure of 3 or 4 or 5 years. The new supply from RIL-BP fields will add to the domestic production, helping cut imports that comprise about 44% of the country’s total gas consumption. India produced about 92 mmscmd of gas and consumed about 165 mmscmd in 2022-23. High import dependence makes India vulnerable to global price volatility. In 2022-23, international LNG prices rose to record highs, with JKM touching $69 per mmbtu in August. The global energy crisis also made it hard for Indian firms to secure supplies from overseas, with some suppliers reneging on contracts.
U.S. Seizes Iranian Oil From Tanker
The United States recently confiscated a cargo of Iranian crude oil from a tanker at sea, according to a maritime security company, indicating that the seizure pre-dated Iran’s move to seize Chevron’s cargo of crude oil on Thursday off the coast of Oman. On Thursday, a Marshall Islands-flagged tanker carrying crude oil destined for Chevron was seized by the Iranian Navy, according to the U.S. Navy. According to Tehran, the tanker had been involved in a collision with an Iranian vessel in the Gulf of Oman, resulting in Iranian crewmember injuries, with several missing. Iran also said that the tanker ignored eight hours’ worth of radio calls following the collision. Iran said it was taking the Suezmax tanker back to Iran for investigation. The U.S. Navy, however, accused Iran of interfering with navigational rights in international waters, referring to the incident as a “threat to maritime security and the global economy.” On Friday, new information surfaced from maritime security company Ambrey, which alleged that Iran’s motive for seizing Chevron’s load of crude oil was in retaliation for the U.S. seizure that took place not even five days prior. “Both tankers were Suezmax-sized. Iran has previously responded tit-for-tat following seizures of Iranian oil cargo,” Ambrey said in a note to clients, according to the Jerusalem Post. Sources familiar with the matter said that the United States seized a Marshall Islands tanker Suez Rajan after obtaining a court order to do so. The tanker’s last known position was near southern Africa. This isn’t the first time the global energy markets have seen a spat between the United States and Iran over seized oil tankers. In 2019, the Iranian National Guard Corps seized a British oil tanker, the Stena Impera, for allegedly violating maritime law. In 2020, Iran seized a Liberian-flagged oil tanker in the Strait of Hormuz, although it let it go. The United States has also participated in the oil seizure squabble, seizing an Iranian oil cargo last May near Greece.
Next Year Will Be A Crucial Year For Suriname’s Emerging Oil Boom
A series of setbacks emerged during 2022 which derailed deeply impoverished Suriname’s nascent oil boom. The former Dutch colony of around 600,000 people, which shares the Guyana Suriname Basin with nearby Guyana, is believed to possess significant offshore petroleum potential. It is estimated that 1.4-million-acre offshore Block 58 where 50% partners Apache and TotalEnergies, which is the operator, have made five commercial discoveries, contains as much as 6.5 billion barrels of oil. If proven correct and successfully exploited, this will endow Suriname with a massive economic boom on the scale of that being enjoyed by Guyana where the economy grew by a stunning 62% during 2022. For these reasons, a fiscally challenged government in Paramaribo, which is facing an economic crisis and the threats of yet another sovereign debt default, views Suriname’s offshore oil potential as an economic silver bullet. It appears, however, that the former Dutch colony’s nascent oil boom is stalled. The final investment decision from Apache and TotalEnergies, which is the operator, regarding the billion-dollar development of Block 58 offshore Suriname was expected last year but has been delayed. TotalEnergies CEO Patrick Pouyanne explained during late-2022 that the energy supermajor was concerned by a lack of understanding of the reservoirs discovered and a mismatch between seismic data and drilling results. This has postponed the first oil from Block 58 to at least 2027, perhaps even later, when it had initially been expected by Paramaribo in two years. When it is considered that it will take an investment of somewhere between $6 billion and $10 billion to develop Block 58 and bring it to first oil TotalEnergies hesitance is understandable. This constituted a serious blow for deeply embattled President Chandrikapersad Santokhi who is facing political and economic crises in a nation which is one of the poorest in South America. Suriname’s 2022 gross domestic product per capita of $5,710 the third lowest on the continent before Bolivia with Venezuela in last place. The former Dutch colony was hit particularly hard by the 2020 COVID-19 pandemic which exposed the economic weaknesses created by Dési Bouterse who was in power from 2010 to 2020. During 2020, Suriname’s gross domestic production shrank by 16% which was the worst performance in South America after Venezuela. Since then, the economy has failed to recover with 2021 GDP falling almost 3% and then only expanding by a mere 1.3% during 2022 when other South American countries were enjoying robust growth. More alarming is that the economic crisis sparked by the pandemic saw Suriname default three times on its sovereign debt and the country is facing the prospect of yet another default. In an attempt to shore up Paramaribo’s shaky finances, President Santokhi secured a nearly $700 million financing program from the International Monetary Fund, which was awarded on the condition of the government implementing harsh economic reforms. Those included removing fuel and electricity subsidies as part of a homegrown economic plan to restore fiscal and economic stability. This has only worsened the plight of everyday people in the impoverished South American country where inflation spiraled to 58% during February 2023. The soaring cost of living sparked violent anti-government demonstrations during February 2023 with protestors storming Suriname’s parliament. These events are magnifying the crises facing President Santokhi’s administration and the urgency with which a solution must be found. Paramaribo had expected an offshore oil boom to resolve Suriname’s economic woes, but there are signs that the FID for Block 58 is still some way off. Even after TotalEnergies demurred on making the FID during 2022 there were government expectations that it would be made during 2023, which could have seen first oil from Block 58 delivered by as early as 2027. It now appears that the FID will be made during 2024 (Dutch) at the earliest, but it could be delayed further if drilling results and flow testing do not meet expectations. The FID was delayed in part due to a series of non-commercial oil discoveries and dry wells. The latest poor drilling result was at the Awari well which was completed in November 2022 and deemed non-commercial, plugged and abandoned. Since then, Apache announced the successful drilling and flow testing of the Sapakara South-2 appraisal well which found 118 feet of net oil pay in what was deemed to be a high quality reservoir. Flow test and pressure data indicates that there are more than 200 million barrels of oil in place adding substantial resources to any planned development. Those results according to Apache CEO John J. Christmann IV confirm the company’s pre-drill expectations as well as geologic, geophysical, and reservoir models. That comes on the back of the June 2022 announcement of successful flow testing of the Krabdagu Discovery Well and the Sapakara South-1 appraisal well during November 2021. Appraisal work is continuing on Block 58. The Krabdagu-2 appraisal was being drilled at the time of Apache’s February press release and will be followed by the Krabdagu-3 well which was scheduled to be spudded during February 2023. If Apache and TotalEnergies continue to experience the success reported during February 2023 then it is foreseeable that the FID for Block 58 will be made next year. Nonetheless, with it likely to take at least three years and potentially longer, to bring the block to first oil this could very well be too late for President Santokhi with a debt crisis and further civil unrest looming. Time is running out for Suriname to successfully exploit the considerable oil potential which lies offshore as the push to decarbonize the world economy gains momentum. This is amplified by the strict fiscal terms of Suriname’s oil production agreements and the impoverished country’s political instability.
Indian oil companies await $300-$400 million dividends from Russia amidst sanctions
Indian oil companies are yet to receive dividends worth $300 million to $400 million from Russia since the war broke out between Russia and Ukraine in February 2022, a senior petroleum ministry official said. Indian companies including ONGC, Oil India, BPCL and Indian Oil have stakes in Russian oil and gas projects for which they have not received dividends due to Western sanctions imposed on Moscow. The government is negotiating a way to resolve the issue, the official said. The issue in payments of dividend to Indian companies arises due to the unavailability of banking channels after Russia was removed from the SWIFT global payment system by the US. Since the US and the EU has imposed sanctions on Moscow, Russia has become the one of the largest crude oil suppliers to India. The share of Russian crude in India’s oil import has risen from 0.2 percent in January 2022 to over 30 percent in March 2023. This comes as Russia is diverting the supply of its crude oil to Asian countries, especially India and China, and providing it at a discounted price. For the month of March, Russia was the top supplier of crude oil to India providing 1.64 million barrels per day (bpd), surpassing traditional suppliers such as Saudi Arabia and Iraq.
Reliance-bp, Nayara price petrol, diesel at market rates
India’s private fuel retailers -Reliance-bp and Russia’s Rosneft-backed Nayara Energy — have begun pricing petrol and diesel at market rates for the first time in over a year after a fall in global oil prices cut losses, sources said. Reliance BP Mobility Ltd (RBML), a joint venture between Reliance Industries Limited and UK’s bp, Nayara Energy and Shell sold petrol and diesel at huge losses as they tried to match the below-cost frozen rates of dominant public sector retailers. The losses were despite pricing fuel at slightly higher rates than state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (BPCL). But a fall in international oil prices over the last six weeks has helped bring the PSU pump-matching retail rates at par with cost, three sources with direct knowledge of the matter said. Reliance BP Mobility Ltd (RBML), a joint venture between Reliance Industries Limited and UK’s bp, Nayara Energy and Shell sold petrol and diesel at huge losses as they tried to match the below-cost frozen rates of dominant public sector retailers. The losses were despite pricing fuel at slightly higher rates than state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (BPCL). But a fall in international oil prices over the last six weeks has helped bring the PSU pump-matching retail rates at par with cost, three sources with direct knowledge of the matter said.
Assam Gas, OIL ink pact for piped natural gas supply to Assam, Tripura
The Assam Gas Company Limited (AGCL) and Oil India Limited (OIL) on Saturday signed an agreement for a joint venture (JV) private limited company with the mandate to lay, build and operate city natural gas distribution networks in parts of Assam and Tripura to start with. The JV company, with the Assam government-owned AGCL having 51 per cent of share equity and OIL retaining the remaining 49 per cent, shall, apart from building local natural gas grids and providing piped natural gas to domestic and commercial establishments in Lakhimpur, Dhemaji, Darrang, Udalguri, Sonitpur and Biswanath Chariali and a few districts of Tripura for the time being, shall also set-up numerous compressed natural gas (CNG) stations. Speaking at the ceremonial signing programme held at Janata Bhawan here, Assam chief minister Himanta Biswa Sarmaexuded confidence that the agreement between AGCL and OIL would provide a thrust to the ongoing process of industrial development in the state for the past couple of years. The chief minister added the JV company, with an authorised share capital of Rs 5 billion and initial paid-up capital of Rs 1 billion, would prove to be a milestone in the strengthening of the state’s economy in the days to come. Sarma further expressed hope that the JV company would support the state’s endeavour to transition towards a greener fuel-based economy, in sync with the central government’s Northeast Hydrocarbon Vision 2030.
Indian crude basket likely to reflect imports from Russia
With Russia emerging as one of the top oil suppliers to India, the Indian crude basket price is likely to factor in the cheaper Russian imports going ahead. The Indian basket of crude oil broadly represents the cost of India’s oil imports, and it has so far not accounted the oil imported from Russia at discounted prices. The Indian basket of crude oil represents a derived basket comprising of sour grade (Oman and Dubai average), sweet grade (Brent Dated) of crude oil processed in Indian refined in the ratio of 75.62 : 24.38. As of April 27, the Indian crude oil basket stood at $78.45 per barrel, according to data from Petroleum Planning & Analysis Cell. “At some point of time the Indian basket will catch up. Indian basket in any case is a dynamic basket. Market is changing, and obviously the basket will change. The new reality for Russian oil accounting for a significant part of our import will have to be reflected in the Indian basket,” said an official in the know of the developments. Russia emerged as a major supplier to India for the first time in FY23 after it started giving oil at discounted rates amid the Ukraine war. Despite concerns raised by the west to India’s imports from Russia during the war, India has taken a strong stand and said that it looks at all options to achieve energy security. Russia was the largest exporter of crude oil to India by value in February in spite of the western price cap of $60 per barrel, according to data from the union ministry of commerce and industry.
Russia’s oil discounts narrow for Indian ports
Urals crude oil differentials for May-loading cargoes for delivery to Indian ports narrowed amid rising competition for discounted barrels in Asia, according to three traders. Meanwhile, Reuters calculations show FOB prices for the grade fell below the Western price cap of $60 per barrel on weaker Brent prices, which are set for a fourth straight monthly fall. Urals discounts narrowed to $10-$12 a barrel to dated Brent on a delivered ex-ship (DES) basis in Indian ports, from minus $13 a barrel for April loading cargoes, according to the three traders. Shipping costs from Baltic ports to India stood at around $7.8 million, another trader said. “May-loading parcels were offered around dated Brent minus $12 a barrel or minus $11 a barrel to Dubai,” a source with an Indian refiner which is a regular buyer of Russian oil told Reuters. Two other Indian refiners said the discount to Brent is about $10/barrel. Russia’s largest oil producer Rosneft and India’s top refiner Indian Oil Corp agreed to use the Asia-focused Dubai oil price benchmark in their latest deal. The Urals price on a free on board (FOB) basis in Baltic ports, allowing about $2 per barrel of additional transport costs, has fallen below $60 per barrel for cargoes loading in May, Reuters calculations show. Lower freight rates, narrowing discounts versus global benchmarks and Brent prices above $85 per barrel nudged the daily price of Urals above the cap earlier in April. China’s increased purchases of April-loading Urals and imports of the grade loading from Russia’s Baltic and Black Sea ports this month may hit an 11-month high, supporting prices, traders said and Refinitiv Eikon data showed.