India’s Russia oil imports jumped tenfold in 2022, bank says
India’s imports of Russian oil rose tenfold last year, according to Indian state-controlled lender Bank of Baroda. The figures show Asia’s third largest economy saved around $5bn (£4bn) as it ramped up crude purchases from Moscow. It comes as Western countries have been cutting their imports of energy from Russia after its invasion of Ukraine. Russia has been selling energy at a discount to countries like China and India, which is the world’s third largest importer of oil. In 2021 Russian oil accounted for just 2% of India’s annual crude imports. That figure now stands at almost 20%, Bank of Baroda said. India’s purchases of oil from Russia during the last financial year, saved it around $89 per tonne of crude, the figures show. Despite pressure from the US and Europe, India has refused to adhere to Western sanctions on Russian imports. New Delhi has also not explicitly condemned Russia’s invasion of Ukraine. India has defended its oil purchases, saying that as a country reliant on energy imports and with millions living in poverty, it was not in a position to pay higher prices. Since the Ukraine war began, Europe had imported six times more energy from Russia than India, the country’s External Affairs Minister S. Jaishankar said in a TV interview last year. “Europe has managed to reduce its imports while doing it in a manner that is comfortable,” he said. Mr Jaishankar added: “If it is a matter of principle why did Europe not cut on the first day?” With no end in sight to the conflict, some analysts expect Russia to continue to offer cheap oil to Asia’s biggest energy importers. “We expect Russian crude intake to remain limited to these two countries [India and China], sustaining the steep discounts,” Vandana Hari, from energy analysis firm Vanda Insights told the BBC. India’s oil refiners will continue to maximise their profit margins for as long as they can, but will simply “go back to their usual crude diet” if the sanctions were to be lifted, she added.
Mubadala, others eye stake in I Squared’s India gas business
Mubadala Investment, sovereign wealth fund of the United Arab Emirates, and a couple of Japanese investors including Sumitomo are in the race to acquire a 30% stake in Indian natural gas distribution business of I Squared Capital. The deal is likely to value the business at $1 billion, multiple people aware of the development said. I Squared, a US private equity firm focused on infrastructure investments, is present in the city gas distribution business in India through Think Gas Distribution and AG&P Pratham. The former also operates over 80 CNG stations. “I Squared will merge Think Gas and AG&P city gas businesses and the investor will pick up stake in the merged entity through a mix of primary and secondary investment,” one of the sources said. The combined platform could fetch a valuation of upwards of $1 billion, the person said. “Talks are on with investors such as Mubadala and a couple of Japanese investors,” he added. Investment bank Barclays is advising I Squared for the stake sale, sources said. Mails sent to I Squared Capital, Mubadala and Sumitomo did not elicit any responses till press time on Thursday. Established by I Squared in 2018, Think Gas operates across 13 districts in India and supplies natural gas to domestic, commercial, industrial and automotive sectors. Headquartered in Delhi NCR, Think Gas serves over 30,000 customers daily, according to company website. AG&P has 12 long-term 25-year exclusive concessions in Rajasthan, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, while Think Gas has seven licences to operate across 13 districts across Punjab, Madhya Pradesh, Bihar, Uttar Pradesh and Himachal Pradesh. I Squared’s city gas distribution business is the largest such institution-owned platform in the country. Other major city gas distribution businesses include Adani Total Gas and Torrent Gas on the private side and PSU-backed players such as Mahanagar Gas and Indraprastha Gas. Last month, Mubadala picked up a significant stake in I Squared Capital-backed roads infrastructure investment trust (InvIT) Cube Highways for around $300 million. Mubadala’s other investments in India include Tata Power Renewables, Jio Platforms, and Reliance Retail. India’s natural gas demand is growing at a CAGR of 8% and the government is trying to increase access to gas to about 70% of the population by 2025.
Oil Prices Set For The Longest Weekly Losing Streak Since November 2021
Early on Friday, oil prices extended the losses of the previous two days as concerns about the Chinese and U.S. economies continue to weigh on market sentiment, dragging prices down and on track for a fourth consecutive weekly loss. As of early morning trade in Europe, the U.S. benchmark WTI Crude had slumped again to the $70 per barrel mark, and traded at $70.57, down by 0.42% on the day, and down from this week’s high of over $73 a barrel. Brent Crude, the international benchmark, was trading down by 0.53% at $74.62. Both benchmarks were on course to book another weekly loss, despite gains in the first two trading days of this week. A fourth consecutive week of losses would mark the longest weekly losing streak for oil since November 2021. Concerns about the U.S. economy, another build in U.S. inventories, and signs of a patchy economic recovery in China have weighed on the petroleum complex this week, overshadowing signals that the United States could begin buying crude soon to fill the Strategic Petroleum Reserve (SPR). The impasse on raising the U.S. debt ceiling and a subsequent looming debt default have also dragged down prices and sentiment in the oil market. Crude oil prices were also weighed down by the Energy Information Administration (EIA) reporting on Wednesday an inventory build of 3 million barrels for the week to May 5. Later on Wednesday, U.S. inflation data showed a decline in core consumer prices. But the still sticky inflation could mean that the Fed may not start cutting rates in the near term, analysts say. Concerns about oil demand in the near future outweighed signals from U.S. Energy Secretary Jennifer Granholm that the Administration could start repurchasing crude to fill the SPR once the June sale from the SPR is completed.
Low-Quality Crude Sees Mysterious Price Rally
Middle Eastern oil producers are raising the export prices for their lower-grade crudes, Bloomberg reported earlier this week. And European buyers have no choice but to pay up—because the alternative is Russian oil, and they can’t have that. It is a curious case, as noted in another Bloomberg report on the issue, since normally, the lower the crude grade, the lower the price. Light, sweet crudes like WTI or Arab Super Light fetch higher prices from refiners because they are easier to process into fuels. Heavier crudes and crudes with higher sulfur content—sour crudes—are normally cheaper because their refining is a more complicated affair. Yet the refining business doesn’t follow this unshakeable logic. Refineries are calibrated to operate with certain types of oil, and a lot of European refineries were calibrated to operate with Russian Urals—a medium sour grade. Energy Intelligence sounded the alarm as early as last year in an article that noted that European refineries had for decades processed Urals and would have a hard time replacing it with similar crudes. Global markets were amply supplied with light sweet crudes, the report pointed out, but the supply of medium sour ones was tighter. A year later, it still is, according to the Bloomberg reports. And producers are responding the way sellers always respond when demand for their product surges. Iraq has raised the price of its Basrah Medium for European buyers to the highest in a year. Saudi Arabia also raised the price of its Arab Light, which is in fact a medium sour crude. At the same time, in what would probably seem like a cruel move to Europeans, both Iraq and Saudi Arabia kept their prices unchanged for Asian buyers—who, to be fair, normally buy a lot more oil than European refiners, and now they’re also gobbling up Russian barrels, making it unwise for the Iraqis and the Saudis to raise prices to them. In addition to the replacement game that’s going on in international oil, there is also another factor: new refineries are coming on stream in the Middle East, so local consumption of various crudes is on the rise, leaving more limited volumes for export, as Bloomberg noted in a report that said the price changes in medium sour were taking traders by surprise. Some relief for European refiners came from the U.S., whose oil exports to Europe were set to reach a record in March at around 2 million barrels daily, but the fact is that U.S. oil production consists mostly of light, sweet crudes that can’t replace Urals at European refineries. They can’t replace heavy crudes for U.S. refineries, either, hence the United States’ continued dependence on imports of oil even after it became the world’s largest producer of the commodity. This means that the market of medium sour crude grades is set for an extended period of tight supply. Until some producers decide to boost output, but they have little motivation to do it, what with the EU’s and the UK’s plans for phasing out fossil fuel consumption. With such a context for future demand, producers are unlikely to invest in a production boost. This, in turn, means fuels will be more expensive for Europeans, and that would add fuel to already high inflation. A decline in benchmark oil prices would be a welcome respite but only a temporary one. Until refiners depend on imported sour crude from producer countries that make most of their money from their oil exports, they would be made to pay as much as the producers see fit. India and China, meanwhile, have access to discount Russian crude—all grades—and also cheap Middle Eastern crude, benefiting from both Europe’s questionable international policies and from internal competition in OPEC+. The EU might want to hurry up with replacing GDP with something else before the differences between its own GDP and China’s and India’s become too glaring.
Proposed India diesel ban offers limited GHG cuts
A proposed ban by 2027 on four-wheeler diesel vehicles in Indian cities with a population of over 1mn and in highly polluted towns could make limited contribution to cutting greenhouse gas (GHG) emissions. The ban, proposed in a report by the Energy Transition Advisory Committee (Etac) of the Indian oil ministry, will not contribute to cutting emissions significantly given the continuing fall in the share of diesel vehicles in India’s total vehicle sales. The report, whose recommendations the oil ministry are yet to accept it said on 10 May, also recommends several other measures to aid India’s 2070 net zero goal, including boosting the share of electric vehicles (EVs) in the total number of vehicles, as well as a progressive switch to gasoline and biodiesel blending in transport fuels. But the fall in emissions is unlikely to come mainly from switching four-wheeler vehicles to cleaner fuels. Four-wheeler full diesel vehicle sales have been on in falling trend since at least 2014. But sales of four-wheeler full gasoline vehicles almost doubled over the same period. The share of full diesel vehicles in total vehicle sales fell to under 11pc in the April 2022-March 2023 fiscal year from just over 14pc in 2014-15, data from government portal Vahan show. The drop in the share of full diesel vehicles in total four-wheeler sales accelerated after the government deregulated fuel prices in late 2014 and ended subsidies, likely because of a narrowing spread between retail gasoline and diesel prices. Retail gasoline prices were 96.72 rupees/litre in Delhi on 9 May compared with Rs89.62/l for diesel, a difference of Rs7.10/l. Gasoline prices were Rs72.26/l in Delhi on 1 April 2014 compared with Rs55.49/l for diesel, a spread of Rs16.77/l. India also launched a national vehicle scrapping policy in August 2021, aimed at phasing out unfit and polluting vehicles. The policy deregisters privately-owned cars older than 20 years and commercial vehicles older than 15 years. Indian carbon dioxide (CO2) emissions rose to 2.7bn t in 2019, the third-highest in the world, from 900mn t in 2000. But around 1.2bn t of emissions came from the power sector in 2019 compared with only 300mn t from the road. CO2 emissions are lower in diesel engines compared with gasoline-powered vehicles. But diesel engines emit more nitrous oxide and particulate matter, controlling which increases the cost of production and discouraging auto manufacturers.