Oil Prices Headed For Weekly Loss Despite Saudi Arabia’s Production Cut
Crude oil was heading for the second week of losses in a row despite the additional production cut Saudi Arabia announced at last Sunday’s OPEC+ meeting. In morning trade in Asia today, Brent crude was changing hands for less than $76 per barrel and West Texas Intermediate was trading at below $71. Both were down from close on Thursday. It appears that traders are still more concerned about oil demand than they are about the adequacy of supply. With news like Germany’s and the eurozone’s recession, a decline in Chinese manufacturing activity instead of continued expansion, and shrinking manufacturing activity in the U.S., demand worry is quite justified. Even the possibility that the Federal Reserve might not announce another rate hike at its next meeting on June 13-14 did nothing to change the dominant sentiment on the oil market. Earlier this week, these new developments prompted Energy Aspects to revise its forecast for oil prices, slashing them by $15 for the second half of the year. As reasons for the revision, the consultancy cited higher interest rates, the inclusion of a U.S. crude into the Brent basket, and the supply differences in sour and sweet crudes. According to Energy Aspects, OPEC is reducing the production of predominantly sour crudes, while Brazil and the United States are expanding the production of sweet crudes that make up both the Brent crude and WTI benchmarks. One additional factor that affected prices this week specifically was a news report that the U.S. and Iran were close to reaching a deal on sanctions and Iran’s nuclear program. Both sides promptly denied the report, which stopped the oil price slide but did not reverse it. There are some expectations that with the start of summer driving season in the U.S. prices will start climbing higher again but any climb could be tempered by demand indications from China.
India to dominate polyvinyl chloride capacity additions in Asia by 2027, says GlobalData
India is set to register the highest polyvinyl chloride capacity additions in Asia, contributing about 49% of the region’s capacity additions by 2027, according to GlobalData, a leading data and analytics company. GlobalData’s latest report, ‘Polyvinyl Chloride Industry Installed Capacity and Capital Expenditure (CapEx) Forecast by Region and Countries including details of All Active Plants, Planned and Announced Projects, 2023-2027’ reveals that India leads with the largest capacity additions, with a capacity of 3.79 million tonnes per annum (mtpa) from six planned and announced projects. Increased application of polyvinyl chloride in the construction, agriculture and packaging industries is expected to result in a growth in demand for polyvinyl chloride in India. Nivedita Roy, Oil and Gas Analyst at GlobalData, comments: “In India, the main capacity addition will be from a planned project, Mundra Petrochem Mundra PVC Plant, with a capacity of 2 mtpa. It is expected to commence production of polyvinyl chloride in 2026.” Reliance Industries Dahej PVC Plant 2, a planned project follows next with second highest capacity addition of 1.20 mtpa. The plant is expected to commence operations by 2026. Nivedita concludes: “Chemplast Sanmar Cuddalore PVC Plant, a planned project is the third highest contributor in terms of capacity additions in the country, accounting a capacity of 0.30 mtpa. The plant is expected to commence production of polyvinyl chloride in 2023.”
Petronas to pick 49% in ReNew project
Energy Global PLC on Wednesday said it has entered into a partnership with Petroliam Nasional Bhd, Malaysia’s state-run oil and gas company. As part of the collaboration, Gentari Sdn Bhd, a subsidiary of Petronas, will acquire a 49% equity stake in NASDAQ listed ReNew’s 403 megawatt (MW) peak power project. First reported by Mint on 8 August 2022, the deal is part of Petronas’ plans to back green energy projects in India by tying up with ReNew at the project level. The move reflects a broader trend of global oil companies, including industry leaders like Shell Plc, Total, and Thailand’s PTT Group, establishing a significant presence in the burgeoning green energy sector in India. As the hydrocarbon sector faces disruptions, other major players, such as Eni SpA from Italy, Statoil ASA from Norway and Russia’s Rosneft are also exploring opportunities in the green energy space. “On 31 May, ReNew entered a partnership with PETRONAS’ clean energy subsidiary Gentari, , which will purchase a 49% equity stake in ReNew’s 403 MW Peak Power project. As a part of the partnership ReNew will invest approximately ₹3,130 million (~$38 million) for its 51% stake in the project and through its affiliates will undertake EPC, O&M, and project management for the project,” ReNew said in a statement, while announcing its Q4 FY23 results. In June 2022, Petronas set up Gentari Sdn Bhd, to accelerate adoption of clean energy and build a renewable energy capacity of 40GW. It plans to supply 1.2 metric tonnes per annum (mtpa) of green hydrogen and establish electric vehicle (EV) charging points across the Asia Pacific, with a focus on Malaysia and India.
Falling global crude prices won’t reduce your petrol, diesel bills anytime soon. Here’s why
Despite a consistent fall in global crude prices, which went through the roof after the start of the Russia-Ukraine war last year, common consumers will have to wait for a drop in petrol and diesel prices in India. Though margins on petrol and diesel have turned positive for the oil marketing companies following the softening of international oil prices, they would require more time to recover their losses accumulated due to high crude prices last year. As far as a revision in oil retail prices is concerned, it may happen only after state-owned oil firms recoup losses they incurred last year, PTI reported, quoting officials. State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have temporarily abandoned the daily price revision since last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are now being recouped with rates dropping. Officials said the three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year, but diesel, which accounts for the bulk of the fuel sales, had been in red. But last month, margins on diesel turned positive with a small 50 paise a litre profit, they said, adding, this, however, was not enough to make up for the past losses. International oil prices had spiked to USD 139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They have since cooled to USD 75-76. At peak, oil firms lost Rs 17.4 per litre on petrol and Rs 27.7 a litre on diesel. In the October-December quarter, oil firms earned Rs 10 a litre margin on petrol but lost Rs 6.5 on diesel. In the following quarter, the margins on petrol moderated to Rs 6.8 a litre while diesel earned Rs 0.5 per litre. Officials said besides past losses, oil companies want to see if the drop in oil prices will last. “I guess they will watch for the prices for one more quarter (April to June) before deciding to restart fuel price revision,” an official said. Holding prices when input cost was higher than retail selling prices led to the three firms posting net earnings loss. They posted a combined net loss of Rs 21,201.18 crore during April-September despite accounting for Rs 22,000 crore announced but not paid LPG subsidy. International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 — climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85 per cent dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic. So, the three fuel retailers, who control roughly 90 per cent of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices. The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 per litre increase in taxes on petrol and diesel effected during the pandemic. That followed the current price freeze that began on April 6, which still continues.