Goldman Sachs Sees Oil Prices Rising On Record Demand
Oil prices are set to rise to $86 per barrel at year-end, from $80 now, as record-high oil demand and lowered supply will lead to a large market deficit. “We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high,” Daan Struyven, head of oil research at Goldman Sachs, told CNBC’s “Squawk Box Asia” program on Monday. While demand is set for a record high this summer, supply is shrinking. The production and export cuts from OPEC+ and the slowdown in U.S. oil production growth will also play a part in large deficits in the third quarter this year. According to Goldman’s Struyven, “We expect U.S. crude supply growth to slow down pretty significantly to a sequential pace of just 200 barrels per day from here.” The total rig U.S. count fell to 669 last week, according to Baker Hughes data on Friday. So far this year, Baker Hughes has estimated a loss of more than 100 active drilling rigs. Last week’s count is also 406 fewer rigs than the rig count at the beginning of 2019, prior to the pandemic. Also last week, oilfield services giants Halliburton and Baker Hughes both signaled softer demand for drilling on the North American market. At the same time, there is already evidence of lower supply from OPEC+. Russian crude oil exports have shown signs of decline for a second consecutive week and are estimated to have sunk to a six-month low in the four weeks to July 16. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month. Saudi Arabia’s crude oil exports have also started to decline, to below 7 million bpd in May, for the first time in many months. Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August.
Russia Is Losing The Energy Battle
“Russia has lost the energy battle,” Fatih Birol, Executive Director of the International Energy Agency (IEA), told French newspaper Liberation in March, a year after Russia invaded Ukraine. In the year and a half since Putin ordered troops into Ukraine and cut off natural gas supply via pipeline to many EU customers, Europe has managed to replace much of the piped gas with LNG imports, and has banned imports of Russian crude and petroleum products. The U.S. has stepped up to fill part of the oil and gas supply gap left by Russia. It was quite a gap, and American oil producers and exporters of LNG have been happy to fill it. “Trade flows have been turned on their head with Middle East and the US exporters the key beneficiaries,” Amrita Sen, head of research at consultancy Energy Aspects, told the Financial Times. Russia Loses European Energy Market Since the invasion of Ukraine, Russia has lost Europe as an energy customer and is now reduced to China and India for selling its crude oil. China and India are the world’s largest and third-largest crude oil importers, respectively, so the potential Chinese and Indian markets for Russian crude are huge. However, we may have already seen peak Indian crude oil imports from Russia, analysts say. Europe, for its part, is buying more oil and gas from the United States and is signing long-term LNG supply deals with U.S. exporters—deals that were not so ‘welcome’ in Europe just two years ago when climate goals were top of developed nations’ energy priorities. Russian gas is neither sanctioned nor embargoed anywhere, but some buyers in North Asia may have become wary of depending on Russian LNG too much. Before the war and the embargoes on its oil, Russia accounted for nearly 40% of all European imports of crude, refined products, and natural gas. Currently, the EU doesn’t import Russian crude, except Bulgaria, due to an EU derogation until 2024. Natural gas supply via pipelines from Russia now accounts for less than 10% of the EU’s gas supply, down from nearly 40% before the Russian invasion of Ukraine. Europe’s single biggest gas supplier now is Western Europe’s top oil and gas producer Norway, a close EU ally and a founding member of NATO. Some Asian Customers May Be Nearing Limits For Russia’s Energy As Europe is shifting away from Russian fossil fuels, Asian customers China and India have become the key customers of Russia’s crude. India’s oil imports from Russia continued to surge in the first half of 2023 as cheaper Russian crude exports find more and more buyers in the world’s third-largest crude oil importer. More than a year since the war began, India has turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo. But India may have seen the peak crude imports of Russian crude, due to infrastructure constraints and the need to keep good trade relations with other crude oil suppliers, according to analysts at Kpler. “India will look to continue Russian crude imports, but perhaps it has reached its limit, hampering any additional barrels,” Janiv Shah, senior analyst at Rystad Energy, told CNBC this week. In natural gas, Asia looks to have limited spot purchases of Russia’s LNG, as major buyers in North Asia are estimated to have slashed imports from Russian export projects to the lowest in two years. Buyers are looking to diversify and avoid potential future problems with payments and deliveries, according to Bloomberg. U.S. Oil And Gas Exporters Win As buyers in Europe retreated from Russian oil, U.S. crude oil exports to Europe rose and are expected to continue rising. Last year, Europe ranked a close second after Asia in terms of U.S. crude oil purchases. European imports of crude from the United States averaged 1.51 million barrels per day (bpd) in 2022, accounting for 42% of American crude exports, just shy of the 43% of U.S. exports that went to Asia, per EIA data. “EU sanctions implemented in December 2022 that prohibit all seaborne imports of Russia’s oil to Europe make it likely that demand for U.S. crude oil will continue in 2023,” the EIA said earlier this year. “The US came out ahead with rising oil and gas exports and a new multibillion congressionally mandated plan to win in clean tech,” Amy Myers Jaffe, a New York University research professor and energy expert, told FT. In the LNG market, Europe and China are in an intensifying competition to sign long-term supply deals with U.S. LNG developers and exporters. Long-term LNG contracting has seen a flurry of deals in recent months, including from buyers in Europe, where energy security has taken center stage at the expense of concerns about emissions from natural gas imports. For the U.S. LNG developers and exporters, more long-term purchase deals with Europe – and Asia – mean more chances for projects to contract future volumes from planned export facilities and underpin financing and final investment decisions for a greater number of U.S. LNG export terminals.
VOC Port allots land to ACME for green hydrogen plant
V O Chidambaranar Port Authority, the state-owned entity that runs the port at Thoothukudi in Tamil Nadu, has issued a letter of intent to ACME Cleantech Solutions Pvt Ltd to lease 222.79 acres of port land for setting up a green hydrogen and green ammonia project with an investment of Rs 52,474 billion. V O Chidambaranar Port has become the first port in India to allocate land for production and export of green hydrogen. The land will be leased on annual rentals set by the port authority for 30 years, government sources said. V O C Port Authority has also leased 10 acres of land to ReNew Power Ltd for storage and export of green hydrogen and ammonia. The ACME plant will produce 3,000 tonnes per day of hydrogen. ACME and ReNew Power were among 25 entities that responded to an expression of interest issued by V O C Port Authority to set up green hydrogen and green ammonia projects on port land.
Pakistan to import 100,000 tonnes of Russian oil every month
In a bid to ensure cheap energy in the country, the government will import 100,000 tons of Russian crude oil every month. The Minister of State for Petroleum, Dr Musadik Malik, while talking to reporters here on Saturday said that the government is making all-out efforts to ensure the supply of cheap energy in the country. He said Russian crude oil is cheaper than other oils in the global market. The State Minister said that the government is expected to sign an agreement with Azerbaijan to buy cheap LNG very soon. He said that the deal to buy cheap LNG would be made, keeping in mind the local demand and condition of the country’s foreign exchange reserves. He also announced that private sector is allowed to purchase cheap LNG for their industry. However, he made it clear that the private sector will not be allowed to resale the cheap LNG. He said an agreement with Saudi Arabia for setting up oil refinery in Pakistan with the estimated investment of $10 billion is also expected soon.
Domestic crude oil production at 2.4 MMT in June, import bill declines to $9.5 billion YoY: PPAC
India produced a total of 2.43 million metric tonnes (MMT) of crude oil in June 2023, compared to the same level of 2.4 MMT reported in the year-ago period, according to Petroleum Planning & Analysis Cell (PPAC). Out of 2.5 MMT, Oil and Natural Gas Corporation (ONGC) produced 1.6 MMT of crude oil while Oil India Limited (OIL) and private sector producers contributed 0.27 MMT and 0.56 MMT, data released by the Oil Ministry showed. Crude oil imports increased by 0.6 per cent and decreased by 1.2 per cent during June 2023 and April-May 2023 respectively, compared to the corresponding period of the previous year. The net import bill for oil and gas was $9.5 billion in June 2023 compared to $13 billion in June 2022, according to PPAC. Out of this, the crude oil imports constitutes $10 billion, liquified natural gas (LNG) imports stood at $1.4 billion and the exports were $3.5 billion during June 2023, the data showed. During June 2023, the Indian basket crude price averaged $74.93 per barrel as against $74.98 per barrel during May 2023 and $116.01 per barrel during June 2022. The price of Brent Crude averaged $74.70/bbl during June 2023 as against $75.55/bbl during May 2023 and $123.70/bbl during June 2022. The production of petroleum products came in 23.1 MMT during June 2023 which is 4.6 per cent higher than June 2022, where 22.8 MMT was from refinery production and 0.3 MMT was from fractionator. On the other hand, natural gas consumption (including internal consumption) for June 2023 stood at 5,066 MMSCM (million metric standard cubic meters), which was 1.2 per cent lower than the corresponding month of the previous year, according to the official data. The cumulative natural gas consumption for the current financial year till June 2023 stood at 15,943 MMSCM, which was higher by 1.2 per cent compared with the corresponding period of the previous year. In addition, LNG import for June 2023 was 2,221 MMSCM which was 1.6 per cent lower than the corresponding month of the previous year. The cumulative import of 7,590(P) MMSCM for the current financial year till June 2023 was higher by 4.4 per cent compared with the corresponding period of the previous year. India is dependent on imports to meet over 85 per cent of its crude oil requirements and around 50 per cent of its natural gas requirements.