China’s Oil Imports From Iran Set To Hit Decade-High In August
China is expected to import as much as 1.5 million barrels per day (bpd) of crude oil from Iran in August, the highest since 2013, per estimates from data intelligence firm Kpler cited by Bloomberg. During the period January to July 2023, China received on average 917,000 bpd of oil from Iran, according to Kpler’s estimates. The world’s largest crude oil importer, China, has been ramping up purchases of cheaper Iranian crude this year as competition with India for cheap Russian crude supply has intensified. Earlier this year, many private Chinese refiners in the Shandong province started buying increasing volumes of Iranian crude as competition for Russian oil from China’s major state-held refiners and from Indian buyers has made Moscow’s barrels relatively more expensive. There isn’t official data on Iranian imports into China, so the market relies on tanker-tracking companies that aim to capture the true picture of how much of Iran’s oil, sanctioned by the U.S. and going to very few destinations these days, is being shipped to China. Commenting on China’s crude oil imports in July, analysts at Vortexa said last week that private Chinese refiners, the so-called teapots, are likely to boost imports of Iranian oil, especially after Russia has pledged to reduce the volume of its oil exports this month and next. “With lower Russian crude supplies, Chinese teapot refiners that largely boosted Russian grades imports since Q2 last year, are expected to lean towards the deeply discounted Iranian barrels or other heavy feedstocks, as Shandong partially re-allowed non-crude imports recently,” Emma Li, China Market Analyst at Vortexa, said. “State-run refiners, on the other hand, will likely import more crude from West Africa and the Americas, as attractive light-sweet crude margins encourage spot purchases against rising Saudi and Russian crude prices.” Meanwhile, Iran’s oil exports have recently jumped to a five-year high of 1.4 million bpd, and the Islamic Republic is looking to boost its oil production to 3.5 million bpd by the end of September.
Woodside Energy Reports Positive Progress In LNG Strike Talks
Talks between workers and LNG producers in Australia are continuing this week although there is talk of positive progress. Woodside Energy, one of the companies risking LNG supply disruptions due to potential industrial action, said negotiations with trade unions had resulted in some “positive progress”, as quoted by Reuters. On the other hand, the unions themselves have said that differences remain on some key issues, the report notes. “Positive progress is being made and the parties have reached an in-principle agreement on a number of issues that are key to the workforce,” Woodside told Reuters, adding “We continue to engage actively and constructively in the bargaining process.” Woodside and Chevron—the other company involved in negotiations—have good reason to want to speed up things. Together, the two produce a tenth of the world’s liquefied natural gas and last week the very talk about strikes led to a 40% jump in European gas prices. With 99% of workers at Woodside’s North West Shelf LNG facilities voting for industrial action a few days ago, negotiations have become even more important. The Australian labor regulator has already allowed the strike if the negotiations fail. “Woodside are well off the pace on key bargaining issues including job security and remuneration,” the Offshore Alliance trade union representing the platform workers said on social media. Chevron workers, meanwhile, are yet to vote on whether they will strike or not, which, according to the trade union, will take place next week. Meanwhile, Reuters reported that Woodside is likely to report strong first-half results thanks to the resilience in LNG prices, according to analysts. Woodside’s North West Shelf is the largest LNG production project in Australia, with a capacity of 16.9 million tons annually, followed by Chevron’s Gorgon, which has a capacity of 15.6 million tons. The Wheatstone project, also operated by Chevron, can produce 8.9 million tons of LNG annually.
India fuel sales slow due to monsoon rains, shows prelim data
Indian state retailers’ gasoline and diesel sales fell in the first half of August from the previous month and a year ago, preliminary sales data showed on Wednesday, as industrial activity and mobility was hit due to monsoon rains. Fuel demand in India, the world’s third-biggest oil importer and consumer, typically falls during the four-month monsoon season beginning in June as parts of the country are affected by heavy floods. State retailers sold 1.19 million metric tons of gasoline in the first half of August, down 5.2% from the same period in July and by 8% from a year earlier, the data showed. Gasoline, also called petrol, is primarily used in passenger vehicles. Sale of diesel, mainly used by trucks and other commercial vehicles, dipped by 9.5% from the previous month and 5.7% from a year ago to about 2.68 million tons in the first half of August, the data showed. Monsoon rains also hit demand from the agriculture sector as farmers use gasoil-fired generators for irrigation. Diesel sales of state fuel retailers were also affected due to marginally lower prices of the fuel at outlets of private refiners. Gasoil accounts for about two-fifths of India’s overall refined fuel consumption and is directly linked to industrial activity in Asia’s third-largest economy. State retailers Indian Oil Corp, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd own about 90% of the country’s retail fuel outlets. Below is a table of India’s preliminary fuel sales data with volumes in thousand tonnes: Refined Fuel Aug. 1-15 % chg from % chg % chg vs 2023 July 1-15 yr/yr 2021 Gasoline 1193.3 -5.2 -8.0 20.6 Gasoil 2677.5 -9.5 -5.7 26.0 Jet Fuel 290.3 -2.1 8.1 66.7 Liquefied 1214.2 -2.0 3.7 11.9
The Real Reason Russia Is Ramping Up Oil Production In Iraq
Russia took control of the oil sector of the semi-autonomous region of Kurdistan (KRI) in northern Iraq in 2017 for four key reasons, as analysed in depth in my new book on the new global oil market order. First, the KRI has significant oil and gas reserves. Second, its troublesome relationship with southern Iraq, governed out of Baghdad, would allow Russia to play the role of mediator between the two parts of the country, giving it leverage over both sides. Third, this leverage could then be used to extend Russia’s grip over southern Iraq too, which has even more oil and gas reserves. And fourth, it would enable Russia to stymie any efforts by the U.S. and its allies to begin to rebuild their influence in the country. This last point found further resonance after March’s resumption of relationship agreement between Iran (Iraq’s chief regional sponsor) and Saudi Arabia, brokered by China. Specifically, a source who works closely with the European Union’s energy security apparatus exclusively told OilPrice.com at the time, Iran was told by a very high-ranking official from the Kremlin that: “By keeping the West out of energy deals in Iraq – and closer to the new Iran-Saudi axis – the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise”. With the future of independent oil supplies from the KRI looking highly precarious, Russia is moving firmly into the last phases of its plan for Iraq, as highlighted by serious discussions over the past two weeks for it to increase its presence in the country’s oil fields. A litmus test for both sides in this respect is Russia finally effecting a major increase in oil production from Iraq’s supergiant West Qurna 2 oil field. This field – along with the supergiant Rumaila – was cited recently by Iraq’s Oil Ministry as being vital to the country’s plan to increase its oil production capacity to around 7 million barrels per day (bpd) in 2027. The entire West Qurna oil field, located 65 kilometres northwest of the southern port city of Basra, has total estimated recoverable oil reserves of 43 billion barrels – making it one of the very biggest oil fields in the world. West Qurna 2 has estimated recoverable oil reserves of around 13 billion barrels and, like most of the big fields in Iraq (and Iran, and Saudi Arabia), it benefits from the lowest lifting costs in the world – at just US$1-2 per barrel. The original development plan for the West Qurna 2 field was to produce 1.8 million bpd but this was amended in 2013 to a three-stage plan in which peak production would be 1.2 million bpd. Phase 1 would add around 120,000 barrels per day (bpd) to the early 30,000 bpd of production from the site’s Mishrif Formation. Phase 2 would add another 400,000 bpd from the full development of the Mishrif Formation. And Phase 3 would add another 650,000 bpd from the development of the deeper Yamama Formation. Related: Oil Prices Continue To Climb As Pace Of Drilling Continues To Slow However, it was at the time of this transition from Phase 2 to Phase 3, scheduled to start around the middle of 2017, that the trouble started from the Russian side, which is why output from the field has barely moved in years. The genesis of the trouble was that Russia’s key corporate oil proxy in Iraq at the time, Lukoil, believed the level of remuneration it was receiving per barrel drilled was too low. It was being paid US$1.15 per barrel recovered – the lowest rate being paid to any international oil company (IOC) in Iraq at that time and dwarfed by the US$5.50 per barrel being paid to GazpromNeft to develop the Badra oil field. Making matters worse for Lukoil at that point was that it had already spent at least US$8 billion in developing West Qurna 2, and compounding this grievance was the fact that Iraq’s Oil Ministry still owed it around US$6 billion in remuneration on recovered barrels and other development payments. In August 2017, a senior source who works closely with Iran’s Petroleum Ministry exclusively told OilPrice.com at the time, Lukoil was assured that Iraq’s Oil Ministry would very quickly pay the US$6 billion that it owed the company and that a higher compensation rate per barrel would be looked into as soon as was feasible. In addition, the Oil Ministry agreed to extend Lukoil’s contract period from 20 to 25 years, so lowering the average yearly cost to the Russian firm. It was also agreed that Lukoil would invest at least US$1.5 billion in West Qurna 2 in the following 12 months with a view to raising production from the 400,000-bpd level closer to the 1.2 million bpd peak production target. However, only one month later, 93% of the people of Iraq’s semi-autonomous region of Kurdistan voted in favour of complete independence from Iraq and chaos ensued, seeing Iranian forces move into the KRI, with Russian support. Only one month after that, Russia effectively took control of the region’s oil sector, and looked to put the squeeze on the Federal Government of Iraq (FGI) run out of Baghdad. As also analysed in depth in my new book on the new global oil market order, Russia looked to gain more favourable terms for its existing operations in the FGI region, and for new oil field development awards there, by interposing itself between the two sides in their ongoing dispute over the 2014 ‘budget disbursements-for-oil’ deal. Part of Russia’s manoeuvring at this point was doing nothing to increase production from West Qurna 2. Crucially for what followed, Lukoil knew back then that it was perfectly capable of producing at least 635,000 bpd on a sustained basis. According to the Iran source, the Russian oil firm had hit 650,000 bpd production over extended periods in August and September 2017, and its engineers had assured senior management that 635,000-bpd
India makes first crude oil payment to UAE in local currency
India and the United Arab Emirates have initiated a paradigm shift in their bilateral trade dynamics by instituting transactions denominated in their respective domestic currencies. Notably, India’s leading petroleum refiner, Indian Oil Corp, recently concluded a transaction wherein it conducted payment in rupees for the procurement of one million barrels of oil from the Middle Eastern nation. This pivotal move underscores a pivotal shift in trade modalities and was executed through a payment to the Abu Dhabi National Oil Company (ADNOC), as confirmed by an official statement from the Indian embassy in the UAE. This reflects India’s endeavor to leverage its trade landscape by reducing reliance on the dollar and consequently streamlining transactional intricacies
Angola LNG offers September cargo
State-owned Angola LNG is offering a cargo for delivery over 29 August to 26 September for loading from its 5.2mn t/yr Soyo liquefaction facility, through a tender closing on 16 August. The cargo is being offered on a des basis to various destinations within the Atlantic basin, Europe, Indonesia, Malaysia, Singapore and Thailand. It can be delivered to Bangladesh, India and Pakistan over 5-20 September. The firm was last in the market to offer a cargo for 29 August to 17 September delivery from its Soyo liquefaction facility, and the tender closed on 9 August. Results of the tender remain unclear. This is Angola’s third tender this month, which could alleviate potential tight supply in Asia-Pacific. Industrial action could impact Chevron’s 15.6mn t/yr Gorgon and Wheatstone LNG facilities in Australia as well as the Woodside-operated 4.9mn t/yr Pluto and 16.3mn t/yr North West Shelf (NWS). The strike might take place sometime in September should it go ahead, potentially impacting production during that month, which could tighten supply and lead to higher offers. Pockets of prompt demand have continued to emerge in south Asia. Indian major importer Gail is seeking a cargo for delivery over 5-10 September through a tender closing on 16 August. Fellow state-owned IOC withdrew its tender for 15-25 September delivery, due on 11 August, as a result of market volatility. The front half-month of the ANEA, the Argus assessment for spot LNG deliveries to northeast Asia, stood at $11.495/mn Btu on 14 August, 85¢/mn Btu higher than a week earlier. The Argus-assessed price for deliveries to India and the Middle East was at $10.95/mn Btu for the front-half month on 14 August, 51¢/mn Btu higher than a week earlier.
India’s imports from Russia doubled to $20.45 bn in April-July period
India’s imports from Russia doubled to USD 20.45 billion during the April-July period of this fiscal due to increasing inbound shipments of crude oil and fertiliser from that country, according to the commerce ministry data. With this, Russia has become India’s second largest import source during the first four months of this fiscal The imports were USD 10.42 billion during April-July 2022. From a market share of less than 1 per cent in India’s import basket before the start of the Russia-Ukraine conflict, Russia’s share of India’s oil imports rose to over 40 per cent India, the world’s third-largest crude importer after China and the United States, has been buying Russian oil that was available at a discount after some in the West shunned it as a means of punishing Moscow for the invasion of Ukraine. The ministry’s data showed that imports from China dipped to USD 32.7 billion during the April-July period as against USD 34.55 billion in the same period last year. Similarly, imports from the US declined to USD 14.23 billion during the period under review from USD 17.16 billion in April-July 2022. The imports from UAE too contracted to USD 13.39 billion during April-July 2023 as against USD 18.45 billion in the same period last year. On the export front, India’s exports to seven of its top 10 destinations have recorded a negative growth rate during the period.
India hikes windfall tax on crude petroleum to Rs 7,100 per tonne
The Indian government on Monday increased the windfall tax on crude petroleum to Rs 7,100 per tonne from Rs 4,250 per tonne with effect from August 15, according to the notification of Finance Ministry Along with crude petroleum, Special Additional Excise Duty (SAED) on diesel will also see a rise. It will be hiked to Rs 5.50 per litre from Re 1 per litre at present, said the notification The notification further stated that a duty of Rs 2 per litre will be imposed on jet fuel or ATF with effect from August 15. Currently, there is no SAED on the jet fuel. SAED on petrol will remain zero, just like the last time windfall tax was hiked.