Money Manager Sees $120 Oil Surprising Bears
Crude oil prices could be on track to hit $100 and even $120 per barrel, which calls for aggressive buying moves into the oil market now, Cole Smead, president and portfolio manager at Smead Capital Management, told BBN Bloomberg on Wednesday. China’s underwhelming economic performance is as bad as it gets and still, oil prices have not fallen apart, Smead told BBN Bloomberg, arguing about his commodity strategy. The weakness in China’s economy is not driving oil prices currently. The crucial factor for oil is the ongoing supply cuts, he added. The supply side calls for faster price moves higher than the market has been probably expecting, according to Smead. “There should be money being thrown around trying to take advantages because if we wait back to a $100 or $120 a barrel, I think people are going to feel ‘Gosh, I really missed that,” he told BBN Bloomberg. So far this year, concerns about China’s economy have stopped any sustained oil price rallies in their tracks. The chances of a ‘soft landing’ in the United States have increased, analysts and the Fed say, but concerns continue about the need of more Fed hikes to fight inflation. The Chinese weakness has made the market take a wait-and-see approach to find if China’s policies to revive its real estate sector and consumer confidence are yielding results. Market participants expect additional stimulus and other measures from China to put its economic growth and industrial production on track to meet the authorities’ 2023 targets. At the same time, the supply cuts from the OPEC+ alliance have started to tighten the market, analysts say. The cuts from OPEC+ and Saudi Arabia, coupled with expected continued strength in demand, are set to result in inventory draws for the rest of the year, supporting oil prices, according to analysts and forecasting agencies.
India’s diesel shipments to Singapore reached record highs in August, while those to Europe decreased
Due to lower freight costs and low inventory levels in the Asian oil hub, India’s diesel shipments to Singapore are expected to reach a 19-month high in August and surpass 330,000 metric tonnes, according to traders and experts. On the other hand, while shipments to the east are more profitable, the nation’s petroleum exports to Europe for August are anticipated to drop to their lowest levels this year, according to one ship tracker, although that condition may not persist. As a result of the increase in Indian diesel exports to Singapore, which will partially offset the decline in exports from refiners in northeast Asia, particularly China, the region’s high refining margins will be capped. In contrast, the decrease in imports from the South Asian country will help to strengthen the margins of European refiners. According to shiptracking data from Refinitiv, Vortexa, and Kpler, India is on schedule to send Singapore between 330,000 and 439,000 tonnes of diesel in August. Serena Huang, the head of Asia-Pacific analysis at Vortexa, said that the volume is at its highest level since January 2022. “The seasonal lull in India’s gasoline and diesel domestic demand due to the monsoon has seen the country raising its clean product exports for August to date,” she said, referring to refined products such as diesel, jet fuel, and gasoline. According to statistics from Sparta Commodities, freight rates for the India-Singapore route were around $21 per tonne less expensive than those for the India-northwest Europe route in July, down from $14 per tonne in mid-July, making it more profitable for sellers to transport cargoes east.
PNGRB re-evaluating performance bank guarantee rule
The Petroleum and Natural Gas Regulatory Board (PNGRB) is re-evaluating a rule on performance bank guarantees for city gas companies that has benefited the likes of Adani Gas, Indian Oil and GAIL. The current rule allows the downstream regulator to reduce the performance bank guarantees (PBG) required of city gas licensees to 40% of the initial amount after they have completed their minimum work programme (MWP). Recently, PNGRB allowed a reduction in the PBG by GAIL Gas Ltd and Indian Oil Adani Gas Pvt Ltd after the two entities completed their MWP in their respective licensed areas of Bengaluru and Daman. After having allowed some city gas companies to benefit from this rule, the regulator is now having a rethink as several companies, which have completed MWP, have queued up with their requests for PBG reduction, according to people familiar with the matter. “A differentiated approach is needed,” a source close to PNGRB said. Companies that have submitted high-value performance bonds need some relief as their increased financial cost could escalate cost for gas consumers, he said, adding that the companies that have submitted small amounts of PBG do not have a strong case for relief. “How will PNGRB enforce the licensing rules for the rest of the contract period if their PBG is reduced to a very small amount?” he added.
GAIL eyes stake in US LNG projects
GAIL is scouting for a stake in LNG (liquefied natural gas) projects in the US and long-term supply deals as the state-run utility expects gas transmission volumes to rise on the back of expanding pipeline network. The company also plans to spend Rs 300 billion in the next three years on expanding its pipelines, city gas network and petrochemicals capacity, chairman Sandeep Kumar Gupta told shareholders on Wednesday. GAIL has teamed up with Greenline, a company backed by Essar group’s venture capital arm Exponentia Ventures, which is pioneering use of LNG for fuel line heavy-duty commercial vehicles. The company has issued EoI (expression of interest) for equity in LNG liquefaction terminal along with about a million tonne per annum from the US, Gupta said, adding talks are on with major suppliers for long-term contracts. Simultaneously, GAIL is connecting gas from new fields and upcoming LNG import terminals into its pipeline network.