Oil prices rise as supply concerns outweigh demand fears
Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global oil supply outweighed fears that further possible U.S. interest rate hikes could dent fuel demand, but they were still headed for a weekly loss in four. Brent futures for climbed 21 cents, or 0.2%, to $93.51 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude (WTI) futures gained 23 cents, or 0.3%, to $89.86. Both benchmarks were on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply as the Organization of the Petroleum Exporting Countries and allies (OPEC+) maintain production cuts. “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd. “Going forward, investors will focus on whether the OPEC+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand,” he said, predicting WTI to trade in a range of around $90-$95. Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilise the domestic fuel market, the government said on Thursday. The shortfall, which will force Russia’s fuel buyers to shop elsewhere, caused heating oil futures Hoc1 to rise by nearly 5% on Thursday. The U.S. Federal Reserve on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end. That buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the U.S. dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies. The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.
India’s LNG imports rose in August
India’s liquefied natural gas (LNG) imports rose in August compared to the same month last year, according to the preliminary data from the oil ministry’s Petroleum Planning and Analysis Cell. The country imported 2.23 billion cubic meters, or about 1.7 million tonnes of LNG, in August, a rise of 10.1 percent compared to the same month in 2022, PPAC said. During April-August, India took 12.21 bcm of LNG, or some 9.3 million tonnes, up by 3.5 percent, PPAC said. India paid $1.3 billion for August LNG imports, down from $1.5 billion last year, while costs dropped from $8 billion in the April-August period last year to $6 billion during the same five months this year, it said. As per India’s natural gas production, it reached 3.16 bcm, up by 9.3 percent compared to the corresponding month of the previous year. During April-August, gas production rose by 3.6 percent to 14.85 bcm, PPAC said. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. India’s Adani and France’s TotalEnergies started supplying natural gas in April to the grid from their 5 mtpa Dhamra LNG import facility located in Odisha, on India’s east coast. During April-August, Petronet LNG’s 17.5 mtpa Dahej terminal operated at 93.4 percent capacity, while Shell’s 5 mtpa Hazira terminal operated at 36 percent capacity, PPAC said. The Dhamra LNG terminal operated at 18.9 percent capacity, it said.
Sizzling oil worldwide, rising worries in India
The ghost of rising oil prices is back to haunt the economy. Brent crude oil prices are now hovering around $96 per barrel, up more than 30% since 31 May. The recent upward pressure on oil prices is primarily led by supply-side concerns, with Saudi Arabia and Russia deciding to extend their voluntary output cuts till the end of December. When oil prices rise, India tends to feel the heat as we import most of our oil requirements. Costlier oil pushes up the oil import bill, which ultimately weighs on the country’s current account deficit. But note that other Asian economies are also vulnerable to rising oil prices. “Within Asia, India, Thailand and the Philippines appear more vulnerable to higher oil prices,” said a Nomura Global Markets Research report dated 15 September.
Energy transition in uncharted waters: Panel
Oil India intends to remain focused on oil and natural gas, with the revenue from those sectors supporting the pursuit of other energy sources, Oil India chairman and managing director Ranjit Rath said on a panel today at the conference in Calgary, Alberta. “We would always look for more and more energy,” Rath said. “Biofuel will actually be a major, major game changer as far as the transition is concerned.” Brazil, which is a net exporter of oil but a net importer of fuel, has focused on the development of its biofuel industry, Brazilian oil and gas regulator ANP director general Rodolfo Saboia said. “If you ride a car on ethanol in Brazil, you would have a smaller footprint than riding an electric car which is moved by the energy matrix in Europe,” Saboia said. “This shows how important a role biofuels have to play during the energy transition.” Natural gas will be the fossil fuel of choice in the transition, according to Saboia, as Brazil strives to develop that market. Rath agreed with that assessment. “At the end of the day, you would like to have more natural gas as part of your primary energy basket,” Rath said, even as his company pursues partnerships to develop biofuels, green hydrogen and critical minerals. “So, there will be a strong focus on exploration and production.” Saboia’s organization regulates everything from the well to the retail fuel station and is keeping an eye on what policy-makers might do with the challenges they face. How the transition is managed could be quickly disrupted by technological advances, such as biofuels and synthetic fuels for internal combustion engines, Saboia said. “We are sailing in uncharted waters right now, so to articulate policies that might lead to a reasonable and effective way of addressing the energy transition is not a clear scenario,” said Saboia. “It’s always hazy.” With so many unanswered questions, the role of government and interactions between countries striving to find solutions will be critical, he said