Oil Prices Set For Their Sharpest Weekly Drop In Six Months
Crude oil prices were set to record their sharpest weekly decline since March, pressured by demand concerns despite OPEC+’s decision to continue constraining supply. Since the start of the week, Brent crude has shed close to 12% and West Texas Intermediate has declined by almost 9%. The crash, which seemed to be sparked by the EIA’s report of weak U.S. gasoline demand, led to a rapid change in market sentiment. The decline was also tied to a bond market selloff that sparked worry about the prospects of the global economy and, by extension, oil demand. “Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries,” Reuters quoted OANDA senior analyst Edward Moya as saying. Meanwhile, inflation in the United States has continued to take its toll on consumer spending, including on fuels, Bloomberg noted in its latest report on prices. “The decline in gasoline demand is unsurprising as inflation’s erosion on household budgets comes home to roost,” Mizuho Bank analyst Vishnu Varathan told the news outlet in comments on the latest gasoline consumption data out of the U.S., which showed a marked weakening. The EIA reported on Wednesday that gasoline inventories had added 6.5 million barrels in the last week of September, which was the largest inventory build since January 2022, ING said in a note, which also highlighted the fact this was the weakest week for gasoline demand in the U.S. since the early 2000s. More sharp swings in oil prices are possible later today after the Bureau of Labor Statistics releases the jobs report for September. If the labor market remains tight, it would fuel expectations of more rate hikes, which would weigh further on crude oil. Next week, all eyes will be on the latest inflation data from the U.S. and economic updates from China. With the latest OPEC+ meeting now behind us, economic concerns have undoubtedly become the primary concern of traders, even as the market remains tight.
India turns a deaf ear to West for paying Russia more for its own gains
A resurgent, pricier Brent Crude means India is lapping up more Russian oil, despite the latter trading well above the Western price cap of $60. A fragile global economy is worryingly staring at the prospects of a recession, and analysts say there is more tightness ahead in the oil market. And India, the third-biggest buyer of oil, cannot afford that. Indian oil minister Hardeep Singh Puri said on October 3 that India will not buy Russian oil if it breaches the Western cap. In December, the Group of 7 countries and various others implemented a maximum price of $60 per barrel for Russian crude oil. While buyers can pay more, they would lose access to essential services provided like insurance by companies in the countries that signed the agreement. The objective was to ensure the continuous flow of Russian oil while also reducing the Kremlin’s revenue by pressuring it to accept reduced prices. ET reported recently that with China seeing a lower intake of Russian oil, Indian refiners bought more of the Russian supply. India is currently buying Russian oil at nearly $80 per barrel, around $20 above the G7-imposed price cap. Russia supplied 1.57 million barrels per day in September, up from 1.44 mbd in August, and increased its share in Indian crude imports to 38 per cent from 33 per cent a month earlier, according to energy cargo tracker Vortexa. Expensive, but still cheaper India has long argued that since it is a matter of energy security, it would purchase any oil that is cheaper, a stance it has relied on ever since it upped its reliance on Russia for oil. Since mid-July, Russia’s primary export grade Urals, has been trading at levels exceeding the Western price limit of $60 per barrel due to production reductions implemented by Organization of Petroleum Exporting Countries and its allies led by Russia, known as OPEC+. Reports say that production cuts mean discounts on Urals have narrowed, yet make for a better proposition given the expensive alternatives. Brent crude prices went up to $95 a barrel in recent weeks, a rise of about 27 per cent since the end of June. India, like many other developing nations has made its dismay clear. Puri has long called for OPEC+ to consider how their policies affect oil-consuming countries. “The opening position with any producing country – they will tell you, ‘we don’t deal with prices,’ to which my response is that: if you deal with the amount of energy that you release – or stocks that you release – you may not want to, but you do affect prices.” Despite the deep squeeze in the oil market, “OPEC+ has the right policy,” news agency Bloomberg quoted United Arab Emirates Energy Minister Suhail al Mazrouei as saying on Monday. Saudi Arabia said on Wednesday it will keep its extra 1 million bpd production cut in place until the end of 2023, while Russia said separately it will maintain its reduction of 300,000 bpd until the end of December, thereby tightening the market further. A costlier brent: calamity The global economy has remained wary of a probable recession of late due to geopolitical developments and monetary tightening. Furthermore, a resurgent crude could make central bankers’ jobs even more difficult, something that the Reserve Bank of India recognises. The Rupee has been losing its value against the dollar steadily. Reports say that when it comes to the Rupee, oil is even more expensive than when it hit $150 a beryl in 2008. If the Brent were to get any more expensive, the dollar would lead to a rise in the USD, making RBI’s fight against inflation tougher. For most of 2022 and 2023, India has bought Russian oil at heavy discounts. But those discounts have now weakened. Reports say that Russian flagship Urals crude was selling at around $40 barrels below Brent. Ural is now selling at around just $10 under. For RBI Governor Shaktikanta Das & co, the situation is already getting a tad complex. A stronger dollar could also lead to demand destruction, something that the Indian officials have alluded to. “High prices lead to demand destruction,” Pankaj Jain, secretary at the Ministry of Petroleum and Natural Gas said in an interview recently. “Our viewpoint is we are finding these prices difficult to pass, difficult to continue to meet our energy needs. Higher Brent impacts India’s current account deficit (CAD) as well. Since large payments have to be made in dollars to buy crude, the rupee takes a hit vis-a-vis the US dollar. According to recent data from the RBI, India’s CAD increased significantly, soaring seven times to reach $9.2 billion during the April-June quarter. This is a substantial rise from the previous quarter, which recorded a CAD of $1.3 billion. The ongoing rise in oil prices and a decrease in global market demand, which has led to a slowdown in exports, are anticipated to affect India’s fiscal math further.
IndianOil GPS Renewables Partners To Setup Compressed Biogas Plant
GPS Renewables, a Bengaluru-based biofuels technology Company, has entered into a strategic partnership with the Indian Oil Corporation (IOCL) to set up Compressed Biogas Plants (CBG Plants). Under the agreement, subject to approval from NITI Aayog and DIPAM, both entities would have a 50:50 equity stake in the proposed joint venture. GPS Renewables, through its project development arm GPSR Arya, aims to expand BioFuel projects across India. Currently, GPSR is incubating projects nationwide, with a particular focus on the northeast and southern states, where biogas projects are less prevalent. From incubating one of India’s largest biogas plants in Indore to becoming a leading name in the industry, this partnership with IOCL signifies a significant step forward. Speaking on the partnership, Mainak Chakraborty, CEO and Co-Founder of GPS Renewables, said, “This proposed joint venture with Indian Oil Corporation is a significant milestone in our commitment to advancing biofuel technology. Together, we aim to accelerate the deployment of Compressed Biogas Plants across the country, bringing us closer to a greener, more sustainable future. We look forward to working hand in hand with IOCL to swiftly establish multiple projects, demonstrating the maturity of the biogas sector.”
Russia’s diesel export curbs can be a windfall for India
The diesel export ban by Russia opened a unique opportunity for India to shore up export revenues in times of falling global merchandise trade and rising crude oil prices. The benefit may be felt in managing the current account deficit, which was 1.1 percent in June and was expected to be wider. The export of refined petroleum products at a premium may help arrest the trend. Bloomberg reported on September 30 that “Russia plans to reduce diesel exports from its key western ports to almost nothing next month (October)”. Notably, October is the peak winter stocking period which lasts up to the first or second week of November. The ban came on the back of a cut in crude production by the Organisation of the Petroleum Exporting Countries (OPEC) in July. Crude prices (WTI) last reached a decadal high of nearly $116 a barrel on June 6, 2022. However, it failed to hold the peak and declined steadily to settle at around $70 a barrel during the June quarter of this fiscal. India played a crucial role in bringing down the prices in 2022 by buying Russian crude at a deep discount, ignoring the US sanction. Elevated Prices The situation has been in reverse gear lately. Firstly, the reopening of China (after prolonged Covid lockdowns) and fast growth in India increased the oil demand. The discount on Russian crude was reduced dramatically. The production cut by OPEC made the market tighter. Crude is now nearing the $100 a barrel mark.
Hydrogen buses can pave the way for energy security in India’s heavy-duty mobility sector
India aspires to be energy-independent by 2047, the centenary year of its freedom. This entails a promising multiple fuels policy and ambitious targets for electric vehicles as well as ethanol blending in petrol and biodiesel. The recent launch of hydrogen buses or Fuel Cell Electric Vehicles (FCEVs) by Union Minister Hardeep Singh Puri further strengthens India’s vision of energy security. In order to achieve the net-zero target by 2070, almost 95 per cent of road freight must move to electric and/or hydrogen. In this article, we calculate the potential of hydrogen in India’s mobility sector and how it can learn from the electric vehicle (EV) roll-out. Not just India, but the world is also rapidly experimenting with hydrogen in mobility. Europe is planning 1,200 hydrogen buses and 150 hydrogen trucks by 2025 under various schemes. In Asia, China is leading deployment and plans to add 50,000 fuel-cell electric vehicle (FCEVs) by 2025 using heavy national incentives and state policy support. South Korea and Japan aren’t far behind with targets for hydrogen cars and buses. There is an opportunity here for India’s National Green Hydrogen Mission, which targets the production of 5 million metric tonnes of green hydrogen per year by 2030. Beyond mobility, hydrogen could find potential use in refineries, fertilisers, city gas sectors, steel production and shipping. Is there substantial potential for FCEVs in the mobility sector? EVs have achieved cost and functional parity for small and light commercial vehicles such as three-wheelers in passenger and freight segments, but the heavy-duty sector remains a concern. Road freight accounts for 35-40 per cent of India’s total on-road carbon emissions, using up 25 per cent of the oil imports.
Gas price drop to make industrial users shun dirtier fossil fuels, says Indian Gas Exchange head
The head of India’s only gas trading platform is optimistic that the drop in prices this year will encourage industrial users in the country to switch from dirtier fossil fuels. Trading volumes on the Indian Gas Exchange are set to rise due to a greater availability of cheaper supplies, Chief Executive Officer Rajesh Kumar Mediratta told Bloomberg Television in an interview. The bourse is looking to offer some longer-duration contracts to help buyers access gas at set prices, he said. Coal-reliant India has a target to increase the share of gas in its energy mix to 15% by the end of the decade, from about 6% now. Both spot LNG and gas from Indian deep water fields are traded on the bourse. Local prices of domestically-produced gas have fallen, partly due to a drop in the Asian benchmark that has more than halved this year. Indian consumers from power plants to petrochemical facilities are highly price-sensitive as gas competes head-to-head with cheaper and dirtier alternatives. But, the government has been active in supplying cheaper gas to households, fuel stations and industrial users. Demand in the country, the world’s fourth-biggest LNG buyer, is expected to rise as pipeline infrastructure is expanded.
Oil Prices Tumble As The EIA Reports A Significant Gasoline Build
Crude oil prices continued to move lower despite the Energy Information Administration report that inventories had shed 2.2 million barrels in the week to September 29. This compared with a draw of the same size estimated for the previous week by the EIA. A day earlier, the American Petroleum Institute reported an estimated inventory decline of 4.2 million barrels for the last week of September. In fuels, meanwhile, the EIA reported mixed inventory changes, but it was a build in gasoline and fears of weakening gasoline demand that traders paid attention to. Gasoline inventories added a substantial 6.5 million barrels for the week to September 29, which compared with a build of 1 million barrels for the previous week. Gasoline inventories are now 1% above the five-year average for this time of year. Gasoline prices fell alongside oil prices on Wednesday morning, trading at $2.238. Gasoline production averaged 8.8 million barrels daily last week, which compared with 9.1 million barrels daily for the prior week. Middle distillates fell by 1.3 million barrels in the week to September 29, which compared with a moderate build of 400,000 barrels for the previous week. Middle distillate production last week averaged 4.7 million barrels daily, which compared with 4.9 million bpd for the previous week. Oil prices were already under pressure from a more expensive greenback combined with a pessimistic outlook for the global economy to pressure benchmarks. A tight market combined with the OPEC+ decision to maintain its production cuts failed to counter bearish sentiment. The downward pressure on prices, which began last week with profit-taking from institutional investors, appears to have built some serious momentum. Brent oil has now fallen below $88 and WTI is down below $86, marking a dramatic shift in sentiment from when traders were calling for triple-digit oil prices last week.