Asian LNG Buyers Wait For War Premium In Natural Gas Markets To Fade
Amid comfortable levels of inventories for this time of the year, Asian LNG buyers have been sitting on the sidelines of the spot market this week, hoping for the surge in natural gas prices after the Hamas attack on Israel to fade. Natural gas prices in Asia and Europe jumped this week, following a suspected sabotage on an offshore gas pipeline in Europe and the threat to supply from the Eastern Mediterranean in case of further flare-ups in the Hamas-Israel war. Buyers in Asia are not rushing this week to buy spot LNG supply for the winter at prices that have now surged to the highest in eight months, traders have told Bloomberg. Last week, spot LNG prices in Asia for November delivery slumped by 10% week-on-week to $13.5 per million British thermal units (MMBtu) amid soft demand and warm weather, industry sources told Reuters. This week, the spot LNG cargoes were offered in the high teens per MMBtu, according to traders who spoke to Bloomberg. With inventories at comfortable levels, buyers in Asia wait for a possible de-escalation in the Middle East. Security of gas deliveries to Europe also came into focus this week, with a suspected sabotage on the Finland-Estonia Balticconnector offshore gas pipeline. “It is likely that the damage to both the gas pipeline and the data cable is caused by external activity. What specifically caused the damage is not yet known,” Finnish President Sauli Niinisto said in a statement on Tuesday. In addition, the global gas markets face concerns about supply from the eastern Mediterranean which could be in jeopardy after the Hamas attack on Israel and the possibility of further escalating tensions in the Middle East and eastern Mediterranean. The front-month futures at the Dutch TTF hub, the benchmark for Europe’s gas trading, have soared by 30% since Monday and were up by 3% on the day as of 7:12 a.m. GMT on Friday.
Oil Prices Rally As The U.S. Enforces Sanctions On Russian Exports
Oil prices jumped by nearly 4% early on Friday after the United States took a tougher stance on the Western sanctions against Russia, adding to growing concerns about supply amid fears of escalation in the Hamas-Israel war. As of 7:00 a.m. EST, the U.S. benchmark WTI Crude was up by 3.63% on the day at $85.95, and the international benchmark, Brent Crude, traded 3.50% higher at $88.99. Both benchmarks were headed for a weekly gain after the Hamas attack on Israel pushed prices higher on Monday. But fears of economic slowdown and a build in U.S. commercial crude inventories capped the weekly gain. On Friday, prices rallied after the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed late on Thursday sanctions on two entities and identified as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap. The price cap of $60 per barrel of Russian crude oil set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil. Thursday’s sanction move is the first time the U.S. has imposed sanctions for a breach of the price cap. “Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” Deputy Secretary of the Treasury Wally Adeyemo said in a statement. “We remain committed to implementing a price cap policy that has two goals: reducing the oil profits upon which Russia relies to wage its unjust war against Ukraine and keeping global energy markets stable and well-supplied despite turbulence caused by Russia’s unprovoked invasion of Ukraine.” While the market continues to be concerned about demand amid high interest rates and slowing developing economies, supply-side issues dominated trades early on Friday with the tougher U.S. stance on Russia and the fear of supply disruptions in the Middle East in case the conflict spreads.
Govt opens 12th city gas bid round
Petroleum and natural gas minister Hardeep Puri launched the 12th city gas distribution bidding round on Thursday, which offered licences for seven geographical areas (GAs) spread over five states and two union territories. The areas on offer cover 92 districts in Arunachal Pradesh, Meghalaya, Manipur, Nagaland, Sikkim, Jammu & Kashmir and Ladakh. The latest licensing round will expand city gas coverage to almost the entire country. City gas licences distributed over the 11 rounds so far already cover 98% of the nation’s population and 88% of its area. Puri said the Petroleum and Natural Gas Regulatory Board (PNGRB) will now work on taking city gas supplies to the country’s islands. In the 12th round, a GA covers a full state, unlike in previous rounds when it was limited to a district or two, said Gajendra Singh, member, PNGRB. The main gas pipeline in the Northeast touches all the state capitals. The Gurdaspur-Jammu pipeline, being built by GAIL, will take natural gas supplies to J&K.
The War Premium Fizzles Out In Oil Markets
Crude oil prices are set for a modest gain this week as the war premium that emerged in the aftermath of last weekend’s attacks of Hamas on Israel appeared to cool down as inventories built and nations made a clear attempt to contain the violence. Brent crude is set to end the week with a gain of 2.3%, Reuters estimated, while West Texas Intermediate is about to book a 0.8% gain. One of the reasons for the short-lived rally was the apparent determination to contain the latest flare-up of violence in the Middle East and prevent any further escalation. President Biden has been unequivocal in his support for Israel and U.S. forces have been put on alert as a clear deterrent to other nations involving themselves in the conflict. At the same time, he has emphasized the importance that Israel and Netanyahu follow the rules of war. Another factor that helped keep oil prices under control was the massive oil inventory build reported this week by both the American Petroleum Institute and the Energy Information Administration. The API saw the build at 13 million barrels while the EIA estimated it at 10.2 million barrels. Separately, the International Energy Agency reported that Russian crude oil and fuel exports had climbed higher in September despite a deal with Riyadh to reduce oil exports by 300,000 bpd. According to the IEA, crude oil and fuel exports from Russia were up by 460,000 bpd between August and September. Russia’s Deputy Prime Minister has since claimed that the country’s pledge to reduce oil exports by 300,000 bpd includes oil products. Meanwhile, all eyes are on Iran after the U.S. said it would investigate whether Tehran was involved in the planning of the Hamas attacks and canceled the transfer of $6 billion to Iran as part of a prisoner exchange deal. Iran has denied any involvement. The U.S. also imposed the first sanctions on two tanker owners that have been transporting Russian crude oil abroad, claiming the oil they transported had been sold at a price higher than the cap of $60 per barrel imposed on Russian crude by the G7 and the European Union. This added to oil’s upward potential, as did OPEC’s latest monthly report that saw oil demand continue to be resilient. The effect was reinforced by the IEA’s monthly report, which acknowledged the supply situation with oil was a tight one. While oil markets remain tight and geopolitical risk will keep traders on edge for the foreseeable future, demand concerns and growing inventories continue to weigh on oil prices amid economic uncertainty.
How India can utilize its coal and lignite mines for Green Hydrogen production
India is gearing up for its green transition with the intention of achieving net-zero emissions by 2070. Several alternative solutions are being explored and assessed to accelerate this transformation. Among the many potential areas identified, to reduce our reliance on imported Hydrogen is to produce it domestically using carbon-emitting methane. According to a study by the Council for Energy, Environment and Water (CEEW), India consumes close to 5.6 million tonnes of hydrogen, most of it produced using methane. In addition to that, 1.9 million tonnes of hydrogen come from abroad, embedded in methanol, ammonia, and fertilisers. This all adds up to the current consumption reaching 7.5 million tonnes annually. Therefore, under the visionary guidance of the Prime Minister of India, Narendra Modi, the National Hydrogen Mission was initiated by the Union Cabinet in January 2022 to meet 7.5 million tonnes of its annual requirement from locally produced green hydrogen and make India a leading producer and supplier in this sector worldwide. Further, with its adoption, it is estimated that India can abate 3.6 gigatonnes of CO2 emissions cumulatively between now and 2050. This can be a significant lever for the nation to contribute towards its announced climate targets and net-zero vision.
GAIL India issues swap tender for Jan delivered LNG cargo
GAIL (India) Ltd has issued a swap tender offering one liquefied natural gas (LNG) cargo for loading in the United States in exchange for one LNG cargo for delivery to India in January, said two industry sources. India’s largest gas distributor is offering a cargo for loading from Cove Point on a free-on-board (FOB) basis on Jan. 14. It is seeking one cargo for delivery to the Dabhol terminal on Jan. 1-7 on a delivered ex-ship (DES) basis. The tender closes on Oct. 12.
India’s Natural Gas Demand To Grow 4% In Last Four Months Of 2023: IEA
India’s demand for natural gas will surge 4% in the final four months of 2023, according to the International Energy Agency’s Medium-Term Gas Report. This is higher than the 2% increase that the Petroleum Planning and Analysis Cell reported in the first eight months of the same year. The growth is expected to contribute an additional 10 billion cubic metres of gas supply by 2026. The report, issued on Oct. 10, also projects an average annual growth rate of over 8% in India’s natural gas demand between 2022 and 2026, resulting in a substantial 20 billion cubic metre increase. This increased demand will primarily be fuelled by the power, petrochemical, and fertiliser sectors. After a steep drop in 2022, the IEA stated that India’s natural gas demand is expected to rebound and resume its growth pattern on the back of a favourable economic outlook, enhanced availability of gas supply, and the ongoing reforms aimed at opening up the gas market. Growth Contributing Sectors The Indian natural gas market is heavily skewed towards industrial demand, according to the IEA report. Industrial demand made up over 70% of the net gas demand increase from 2017 to 2021 and is projected to contribute 40% of the overall demand growth by 2026. The Indian natural gas market, as per the IEA report, is heavily tilted towards industrial demand. This sector represented over 70% of the net gas demand increase between 2017 and 2021 and is expected to contribute 40% to the overall demand growth by 2026. Although smaller than industrial demand, gas demand for power generation also plays a significant role in India, the report stated. Gas-to-power demand is projected to grow 15% annually from 2022 to 2026, due to expanding capacity at existing gas plants and increasing power demand, despite ongoing additions of renewable capacity. The IEA indicated that the fertiliser sector will significantly drive India’s industrial gas demand growth as the country works towards discontinuing urea imports by the end of 2025. By 2025, India’s traditional urea production capacity is projected to rise by over 6 Mtpa, potentially leading to nearly 5 bcm of additional gas demand, the report said. In the first eight months of 2023, demand for re-gasified LNG in the fertiliser sector nearly tripled compared to 2022, with government subsidies and improved connectivity for southern Indian fertiliser plants contributing to this surge, according to the IEA. The commissioning of the Dhamra LNG import terminal in April is anticipated to boost India’s regasification capacity by more than 10%, it said.
G-7 price cap on Russian oil tested as India pays record premium
Refiners in India are buying cargoes of Russian oil at the widest premium above a G-7 imposed cap since the curb was introduced, highlighting the market’s importance to Moscow and a gap that may intensify scrutiny of the controversial mechanism. Crude processors in the key importer paid an average of $86 a barrel for Russian shipments in August, according to the Ministry of Commerce and Industry. That’s the biggest spread in dollar terms since the $60-a-barrel limit came into force after Moscow’s invasion of Ukraine in the first quarter of 2022. Oil rallied in the third quarter as OPEC+ leaders Russia and Saudi Arabia choked off some supply to tighten the market. That rally lifted benchmark prices even further above the price set by the cap — which is designed by the Group of Seven to meet the twin needs of seeking to limit the Kremlin’s crude-based income, while at the same time keeping Russian flows on the global market. The cap is constructed to bar access to critical western financing and insurance services for crude cargoes if shipments are valued above $60. Beyond that level, they are permitted, as long as buyers and sellers make alternative arrangements. India, a vast oil buyer, has been adept at doing so. US Treasury Secretary Janet Yellen recently warned that the US is preparing to crack down on evasion of the G-7 cap on Russian oil, as recent market prices signal the mechanism may no longer be working as hoped. The US is looking at enforcement very carefully, Yellen told the Wall Street Journal.