Saudi Arabia Expected to Cut the Price of Its Oil to Asia
Saudi Arabia is expected to reduce its official selling price for crude for Asian buyers, a survey among analysts conducted by Bloomberg has shown. According to the survey sample, including a total of six refiners and traders, the move would be prompted by intensified competition for the Asian market and cheaper crude from the United States and Europe, as well as Guyana. The influx of non-Middle Eastern oil comes as Brent crude, the global benchmark, is at near parity with the Dubai benchmark, according to PVM Oil Associates. The development, which is unusual, is the result of OPEC production cuts—notably Saudi Arabia’s voluntary cut—that have pushed Middle Eastern oil prices higher, and closer to Brent. As a result, Bloomberg reports, non-Middle Eastern oil has become more attractive for bargain hunters in Asia, doubling as evidence of the unintended effects of the production cuts, such as increased demand for less expensive oil. According to the Bloomberg survey, the average price cut forecast is for $1.05 per barrel of Arab Light, for deliveries in February next year. However, the individual forecasts ranged between $0.75 per barrel and $2 per barrel, the news outlet also reported. In the past few months, Saudi Arabia has been raising its prices for Asian buyers. In fact, it raised them for five months in a row until November, before announcing it would keep prices for Arab Light unchanged for December deliveries, earlier this month. It did, however, raise the price for Arab Extra Light by $0.70 per barrel. This suggests healthy enough demand for Saudi barrels in Asia despite competition from the U.S. Guyana and the North Sea. Supply, on the other hand, is likely to remain tight for the foreseeable future. The overwhelming expectation of analysts and traders from the OPEC+ meeting set to take place tomorrow is that the Saudis and the Russians will extend their production cuts into 2024. At this point, they probably can’t afford not to.
U.S. Crude Oil, Gasoline, Cushing See Inventory Dips
Crude oil inventories in the United States fell this week by 817,000 barrels for week ending November 24, according to The American Petroleum Institute (API), after a 9.05-million-barrel rise in crude inventories in the week prior, API data showed. Analysts had expected a 2 million barrel draw. API data shows a net build in crude oil inventories in the United States of more than 20 million barrels so far this year. On Monday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) broke a seven week streak of status quo, rising by 300,000 barrels. Inventories are still near the 40-year low of 351.3 million barrels, with total purchases for the SPR coming in at about 4 million barrels since the Biden Administration began its buyback program. Oil prices were trading up substantially ahead of API data release despite OPEC+ chatter that dampened the markets hopes that the group would cut production deeper at its next meeting, which is currently scheduled to take place this Thursday. At 3:40 pm ET, Brent crude was trading up 2.13% at $81.68—still $.30 per barrel short of where it was this same time last week. The U.S. benchmark WTI was trading up on the day by 2.06% at that time, at $76.40–$1 per barrel below this time last week. Gasoline inventories also fell this week, by 898,000 barrels, on top of the 1.79 million barrel decrease in the week prior. As of last week, gasoline inventories were 2% below the five-year average for this time of year. Distillate inventories saw the only rise this week, with a gain of 2.806 million barrels. Last week, distillates fell by 3.51 million barrels in the week prior. Distillates are roughly 13% below the five-year average. Cushing inventories fell by 465,000 barrels, after rising by 640,000 barrels in the previous week.
After tanking in September, India’s crude oil imports rise in October
India’s crude oil imports appreciated in October 2023 largely propelled by growing domestic demand after the inbound shipments hit their lowest in the last 12 months in September this year. According to the Petroleum Planning and Analysis Cell (PPAC), crude oil imports by the world’s third largest importer rose 6 per cent q-o-q and more than 2 per cent y-o-y to 18.53 million tonnes (mt) last month. Analysts and market players said that imports rise during October-December in line with the revival in industrial, mining and construction activities. Besides, Rabi sowing also commences during the same period. Also, the December quarter also witnessed higher demand for petrol and diesel due to the festival and marriage season, which commenced last week. The consumption of petrol and diesel rose to a four-month high in October, while jet fuel sales surged to their highest in the current financial year and calendar year as rising industrial and construction activity coupled with the onset of the festival season boosted sales. Domestic oil marketing companies (OMCs) have also increased refinery runs for the remainder of 2023 to meet the growing demand for auto fuels, bitumen, fuel oil and other refined petroleum products. India imported 4.66 million barrels per day (mb/d) of crude in October 2023, which is almost flat compared to September, Kpler data shows. OPEC in its latest monthly oil market report for November 2023 said that India’s oil demand outlook in Q4 2023 should continue to benefit from strong annual GDP growth in 2023, combined with robust manufacturing activity and a proposal by the Indian government to increase capital spending on construction. Besides, the post-monsoon harvesting season and construction activity are also expected to support oil demand growth. In addition, the forward-looking indicators show strong manufacturing and services PMIs, suggesting prospects for healthy oil demand in the near term, it added. “In Q4 2023, oil demand is projected to grow by 243,000 barrels per day (b/d), y-o-y. Distillates are expected to be the driver of oil demand growth, supported by harvesting, construction and manufacturing activity. Additionally, traditional festivities are expected to support mobility and boost gasoline demand, while increasing air travel is expected to support jet/kerosene demand,” OPEC has projected.
Adani Total to blend green hydrogen with natural gas
Adani Group’s city gas distribution company Adani Total Gas Ltd on Tuesday announced a pilot project on green hydrogen production and blending as it looks to diversify its energy mix, develop a hydrogen ecosystem as well as reduce CO2 emissions. As part of the project, Adani Total Gas will use the latest technologies to blend Green Hydrogen (GH2) with natural gas for over 4,000 residential and commercial customers in Ahmedabad, Gujarat. GH2 is produced using electrolysis of water with electricity generated by renewable energy. Hydrogen blending is less carbon intensive than burning gas but has the same heating capabilities. The project is expected to be commissioned by the first quarter of 2024-25 and the percentage of green hydrogen will be gradually increased in the blend to up to 8% or more, depending on regulatory approvals, the Adani Group company says in a stock exchange filing. After successfully completing the pilot, hydrogen blended fuel will be supplied stepwise to larger parts of the city and other license areas of Adani Total Gas, the company says. As per studies, an up to 8% hydrogen blend can reduce emission by up to 4%. With this pilot, Adani Total Gas says it would like to partner with various stakeholders including regulatory authorities to share its firsthand learning and develop ecosystem about hydrogen blending in city gas distribution in India. This will also help in gaining and sharing knowledge on the operational aspects and the compatibility of blended fuel on existing infrastructure, it says. “We are fully committed towards building an environmentally sustainable operation and this project represents our ongoing dedication towards national infrastructure building for India to become energy independent by 2047. This project will reduce our carbon footprint and by investing in such innovative projects, we are actively contributing to the evolution of the industry and driving progress in sustainable energy solutions,” says Suresh P Manglani, executive director and CEO of Adani Total Gas. Adani Total Gas supplies piped natural gas (PNG) to industrial, commercial and residential customers and compressed natural gas (CNG) to the transport sector. Given its gas distribution mandate catering to 38 Geographical Areas (GAs), which account for 8% of India’s population, the company plays a significant role in the nation’s efforts to enhance the share of natural gas in its energy mix. Of the 38 GAs, 19 are managed by ATGL and the rest by Indian Oil-Adani Gas Private Ltd, a 50:50 joint venture between Adani Total Gas and Indian Oil Corporation. In September 2023, India’s largest commercial vehicle manufacturer Tata Motors delivered Hydrogen Fuel Cell powered (FCEV) buses to Indian Oil Corporation. These buses are to be assessed as potential mass transport solutions for inter and intra-city commute.