Oil Prices on Course for a Weekly Gain as Economic Optimism Returns
Crude oil prices were set for a weekly increase earlier today as optimism returned to the oil market following the release of a couple of better-than-expected reports on the U.S. economy. One of these was the retail sales report for July, which showed a 1% increase versus expectations of a 0.3% improvement, Reuters reported. The increase was all the more significant because it followed a monthly dip of 0.2% for June. The other report was the weekly jobless claims tally, which came in lower than expected, with new claims down by 7,000 for the week to August 9 from the previous one. “US economic data released this week has helped to temper fears of a sharp slowdown in the US economy,” FGE told Reuters. The latest data will also likely reinforce hopes that the Fed will soon begin cutting interest rates, which is seen as a major potential oil demand booster. On the other hand, the Fed has signaled repeatedly it would not rush into any interest rate cuts, meaning that these hopes may yet get betrayed. The strength of oil benchmarks is notable because of the abundance of bearish factors weighing on the commodity. Signs of weaker Chinese oil demand and two global demand revisions that came out this week, from OPEC and the International Energy Agency, are the key bearish factors. Meanwhile, in the Middle East the danger of an escalation remains while Israel continues to bomb Gaza and Iran continues biding its time. Israel this week began negotiations with international mediators on a possible ceasefire but what good that would do remains unclear since Hamas is boycotting the talks. “Geopolitics and the risk of an expanding conflict in the Middle East are propping up prices, as the threats of retaliation continue to grow louder,” Matador Economics chief economist Tim Snyder told Reuters on Thursday.
Russia Expands ‘Dark Fleet’ to Evade LNG Sanctions
Russia’s push to navigate sanctions and maintain its foothold in the global LNG market is gaining momentum with the deployment of a second vessel from its Arctic LNG 2 project. The tanker, Asya Energy, part of what’s being dubbed a “dark fleet,” recently departed from the sanctioned terminal in northern Russia, signaling Moscow’s continued efforts to circumvent Western restrictions. This development is similar to its first LNG tanker that was part of the Arctic LNG 2 project, known as the Pioneer. That vessel was last tracked in the Mediterranean. These vessels, reportedly part of a fleet assembled through discreet ownership transfers and minimal transparency, are crucial for Russia’s strategy to sustain LNG exports amid tightening sanctions. Russia has been expanding its dark fleet of LNG carriers, much like it did with oil tankers following its invasion of Ukraine. The ownership of several ice-class LNG tankers has been transferred to little-known entities, primarily in Dubai’s free trade zones, allowing them to operate under the radar. This strategy enables Russia to continue exporting LNG despite U.S. sanctions and recent EU measures that ban new investments and transshipment operations of Russian LNG. The sanctions, particularly those delaying the Arctic LNG 2 project and restricting the use of EU territory for transshipments, have driven Russia to employ its shadow fleet more aggressively. With demand for LNG still strong globally, Moscow is betting on these clandestine operations to keep its energy sector afloat. An analysis earlier this summer conducted by Bloomberg found that little-known shipping firms operating from Dubai’s free trade zone have assumed ownership of at least eight vessels in the earlier part of the year, including four ice-class LNG carriers that had already received Russia’s approval to transverse the Arctic route. Some of the tankers with new ownership do not have listed insurers, according to the analysis—a strong indication of being part of the dark fleet.
Jamnagar Refinery is among the top 10 largest oil refineries in the world
The Al-Zour Refinery in Kuwait, which commenced operations in 2022, has been ranked eighth globally among the largest oil refineries. With a refining capacity of 615,000 barrels per day, it accounts for 8.54% of the total refining operations carried out by the ten largest refineries worldwide, which collectively process 7.2 million barrels of crude oil daily. According to a report by Offshore Technology, as highlighted by Global Data, the Al-Zour Refinery is the only Gulf and Arab refinery to make the list of the top ten largest refineries globally. The refinery, owned by the Kuwait Integrated Petroleum Industries Company (KIPIC), received a score of 7.1 on the net refining index. It was specifically designed to handle heavy crude oil and produce high-value derivatives. Currently, there are 825 active refineries globally, with the sector expected to see substantial growth. The capacity of crude distillation units (CDUs), a key measure of refining capability, is projected to increase by 15% between 2023 and 2027. The top ten oil refineries by CDU capacity worldwide in 2022 are as follows: Paraguana Refinery, Venezuela – 955,000 barrels per day (established in 1949) Ulsan Refinery, South Korea – 840,000 barrels per day (established in 1964) Ruwais Refinery, South Korea – 800,000 barrels per day (established in 1969) Daewooshan Island Refinery, China – 800,000 barrels per day (established in 2019) Jamnagar Refinery II, India – 707,000 barrels per day (built in 2008) Jamnagar Refinery I, India – 660,000 barrels per day (started operating in 1999) Port Arthur Refinery II, United States – 635,000 barrels per day (built in 1903) Al-Zour Refinery, Kuwait – 615,000 barrels per day (fully operational in 2022) Texas City Refinery III, United States – 593,000 barrels per day (built in 1934) Gurun Island Refinery I, Singapore – 592,000 barrels per day (built in 1966)
Petronet LNG receives GST Bill of over Rs 40 million, calls tax demand unjustified
Petronet LNG has received a tax demand of over Rs 40 million from the Department of Goods and Service Tax, New Delhi, the company said in a filing dated August 14. The alleged violations include under-declaration of outward supplies and claiming input tax credit on supplies from GST identification cancelled dealer and from those who don’t pay taxes. The company has said that the demand and penalties are unjustified and that it will seek legal recourse. The filing stated: “The Company has received an order u/s Section 73 of the Goods & Services Tax Act, 2017 raising a tax demand amounting to INR 4,08,93,486/- (including penalty of INR 21,21,032 and interest as applicable) for FY 2019-20.”
India ramps up crude oil supply from Russia in the last two months; Iraq, Saudi lag behind
In CY24, India has sourced the maximum crude oil from Russia in the last two months, while supplies from its traditional suppliers Iraq and Saudi Arabia have depleted to the lowest level in the same period, according to energy cargo tracker Vortexa. In June, at 1.93 million barrels per day (bpd), Indian imports of crude oil from Russia were the highest, while in July it was 1.81 million bpd. The rise in Russian oil supply to India comes despite narrowing discounts from the country. Russia has become the biggest supplier of crude to India since war broke out between Ukraine and Moscow in 2022. The country has been providing crude at discounted rates to India after the West imposed sanctions on it. However, in recent months, the discounts have reduced as more countries are accepting Russian oil. Meanwhile, imports from Saudi Arabia and Iraq slumped to their lowest this year in June and July 2024. In June, Saudi Arabia supplied 4,54,000 bpd of crude to India, while in July it supplied 6,06,000 bpd. From Iraq, India imported 8,01,000 bpd in June and 6,03,000 bpd in July. “Even if we get only a few dollars worth of discount on Russian crude, it is still attractive to Indian refiners. Right now, GRMs (gross refining margins) have come down globally, so it makes economic sense for refiners to keep buying Russian crude even when discounts have gone down,” said Prashant Vasisht, VP and Co-Head, Corporate Ratings, ICRA.
As Vaidya’s exit looms, Indian Oil getting ready for a new leadership
In the coming weeks, Shrikant Madhav Vaidya’s extended tenure as chairman of Indian Oil Corp Ltd (IOCL) will wrap up, and the search for his successor is already in full swing. Last week, a three-member search-cum-selection committee, led by Mallika Srinivasan, chairman of the Public Enterprises Selection Board (PESB), including petroleum secretary Pankaj Jain and former HPCL chairman M.K. Surana, interviewed about a dozen candidates to find the right fit. The selection process, held at Shastri Bhawan — the heart of the ministry of petroleum and natural gas — saw a mix of internal candidates from IOCL and at least one strong external contender. While early signals suggest a frontrunner has emerged, it might be a while before we know for sure who will take the helm of this Fortune 500 giant. Notably, when a search-cum-selection committee (SCSC) steps in, it has the authority and discretion to choose the best candidate for the job. Mr Vaidya, originally set to retire on August 31 last year, was granted a one-year extension, pushing his retirement to this month-end, on a re-employment and contract basis. Rumour has it that he might stay on for a few more weeks to ensure a smooth transition, pending the final nod from the Appointments Committee of the Cabinet (ACC).