Goldman Sachs Cuts Its Expected Oil Price Range by $5
Weaker Chinese oil demand, high inventories, and rising U.S. shale production have prompted Goldman Sachs to reduce its expected range for Brent oil prices by $5 to $70-$85 per barrel. Commercial inventories have been stable in the peak summer demand season, contrary to expectations of drawdowns, analysts at the Wall Street bank wrote in a note carried by Investing.com. Higher U.S. supply has been offsetting some of the seasonal demand, according to Goldman Sachs. Efficiency gains among U.S. producers have raised shale supply by 200,000 barrels per day (bpd) above the investment bank’s expectations. Higher supply from America, and possibly from OPEC+ later this year and in 2025, has led Goldman Sachs to forecast that Brent Crude prices would average below $80 per barrel next year. The current forecast is now Brent to average $77 a barrel, as OPEC+ could opt for a strategic move to add supply and punish non-OPEC+ growth, according to Goldman’s note carried by Bloomberg. OPEC+ could decide to add supply on the market in a move that could be “strategically disciplining non-OPEC supply,” Goldman Sachs’s analysts wrote. “Prices could significantly undershoot in the short term, especially if OPEC were to strategically discourage US shale growth more forcefully, or if a recession were to reduce oil demand,” the bank’s analysts noted, referring to a scenario in which Brent could trade lower than its price forecast. Morgan Stanley has also recently revised its oil price forecasts downward, reflecting expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank now anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into a surplus by 2025. Morgan Stanley has cut its forecast for the fourth quarter to $80 per barrel, down from $85, and now expects prices to gradually decline to $75 per barrel by the end of 2025, slightly lower than their previous estimate of $76.
Hydrogen – Making India self-reliant: Alok Sharma, Director (R&D), IndianOil
India’s journey towards energy self-reliance is being significantly bolstered by the potential of hydrogen as a sustainable energy source. The hydrogen market outlook is promising, with key insights from industry experts and strategic national missions setting the stage for a transformative energy landscape. Hydrogen Market Outlook The global hydrogen market is experiencing a dynamic shift, primarily driven by advancements in green hydrogen technology and supportive policy frameworks. According to BloombergNEF, the levelized cost of hydrogen (LCOH2) has seen a slight increase due to inflation and higher financing costs. However, green hydrogen is expected to become competitive with grey hydrogen (produced from natural gas) in several key markets by 2030. This competitiveness is attributed to technological advancements and economies of scale, which are projected to reduce the cost of green hydrogen production significantly. Green hydrogen, produced through the electrolysis of water using renewable energy, is set to undercut grey hydrogen as early as the end of this decade in major economies such as Brazil, China, India, Spain, and Sweden. This shift is crucial for decarbonizing industries and achieving net-zero targets, especially for a country like India, which has a large industrial base dependent on fossil fuels. National Green Hydrogen Mission India’s National Green Hydrogen Mission is a strategic initiative aimed at positioning the country as a global hub for green hydrogen production and export. Launched by the Indian government, this mission underscores the country’s commitment to reducing its carbon footprint and achieving energy independence. The mission includes various policy measures and financial incentives to promote the adoption of green hydrogen across different sectors, including transportation, industry, and energy storage. Key components of the mission involve the establishment of green hydrogen production facilities, the development of a robust hydrogen infrastructure, and fostering research and development in hydrogen technologies. The government has outlined specific targets to produce and utilize green hydrogen, which will play a crucial role in reducing greenhouse gas emissions and enhancing energy security. The initial outlay for the Mission will be INR 197.44 billion, including an outlay of INR 174.90 billion for the SIGHT programme, INR 14.66 billion for pilot projects, INR 4 billion for R&D, and INR 3.88 billion towards other Mission components. Green Hydrogen Targets India has set ambitious targets for green hydrogen production to meet its energy and climate goals. The government aims to produce 5 million metric tonnes of green hydrogen annually by 2030. This target is supported by the development of renewable energy capacity, with a focus on solar and wind power, which are critical for producing green hydrogen. To achieve these targets, India is investing in large-scale green hydrogen projects and forming strategic partnerships with global leaders in hydrogen technology. Additionally, the government is providing financial incentives such as subsidies, tax breaks, and grants to encourage private sector investment in green hydrogen infrastructure. These measures are expected to drive down the cost of green hydrogen production and make it more competitive with traditional fossil fuel
Fears of U.S. Economic Hard Landing Erase Gains from Libya Oil Shutdown
Oil markets have failed to build any kind of sustained momentum over the past couple of weeks, with persistent fears of a hard landing for the U.S. economy outweighing supply disruptions. Crude oil futures surged more than 3% on Monday after Libya’s rival eastern government said it is shutting down oil production and exports, adding to gains made the previous week when Fed chair Jerome Powell indicated a start to interest rate cuts in September. Unfortunately, oil prices have pulled back, with Brent crude for October delivery trading at $79.23/barrel in Wednesday’s session down from its weekly peak at $81.47 on Monday while WTI was quoted at $75.15/barrel after hitting $77.54 on Monday. Further, Brent spreads have widened significantly; October-November backwardation has increased by $0.51/bbl w/w to $1.07/bbl at settlement on 26 August, November-December backwardation has increased by $0.43/bbl to $0.85/bbl who;e December 2024-December 2025 backwardation has increased by $1.08/bbl to USD 4.13/bbl. Oil Crisis in Libya Oil prices surged on Monday after Libya’s eastern government called a force majeure on all oil production and exports, which could remove up to 1 million bpd of crude from the markets. Oil was already trading higher after Israel sent more than 100 warplanes to take out thousands of Hezbollah missile launchers on Sunday. However, the Libya development is much more significant to oil markets because it represents “real barrels lost, effectively tightening the physical market for as long as the Libya crisis lasts, UBS analyst Giovanni Staunovo has told Bloomberg. In 2022, a deal between Tripoli-based Prime Minister al-Dbeibah and the Benghazi-based warlord Khalifa Haftar reunified the central bank and put it (loosely) under Tripoli’s control, while a Haftar loyalist took control of the state oil company. The eastern and western factions have been competing over access to state revenues, with eastern factions recently shutting down oil flows in response to the Tripoli-based Presidency Council’s bid to oust CBL governor Sadiq al-Kabir. Periodic instability in Libya’s oil output has been a recurring feature since 2011’s First Libyan Civil War, with commodity analysts at Standard Chartered estimating that it has led to a loss of just over 4 billion barrels of output and cost the North African country $320 billion in lost revenue. The past month has seen some sharp oil price swings but no sustained momentum, raising questions over the quality of price discovery involved in the cycles. According to StanChart, both price cycles over the past month have been primarily due to spillovers from interest rates markets and a seasonal dominance of algorithmic trading. However, other than the Libya oil shutdown, there have not been major changes to market fundamentals to justify the large oil price fluctuations. According to the experts, negative positioning on oil relative to neutral positioning on copper reflects heightened fears of a hard landing in the U.S economy, as well as a bearish outlook for 2025. The bearishness is hard to justify considering that the cumulative fall in U.S. crude oil inventories over the past eight weeks clocked in at 34.7 million barrels, an average of 620 thousand barrels per day (kb/d). Mixed Bag for Natural Gas Prices Natural gas markets have been mixed, with European gas markets bullish while U.S. markets have continued to lag. European natural gas futures have managed to hold steady close to €40 per megawatt-hour due to supply concerns related to Norway’s annual maintenance and the Ukraine-Russia conflict. Maintenance activity lowered Norwegian gas nominations by 10 million cubic meters per day, affecting major pipelines such as Franpipe, Emden, and Dornum. Nevertheless, Russian gas continues to flow to Europe, and regional storage is at around 92% capacity, exceeding the EU’s November target by over two months. In contrast, U.S natural gas prices have weakened again, with front-month Henry Hub (September) falling below $2 per million British thermal units (mmBtu) for the first time in three to trade at $1.93/MMBtu in Wednesday’s session. However, the Henry Hub forward curve is in a steep contango, with the December 2024 to February 2025 contracts all settling above $3.00/MMBtu, with inventories remaining relatively flush. U.S. gas prices were further depressed over the past week by weather forecasts that imply a decline in cooling demand in key consuming regions over the next two weeks, coupled with a lack of significant hurricane activity near the offshore Texas gas fields.
Oil and gas PSUs carry out a third of annual capex in April-July
Public-sector oil and gas companies have spent over Rs 380.419 BILLION as capex in the first four months of the current financial year 2024-25, nearly 32.4% of the annual capex target of Rs 1200 billion, provisional data from the Petroleum Planning and Analysis Cell showed. The capital expenditure during the period was driven by Oil and Natural Gas Corp, Indian Oil Corp, and Hindustan Petroleum Corp. While ONGC incurred a capex of Rs 117.10 billion constituting 38% of its annual capex target of Rs 308 billion, Indian Oil spent Rs 114.83 billion of its annual target of Rs 309.09 billion during Apr-July. The robust capex pace maintained by these firms is at a time overall capital expenditure by the central public sector enterprises fell by 16% on year in April-July due to the disruptions caused by general elections. The decline in the CPSEs capex in the first four months of the fiscal was more prominent for the top two investors –Railways Board and the National Highways Authority of India (NHAI), where state-run companies have improved upon last year’s performance. ONGC, in its earnings call earlier, has guided to a capex of Rs 320-330 billion each for FY25 and FY26. The company is expected to invest a major portion of its capex towards increasing its oil and gas production particularly from KG 98/2 basin. The field currently produces 12,000 barrels per day of oil (from 4 wells) and ~0.4 mmscmd of gas. The company expects to start additional wells in the second and third quarter of the fiscal, which should help it reach oil production of 30,000 bbl/d in Q4 and 45,000 bbl/d in subsequent quarters, it had said. Analysts believe that the major expansion projects announced by the oil marketing companies in the next two years, and robust volume growth for the city gas distribution companies are expected to lead to substantial growth for the Indian energy sector companies. HPCL and Bharat Petroleum Corpspent Rs 35.21 billion and Rs 30.88 billion respectively in April to July. The country’s state-owned downstream companies intend to boost their refining capacity and strengthen their marketing infrastructure going ahead.
GAIL (India) Ltd. Eyes Expansion with New Ethane Cracker, LNG Deals, and Net Zero Target
GAIL (India) Ltd. hosted its 40th Annual General Meeting (AGM) for the fiscal year 2023-24, where Chairman Sandeep Kumar Gupta revealed plans to explore the feasibility of setting up a world-scale greenfield ethane cracker. This move reflects GAIL’s confidence in the growth of its petrochemical sector and its ambition to solidify its position as a key player in India’s petrochemical industry with a diverse range of products. Gupta highlighted ongoing projects including the 500 KTA PDHPP Project at Usar, a 60 KTA Poly-propylene plant at Pata, a 1,250 KTA PTA plant at GMPL, Mangaluru, and a 50 KTA Isopropyl Alcohol Project at Usar. These projects are set to diversify and expand GAIL’s petrochemical portfolio. Further, GAIL continues to maintain its leadership in the natural gas sector, operating a network of 16,271 km of natural gas pipelines and actively working on approximately 3,400 km of new pipelines to complete the National Gas Grid (NGG). On the supply front, Gupta announced the signing of two 10-year LNG supply agreements starting in 2026, with 1 MMTPA from Vitol Asia Pte Ltd, Singapore, and 0.5 MMTPA from ADNOC Gas, UAE. Additionally, GAIL’s volume of 4.5 MMTPA has been renewed under a new LNG SPA with Qatar Energy LNG, set to begin in 2028. The company also chartered a long-term LNG vessel, GAIL Urja, under a 14-year Time Charter Party agreement starting in early 2025, with a fleet of five LNG carriers to ensure secure LNG transport. Gupta stated that GAIL’s joint venture company, Mahanagar Gas Limited, has expanded by acquiring new geographical areas in Maharashtra and Karnataka, positioning GAIL as the largest City Gas Distribution operator in India. As of this year, GAIL and its group companies have added over 1.1 million PNG connections and 422 CNG stations, totaling approximately 8.34 million PNG customers and 2,770 CNG stations nationwide. Gupta also emphasized GAIL’s advancement in achieving its Net Zero target, which has been moved forward by five years to 2035. The company’s commitment includes reducing Scope 1 & Scope 2 emissions by 100%. To further their environmental goals, GAIL installed India’s first MW scale Green Hydrogen electrolyzer in Vijaipur, Madhya Pradesh, with a 10 MW capacity capable of producing 4.3 TPD of Hydrogen using renewable energy.
Global LNG markets heading towards supply glut
After two volatile years in terms of natural gas supplies and pricing in CY2022 and CY2023, the global liquified natural gas (LNG) markets are now moving towards significant supply glut with large capacity additions planned from CY2024 to CY2028, stated a report by ICRA. It further added that about 193 MMT of the LNG production and liquefaction capacity is expected to be added globally over the next four years. Significant capacity addition amid expectation of modest demand growth in the global natural gas consumption will keep the LNG prices under check and this will ultimately benefit India. Girishkumar Kadam, Senior Vice President and Group Head, Corporate Ratings, ICRA Ltd, said, “Global natural gas consumption is expected to witness modest growth, given the focus of the major natural gas consumers in regions of European Union, Japan & Korea towards other sources of energy. Amidst these demand headwinds, the LNG capacity addition over the next four years, which is equivalent to ~41 per cent of the current global LNG production capacity, is expected to result in a downward pressure on the global LNG prices. India thus stands to benefit in terms of availability of LNG at reasonable prices over the medium term, notwithstanding the near-term volatility amid geo-political tensions in West Asia.” After witnessing headwinds in FY2023 owing to the elevated LNG prices, India’s gas consumption recovered sharply to 187.9 mmscmd in FY2024 (~17 per cent increase YoY) with easing of LNG prices. Further, the report added that consumption in India is expected to grow by 6-8 per cent YoY in FY2025 on softer LNG prices and an uptick in the domestic gas production. This growth, per ICRA report, is supported by the City Gas distribution (CGD) sector, followed by the refineries’ offtake. The demand from the CGD sector is underpinned by the CNG segment, which remains robust owing to the strong economic advantage over alternate fuels, following the strong uptick in CNG vehicle sales in the last couple of years. “The increasing adoption of electric vehicles in the passenger vehicle and bus segments will remain key threats for the CNG offtake. Additionally, ability of the CGD entities to ensure availability of CNG at competitive prices going forward will remain a key challenge, given the falling share of the APM gas in the overall gas mix. The fertiliser segment will remain the largest off-taker of natural gas, albeit the demand from here on is not expected to grow, given there are no further capacity expansions in the urea segment,” ICRA stated in the report.