India’s Coal Output Surged in H1
India’s coal production from captive and commercial mines surged by 32% over the first half of this financial year, the country’s coal ministry said, with the total reaching 79.7 million tons. Captive and commercial coal production in September alone also rose by 32%, the ministry reported, from 10.4 million tons in September 2023, to 13.74 million tons last month. India’s financial year begins in April. India is the second-largest coal consumer of coal in the world and a sizeable producer as it seeks to satisfy more of its demand for the energy commodity with domestic production as demand keeps growing at a healthy pace. In the 2023-2024 fiscal year ending March 2024, India’s total coal production rose by 11.65% to 997.25 million tons, according to data from the Ministry of Coal. The above figures suggest that this fiscal year will also see considerable production growth despite climate pledges. Earlier this year, Bloomberg reported citing unnamed sources that India aimed to add as much as 15.4 gigawatts of new coal-fired power capacity this year, the most in nearly a decade. Coal is the biggest source of energy on the subcontinent, accounting for some 70% of the energy mix, even as the government works to expand wind and solar capacity. In the first quarter of the year, coal consumption for power generation surged to a record high amid a heatwave and droughts that reduced hydropower generation. As a result of efforts to boost domestic supply, in July the Indian Ministry of Coal said that the country saw a record decline in the share of imported coal in the past decade, noting that “medium and low-grade thermal coal are abundantly available domestically, making it imperative for the country to sufficiently produce to fulfill domestic demand.” Meanwhile, imports also rose earlier in the current fiscal year, following demand patterns. Over the first quarter, coal imports ticked 0.9%, with July imports alone up by 15.9%.
Oil Price Rally Continues Despite U.S. Inventory Build
Crude oil prices were on the climb again today, fueled by expectations of Israel’s retaliation against Iran after the latter showered it with missiles earlier in the week, sparking fears of a broader war in the Middle East. The biggest worry is, of course, Israel targeting Iranian oil infrastructure, which analysts expect it to do. “The next turn in this retaliation spiral may very well involve oil – via the degrading of Iran’s oil capacity or Iran’s proxies attacking oil and gas shipping from the Persian Gulf,” according to Piper Sandler analysts, as quoted by CNBC. Israeli media also reported that attacks on oil infrastructure were likely, citing government officials. However, oil’s gains were moderated by the U.S. Energy Information Administration’s latest weekly inventory report, which showed a build in crude oil. At 3.9 million barrels, the build was considerable enough to make oil traders bearish despite events in the Middle East. “Swelling U.S. inventories added evidence that the market is well supplied and can withstand any disruptions,” ANZ analysts wrote, as quoted by Reuters. That statement may be seen as a little questionable since the disruption of Libyan production drove prices higher earlier this year. Libya produces a third of what Iran does in crude oil. Disruption of Iranian production would quite likely have a palpable impact on international markets. On the other hand, as Energy Aspects’ Amrita Sen pointed out to Reuters. “In theory, if we lost all Iranian production – which is not our base case – OPEC+ has enough spare capacity to make up for the shock,” Sen said. Indeed, analysts have calculated that Saudi Arabia and the UAE alone could more than offset a potential loss of Iran’s total production, which is around 3.2 million barrels daily. Of that, Iran exports about 1.8 million bpd. Yet if Iran moves to block oil transport via the Strait of Hormuz, that would be a different story altogether. According to Rapidan Energy Group’s Bob McNally, a blockade on the chokepoint would send oil prices a lot higher.
IEA: Global Natural Gas Demand Set for New Record Highs
Amid a normalization of natural gas prices, global gas demand is picking up this year at a stronger pace than in the past two years and is set for a record high in 2024 and 2025, the International Energy Agency (IEA) said in a new report on Thursday. After the supply and price shock of 2022 and 2023, which weighed on natural gas demand, consumption is picking up pace this year and is set to rise by over 2.5% in 2024, or by just over 100 billion cubic meters (bcm). As a result, natural gas demand is set to reach a new record-high of 4,200 bcm in 2024, mostly thanks to growth in the Asia Pacific region, the IEA said in its annual Global Gas Security Review. Asia Pacific is expected to account for nearly 45% of incremental global gas demand this year. The primary growth drivers are industry and energy use, contributing more than half of demand growth. Moreover, Europe’s industrial gas demand is recovering as prices normalized and is also contributing to demand growth, even though it remains well below its pre-crisis levels. Next year, we will see another all-time high in global natural gas demand as consumption is expected to rise by another 2.3% (or nearly 100 bcm) in 2025. Similarly to 2024, growth is largely supported by Asia, which alone is expected to account for over half of incremental gas demand. Supply of natural gas remains tight, and geopolitical uncertainties are adding volatility to natural gas markets, according to the IEA. “The growth we’re seeing in global gas demand this year and next reflects the gradual recovery from a global energy crisis that hit markets hard,” said IEA Director of Energy Markets and Security Keisuke Sadamori. “But the balance between demand and supply trends is fragile, with clear risks of future volatility.”
Exclusivity with Reliance has ended but BP to continue with Ambani firm: India head
Global supermajor British Petroleum (BP) Plc’s exclusivity with Reliance Industries Ltd has ended but the energy giant will continue to pursue oil and gas as well as mobility ventures in India with the Mukesh Ambani firm owing to an unwritten strategic partnership, BP’s outgoing India head Sashi Mukundan said. BP in 2011 spent $7.2 billion to acquire 30% interest in 23 oil and gas blocks of Reliance. Eastern offshore KG-D6 block was the cornerstone of the deal that also provided for a 10-year exclusivity period which meant that BP would take up energy projects or investments in India only in partnership with Reliance. The firm has so far invested more than $2 billion across the energy value chain including bringing on stream three new deepwater natural gas projects in KG-D6 that account for one-third of India’s gas production. “We started working with Reliance as early as 2005 when first (the then BP CEO) Lord John Browne visited India,” Mr. Mukundan said. It finally fructified in the 2011 deal. “13 years since we did the upstream deal, not once have we gone back and looked at the contract,” he said, adding the partnership with Reliance is not a contract based but one based on “trust and relationship”. “So anytime we have any issues between the two partners, we just sit face to face. I just have to make a call or (send a) WhatsApp (message) and say I want to come and see you. And you know, between him (Mukesh Ambani, Chairman and Managing Director of Reliance Industries Ltd) and Mr (PMS) Prasad (Executive Director at Reliance), we resolve everything,” he said.
What does Middle East tension, oil price spike mean for India’s macro economy?
Iran’s recent ballistic missile strike on Israel have fuelled fears of a broader regional conflict across the Middle East, sending crude oil prices up by as much as 4 per cent overnight due to concerns over supply disruptions. As oil prices continue to rise, experts warned that India, which is heavily reliant on energy imports, could face significant economic challenges. Sugandha Sachdeva, Founder of SSWealth Street, explained that for every $10 increase in oil prices, India’s inflation rises by about 0.3 per cent, while the current account deficit (CAD) widens by $12.5 billion, equivalent to roughly 43 basis points (bps) of gross domestic product (GDP). “This can diminish consumer purchasing power as higher fuel costs drive up transportation and input expenses, leading to an overall increase in the prices of goods and services,” she said. Jigar Trivedi, Senior Research Analyst for Currencies & Commodities at Reliance Securities, agreed with Sachdeva. He warned that rising oil prices would lead to a higher dollar outflow from India, further weakening the rupee. Iran, a key OPEC (Oragnisation of the Petroleum Exporting Countries) member, exports approximately 1.7 million barrels of oil per day. Beyond its role as a global oil supplier, Iran’s strategic location near the Strait of Hormuz — through which major Persian Gulf energy producers such as Saudi Arabia, Qatar, and the UAE export their oil—heightening the risk of global energy supply disruptions, especially as tensions escalate. Iran’s missile strike followed Israeli military action in Lebanon, including a targeted killing of Hezbollah’s chief Hassan Nasrallah, has heightened concerns of further regional instability.