WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment
West Texas Intermediate broke below $70 per barrel on Monday as Hurricane Rafael weakened to a storm that is unlikely to cause any damage to U.S. oil production in the Gulf of Mexico. Separately, oil benchmarks got depressed by trader pessimism about Chinese oil demand after the country’s ruling party announced its latest stimulus package, which underwhelmed, according to Reuters. At the time of writing, Brent crude was trading at $73.30 per barrel while WTI had dropped to $69.69 per barrel. “The market will now shift focus to the Politburo meeting and Central Economic Work Conference in December, where we expect more pro-consumption countercyclical measures to be announced,” ANZ analysts wrote about China. Beijing on Friday announced additional stimulus measures that focused on the real estate sector and consumer demand for goods. Apparently, this was not good enough for oil analysts. “The crude market has hit a fair value and feels incredibly comfortable at the $70 level,” Chris Weston, head of research at Pepperstone Group, told Bloomberg. “Granted, we have US election risk that could impact growth expectations, but we’re not expecting that battle to bite and impact this week.” China, of course, remains in the focus of traders’ attention as the second-biggest consumer of the commodity and top importer. Just last week, Vitol’s head of research noted that this focus will remain in place as China continues to drive growth in oil demand thanks to petrochemicals. These, Giovanni Serio said, will replace transport as the main source of demand growth in the coming years. “The growth just next year is entirely capable of satisfying the total demand globally for plastics,” Serio said at the FT Asia Commodities conference, as quoted by Reuters. “There is no doubt that this is going to be the driving force of oil demand in China and globally because it is less of a decarbonisation story in that space,” he added.
Russia explores plan to merge Rosneft with Gazprom subsidiary and Lukoil, WSJ reports
Russia is working on a plan to merge state-backed Rosneft Oil, opens new tab with Gazprom Neft, opens new tab and Lukoil, opens new tab, creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify., opens new tab with Gazprom Neft, opens new taband Lukoil, opens new tab creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify. A combination of Rosneft, Gazprom, opens new tab subsidiary Gazprom Neft and Lukoil, would be second to Saudi Arabia’s Aramco, opens new tab and could pump almost three times U.S. oil producer Exxon’s, opens new taboutput, the report added. There are some obstacles, including opposition from some Rosneft and Lukoil executives and the problem of collecting funds to pay Lukoil shareholders, the report said. Lukoil, Rosneft, Gazprom and the Kremlin did not immediately respond to Reuters requests for comment, while Gazprom Neft could not immediately be reached.
India Now Biggest EU Fuel Exporter, Russian Oil Refinement Loophole
India’s export of fuels like diesel to the European Union jumped 58 per cent in the first three quarters of 2024, with a bulk of them likely coming from refining discounted Russian oil, according to a monthly tracker report. The EU/G7 countries in December 2022 introduced a price cap and an embargo on the imports of Russian crude oil in a bid to cripple Kremlin’s revenue and create a vacuum in its funding for the invasion of Ukraine. However, a lack of a policy on refined oil produced from Russian crude meant that countries not imposing sanctions could import large volumes of Russian crude, refine them into oil products and legally export them to the price-cap coalition countries. India has become the second biggest buyer of Russian crude oil since the invasion, with purchases rising from less than one per cent of the total oil imported in the pre-Ukraine war period to almost 40 per cent of the country’s total oil purchases. The rise was primarily because Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow. Fuel exports were, however, at full price. “Capitalising on the refining loophole, India has now become the biggest exporter of oil products to the EU. In the first three quarters of 2024, exports to the EU from the Jamnagar, Vadinar (in Gujarat) and new Mangalore refinery – which are increasingly reliant on Russian crude – saw a 58 per cent year-on-year rise further,” the Centre for Research on Energy and Clean Air (CREA) said its latest report. Reliance Industries Ltd has oil refineries at Jamnagar while Russia’s Rosneft-backed Nayara Energy has a unit at Vadinar. Mangalore Refinery and Petrochemicals Ltd (MRPL) is a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC). This, it said, amplified “the fact that EU Member States continued imports are expanding the refining loophole and Russian revenues from crude exports to third countries”. Europe typically imported an average of 1,54,000 barrels per day (bpd) of diesel and jet fuel from India before Russia’s invasion of Ukraine. This has almost doubled. While CREA did not give an absolute number for imports, the European think tank had in a previous report stated that Euro 8.5 billion of price cap coalition countries’ imports of oil products in 13 months to December 2023 were made from Russian crude. These imports in 13 months were equivalent to 68 per cent of the EU’s annual commitment to aid Ukraine between 2024 and 2027. “In the 13 months since the oil price cap took effect (in December 2022), over one-third of India’s exports of oil products to sanctioning countries was derived from Russian crude (EUR 6.16 billion or USD 6.65 billion),” the Finland-based CREA had said in the previous report. While there are no restrictions or sanctions on buying/using Russian crude oil and exporting fuels like diesel derived from it, the Group of Seven (G7) rich nations, the European Union and Australia – called the price cap coalition countries – first set a crude price cap of USD 60 per barrel starting December 5, 2022, and later on products like diesel to keep the market supplied while limiting Moscow’s revenue. CREA in the latest report said India, the world’s third largest oil-consuming and importing nation, in October bought Euro 2 billion worth of crude oil from Russia, down from Euro 2.4 billion in the previous month. “China has bought 47 per cent of Russia’s crude exports (in October), followed by India (37 per cent), the EU (6 per cent), and Turkey (6 per cent),” it said. “India was the second-largest buyer of Russian fossil fuels in October, contributing 19 per cent (EUR 2.6 billion) to Russia’s monthly export earnings from its top five importers. An estimated 77 per cent of India’s imports (valued at EUR 2 billion) comprised crude oil.” In September, India contributed 21 per cent (EUR 2.8 billion) to Russia’s monthly export earnings from its top five importers. Almost 85 per cent of India’s imports (valued at EUR 2.4 billion) comprised crude oil. “From December 5, 2022, until the end of October 2024, China purchased 46 per cent of all Russia’s coal exports, followed by India (17 per cent), Turkey (10 per cent), South Korea (10 per cent), and Taiwan (5 per cent) to round off the top five buyers list,” the agency said. India is more than 85 per cent dependent on imports to meet its crude oil needs. In October, the discount on Russian Urals grade crude oil increased 77 per cent to an average of USD 5.14 per barrel compared to Brent crude oil. The discounts on the ESPO grade narrowed by 5 per cent and traded at an average discount of USD 4.58 per barrel, while that on the Sokol blend widened by 8 per cent to USD 6.77 a barrel. According to CREA, 34 per cent of Russian seaborne crude oil and its products in October were transported by tankers subject to the oil price cap. The remainder was shipped by ‘shadow’ tankers and was not subject to the oil price cap policy. Cargoes of Russian crude can access western services like insurance and shipping only if sales are capped below USD 60 a barrel. To circumvent this, a dark or shadow fleet of oil tankers emerged. The shadow fleet consists of second-hand decrepit oil tankers with opaque ownership structures that make it difficult to ascertain who controls them or forces them to follow Western laws.
India Defends Propping Up Russian Oil – Prices “would have hit the roof”
India, the world’s third largest oil importer and consumer, has become the top buyer of discounted Russian sea-borne oil shunned by Western countries since Ukraine’s invasion began in early 2022. Before that, India bought little oil from its long-running defence partner, Russia. New Delhi has repeatedly defended its purchases from Russia as necessary to keep prices in check in the developing country of 1.42 billion people. “What many around the world don’t seem to realise is that global oil prices would have hit the roof if India had not bought oil from Russia,” India’s oil minister, Hardeep Singh Puri, wrote on X late on Friday. “We owe it to our citizens – India will buy oil from wherever our companies get the best rates.” India’s crude oil imports from Russia rose by 11.7% to about 1.9 million barrels per day in September, accounting for about two-fifths of the South Asian nation’s overall crude imports in the month. Russia was followed by Iraq and Saudi Arabia as India’s biggest suppliers.
Northeast gas grid to be operational by 2026: Indian Gas Exchange CEO
Ongoing work for Northeast Natural Gas Grid are as per the schedule and will likely be operational by 2026 according to Rajesh K Mediratta, Managing Director and CEO of Indian Gas Exchange (IGX). India’s northeast region has tremendous potential in the production of natural gas. The region has a deposit of 6 million MMSCMD Natural Gas which can be monetized by the existing producers, said Mediratta, addressing the ‘Gas Market Development for North East’, where leading energy producers and stakeholders participated in Guwahati. “This (grid) will add to the country’s energy security as IGX will help Gas producers to monetise stranded gas who can sell the surplus gas to the other regions,” Mediratta added, as per a statement by the gas exchange