OPEC Secrecy Isn’t Helping Its Exit Strategy from Production Cuts
This week, the OPEC+ group is meeting to discuss when and how to begin easing the ongoing production cuts. The alliance looks to have dug itself deeper into a position between a rock and a hard place, again. Although they are not publicly admitting it, OPEC and its allies want to keep oil prices fairly high, as many of these need oil to trade at least above $80 per barrel to avoid budget deficits, and even above $90 a barrel for most, including Saudi Arabia. OPEC’s Dilemma However, higher oil prices are also helping non-OPEC+ supply growth, not only from the United States but also from producers such as Guyana and Brazil. For the umpteenth time, OPEC is caught between its own revenue needs and the loss of market share to rival non-OPEC+ supply. OPEC, of course, has been stating for years that it isn’t going for a specific oil price with the production cuts—rather it’s all about ensuring and keeping “market stability.” But as prices have stabilized at just over $70 per barrel Brent in recent weeks, OPEC faces another dilemma at the December 5 meeting, which was postponed from the originally planned date December 1. If the cartel and its allies begin unwinding the cuts in January – as currently planned – they risk a certain slide of Brent Crude prices below $70 a barrel and possibly further down as demand doesn’t appear great and the oversupply next year would only grow. Lower prices could hurt U.S. drillers, but they would also hurt OPEC and Russia, the ultimate petrostates for which oil revenues are the single biggest budget income. OPEC’s Rare Half-Admission In this situation, OPEC’s exit strategy from the production cuts is now more unclear than ever. If OPEC+ producers want to bankrupt U.S. drillers as they have attempted – and achieved – in the past, they would have to bust their own budgets and endure a prolonged period of price pain until demand begins outstripping supply again. Yet, the leader of the cartel and the OPEC+ group, Saudi Arabia, needs oil income pouring in, a lot of it, to fund the Crown Prince’s Vision 2030 program of tech and construction and tourism wonders that would reduce the Kingdom’s reliance on oil. The group has limited options in easing the production cuts as these restrictions, aimed at supporting oil prices, helped non-OPEC+ supply, especially from the United States, Iran’s Governor for OPEC, Afshin Javan, wrote in a column of Iranian state news agency Shana last week. The post was taken down hours after it was published, but it managed to catch the attention of analysts. It is as a rare admission from an OPEC member that the cartel’s policies to boost oil prices are boosting U.S. oil production growth, too, Bloomberg Opinion columnist Javier Blas argues. In the post, which briefly appeared online, Iran’s Javan wrote that “This strategy in support of prices has effectively encouraged higher supply outside the group, particularly on the part of the US.” And acknowledged, “That would leave a limited room for maneuvering by OPEC+ to ease its restrictions.” Javan also cited “bleak economic prospects” in China as throwing in another challenge at OPEC’s plans to ease the production cuts. OPEC+ had earlier this year announced plans to start gradually bringing back supply towards the end of the year, market conditions permitting. Since the price has lingered below $80 per barrel for months, the group has been postponing its supply return. Some have suggested the production caps may have to become long-term because of the market’s refusal or failure to respond to the supply curbs with higher prices. Weak fundamentals could prompt the OPEC+ group to delay – once again – the output increase currently planned to begin in January, according to recent market speculation. Saudi Arabia is pushing for a delay of between three and six months, OPEC+ delegates have told Bloomberg’s Blas. The Saudis have even sought support for extra cuts, but none of the other producers in the alliance has expressed willingness to support additional cuts, according to the delegates. The Trump Wildcard The OPEC+ group is likely to delay the unwinding of the production restrictions, not least to see what U.S. President Donald Trump will do with Iran and Venezuela when he returns to the White House in January. Analysts widely expect Trump to tighten the screws on Iran and attempt stricter enforcement of the U.S. sanctions. If a fairly large chunk of Iran’s supply – which goes mostly to China – is taken off the market, OPEC+ will have a reasonable justification for starting to ease the production cuts. However, if President Trump follows through with his tariff threats, global trade and economies could suffer and reduce the expected oil demand growth, analysts say. OPEC+’s best play for this week’s meeting may be to postpone the cuts until the end of March 2025, to see how the first policies of the new Trump administration would affect the oil market and the economy.
Petrol and diesel sales rebound across India on festival demand
India’s petrol and diesel consumption soared in November 2024 as the festive season reversed a slump in demand for motor fuels that was witnessed in previous months, reveals the preliminary data released by the state-owned oil marketing firms. While petrol sales have shown a year-on-year (YoY) increase, diesel sales remained a laggard since monsoon this year. November was the first month this year that witnessed positive growth in diesel consumption. Petrol sales of the three state-owned firms, which control 90 per cent of the fuel market in India, surged 8.3 per cent to 3.1 million tonnes in November 2024 as compared to 2.86 million tonnes of petrol consumed in the same month last year. On the other hand, diesel demand was up 5.9 per cent to 7.2 million tonnes. Festivities give petrol, diesel’s tepid demand necessary push Petrol and diesel sales in India remained tepid during the monsoon months this year as rains and bad weather conditions resulted in reduced vehicular activities. Also, demand from the agriculture sector was low as well. However, petrol demand soared once rains eased but consumption of diesel lagged on a year-on-year basis. PTI has reported that month-on-month petrol sales in India were up 4.7 per cent in November when compared to 2.96 million tonnes of consumption in October this year. On the other hand, diesel demand was almost 11 per cent more than 6.5 million tonnes of registered consumption in October 2024.
Amit Garg Recommended as CMD of HPCL by MoPNG Panel
Amit Garg, currently serving as Director (Marketing) at Hindustan Petroleum Corporation Limited (HPCL), is set to become the next Chairman and Managing Director (CMD) of the Maharatna public sector enterprise. A selection panel formed by the Ministry of Petroleum and Natural Gas (MoPNG) has recommended his name for the top post following interviews conducted, according to sources. Garg, who took over as HPCL’s Director (Marketing) in December 2023, has extensive experience in the oil and gas industry, spanning over 35 years. Before assuming his current role, he was Executive Director (Aviation) at HPCL. His professional portfolio includes responsibilities across sourcing, storage, logistics, and sales in various capacities at Bharat Petroleum Corporation Limited (BPCL). Earlier this year, the Public Enterprises Selection Board (PESB) had conducted interviews for the CMD position but declared in June that no candidate met the suitability criteria for the role. The board subsequently advised the ministry to explore alternative options for appointing a candidate. Garg’s prior roles also include serving as a full-time director with Indraprastha Gas Limited, India’s largest city gas distribution company, and as a nominee director with Maharashtra Natural Gas Limited, a BPCL-GAIL joint venture. He holds a postgraduate degree in Electronics and Management. The final approval for Garg’s appointment as CMD will likely be announced after formal clearances. HPCL, one of India’s leading oil marketing companies, has been operating under interim leadership since the retirement of the previous CMD.
Ethanol-petrol blending initiative helped farmers earn Rs 575 billion in 3 years: Centre
The Ethanol-Blended Petrol (EBP) programme has helped expeditious payment of about Rs 575.52 billion to the farmers and savings of more than Rs 750 billion of foreign exchange in the last three years, the Parliament was informed on Monday. Under the EBP programme, public sector oil marketing companies (OMCs) sell ethanol blended with petrol. Minister of State for Petroleum and Natural Gas, Suresh Gopi, informed the Rajya Sabha that in the last three years (as on September 30, 2024), the EBP programme also resulted in crude oil substitution of nearly 11 million metric tonnes and net CO2 reduction of about 33.2 million metric tonnes. Under the EBP programme, the blending of ethanol with petrol increased from 1886 million litres in ethanol supply year (ESY) 2018-19 to more than 7 billion litres in ESY 2023-24, with a corresponding increase in blending percentage from 5 per cent in ESY 2018-19 to approximately 14.6 per cent in ESY 2023-24. Since 2019, the number of retail outlets selling ethanol-blended petrol has increased steadily. In 2019, ethanol-blended petrol was sold from 43,168 retail outlets of Public Sector OMCs which increased to all retail outlets across the country in 2024, the minister said. In order to promote the blending of ethanol in petrol, the government has taken several measures which include the expansion of feedstock for the production of ethanol, an administered price mechanism for procurement of cane-based ethanol under the EBP Programme, Ethanol Interest Subvention Schemes (EISS) for ethanol production from molasses as well as grains, and Long-Term Offtake Agreements (LTOAs) by OMCs with Dedicated Ethanol Plants (DEPs), etc. From 1.53 per cent in 2014, ethanol blending has surged to almost 15 per cent in 2024, with the government advancing the target of 20 per cent blending to 2025 – five years ahead of schedule.