Oil Prices Set For Another Weekly Gain
Crude oil prices were set for a weekly gain despite a slide earlier today, mostly on renewed optimism about U.S.-Chinese trade negotiations but also on supply uncertainty in Venezuela in Iran. At the time of writing, Brent crude was trading at $65.15 per barrel, with West Texas Intermediate at $63.18 per barrel, following President Trump’s statement that the latest talks, directly with China’s Xi, had ended in a “very positive conclusion,” and that the U.S. was “in very good shape with China and the trade deal,” as carried by Reuters. Meanwhile, the likelihood of more U.S. sanctions on Venezuelan oil and the threat of Israeli attacks on Iranian energy infrastructure provided additional support for prices. “The potential for increased US sanctions in Venezuela to limit crude exports and the potential for Israeli strike on Iranian infrastructure add to upside risks for prices,” BMI analysts said in a note today, adding that “both weaker demand for oil and increased production from both OPEC+ and non-OPEC producers will add to downside price pressures in the coming quarters.” The BMI note came out after on Thursday the International Energy Agency said in its new World Energy Investment report it expected demand for oil to weaken this year. The IEA also predicted investment in oil and gas exploration would decline by 6% in 2025, in tune with its demand forecast. Demand for oil this year, according to the IEA, is set to decline for the first time since the pandemic lockdowns of 2020. Supporting the bearish view on oil this week was the news that Saudi Arabia was going to cut its oil prices for Asian buyers yet again – to the lowest in two months. The cut, however, was smaller than analysts expected, suggesting some resilience in demand in the world’s largest importing market.
India’s Green Hydrogen Bet Gets a $5.6B Boost
India is advancing efforts to boost renewable energy use even as the world’s third-largest crude oil importer is leading global oil demand growth. Indian Oil Corporation, the country’s top refiner, plans to replace fossil fuel-made hydrogen with green hydrogen – made from electrolysis – at one of its refineries. Indian Oil has recently finalized the cost for its green hydrogen plant in the Panipat Refinery & Petrochemical Complex, which will be India’s biggest renewable hydrogen production facility when it is commissioned, which is expected to take place in late 2027. The state-owned refining giant has picked Larsen & Toubro to build and operate the plant with a capacity to produce 10,000 tons of hydrogen per year. Larsen & Toubro (L&T) isn’t new to building hydrogen electrolyzers-the company commissioned in March its first India-made electrolyzer at the Green Hydrogen Plant at A M Naik Heavy Engineering Complex in Hazira, in the western state of Gujarat. Indian Oil’s green hydrogen project is in line with India’s National Green Hydrogen Mission, the state-run oil firm said. The mission aims “To make India the Global Hub for production, usage and export of Green Hydrogen and its derivatives.” Projects part of the mission will lead to significant decarbonization of the economy, reduced dependence on fossil fuel imports, and enable India to assume technology and market leadership in green hydrogen, the Indian Ministry of New and Renewable Energy says. India is supporting pilot projects to use green hydrogen in several crucial sectors, consuming a lot of petroleum-based fuels such as long-range heavy mobility, ports and shipping, and steelmaking, and to start replacing biomass with renewable hydrogen. As part of the National Green Hydrogen Mission, the Indian government launched in March five pilot projects for using hydrogen in buses and trucks. India looks to become a global leader in green hydrogen production and utilization, New and Renewable Energy Minister, Pralhad Joshi, said at the time. India has a target to produce 5 million metric tons of green hydrogen annually by 2030, install 60 GW-100 GW of electrolyzer capacity, and add 125 GW of renewable energy capacity dedicated to hydrogen production, the minister noted. These initiatives are expected to help cut carbon emissions, save money from imports, and attract investments, India says. India is set to see a surge in power demand and renewable energy build-out in the coming years and decades and could assert itself as a clean energy powerhouse if it boosts investments, U.S.-based clean energy think tank Rocky Mountain Institute (RMI) said in a report on last month.
India can increase imports of shale gas, LNG, crude from US: Official
India’s exports to the US are rising, and it can increase imports of products like shale gas, LNG, and crude oil from America to diversify its import basket, as prices of these items are lower in the US, an official said. Teams of both countries will start next round of talks this week here on the proposed bilateral trade agreement. Though India is looking for a balanced and a mutually beneficial trade agreement with the US, “what we get as compared to other countries, will determine what we ultimately finalise in the deal,” the official said. Asked if some kind of interim trade deal can be agreed upon before July 9, the official said a lot of uncertainties are there at present because of developments like the Trump administration’s plan to further increase tariffs on steel and a stay on a court order against the US authorities’ decisions on tariffs. But within the constraints of uncertainties, India has to find pathways which are good for the country, the official said. “Exports are increasing… there are several things we can buy from the US… For example shale gas, LNG, crude oil. The more diversified our sources, the greater the benefit for us. Prices are also low in the US,” the official, who did not wish to be named, said. The official added that the US is a major trading partner of India, with a significant trade surplus in India’s favour. Moreover, a large number of jobs are linked to exports to the US.
Permian or Bust? U.S. Oil Growth Has a One-Basin Problem
The Permian basin has been the chief growth driver for U.S. shale oil production. The most prolific shale basin in North America has been the focus of attention for industry players and traders alike. But there might be a problem with the Permian. U.S. oil growth may be a bit too dependent on it. For proof, look no further than the Energy Information Administration’s drilling productivity report, which is now part of its Short-Term Energy Outlook. Month after month, the EIA reveals that of all major oil basins in the country, the Permian is usually the only one that sees growth in production. On occasion, another basin records some growth in output, but that growth is rather minor as compared to the solid five-figure growth numbers for the Permian. Indeed, the Energy Information Administration itself suggested growth in U.S. crude oil production has been heavily leaning on the Permian—for over a decade, at that. In a new report, the authority noted that onshore U.S. oil production had expanded threefold since 2010, driven by the shale boom, with that boom led by the Permian. Shale output, the EIA reported, grew from 800,000 bpd in 2010 to 8.9 million bpd in 2024. Of that, the Permian accounts for over 6 million barrels daily. But here’s the thing. In the same period, conventional oil production onshore declined from 2.4 million bpd in 2010 to 2.1 million bpd in 2024. This is certainly not a sharp decline, but it is a decline, and it might be noteworthy because growth in the Permian is starting to slow down as well. Not everyone is in agreement about the reasons. The exhaustion of top-tier acreage is certainly a fact, but opinions differ as to what comes next—a gradual and irreversible decline or another boom down the road. Top executives at major shale firms have already said that Permian oil production could hit its peak as early as the end of this decade. This is because some parts of the play have hit geological limits while others, yet to be drilled, are not expected to be as prolific as that top-tier acreage that the industry is running out of currently. Yet others, such as industry vet and commentator David Blackmon, argue that there may be another boom still left in the Permian. Granted, it probably won’t be the same as the original boom in the earlier 2000s, but there is still a lot of oil and gas left underground—it just needs the right price. It also seems to need the right producer configuration, namely a more consolidated industry with fewer but larger companies with greater resources in terms of cost efficiency by virtue of their sheer size and structure. Back in 2017, oil production in the Permian stood at 2.2 million barrels daily. Today, the Permian is producing over 6 million barrels daily, accounting for nearly half of the U.S. total, including both onshore and offshore production. This is truly impressive growth that is currently only comparable perhaps to Guyana’s meteoric rise to oil stardom. But this rate of production growth is unsustainable, at the very least, because of technical constraints. Shale wells get drilled faster, start producing faster and, unsurprisingly, deplete faster. There is also the issue of the oil-to-gas ratio in the yield. Pressure within the reservoir declines as more oil is brought to the surface, which allows more natural gas to be released from the geologic formation, so the ratio changes in favor of gas. Add cost considerations and the dominant expectation among analytical outlets that the Permian will slow down this year, and over the medium to long term, it starts to sound like the only reasonable expectation for the region. Wood Mackenzie recently forecast that production in the Permian will peak at 7.7 million barrels daily. This should happen around 2035, the consultancy said. But this will not be the end of the Permian—because when it reaches this level, production will stay there for a while. There will be no falling off a cliff for Permian oil output. At this level, Permian production will continue to offset declines in other shale plays, keeping the U.S. national total at a stable level. “It’s going to be a slow decline beyond that because there’s a lot of resource,” ConocoPhillips’ Ryan Lance said about the Permian recently. Occidental’s Vicki Hollub, for her part, said that peak U.S. production will occur sometime between 2027 and 2030, “and after that some decline.” Both predictions are quite guarded and rightly so. After all, no one really expected the original shale boom. This is the interesting thing about the oil industry, in fact, and this is why, although U.S. crude oil production may be heavily reliant on the Permian for its growth, this is not necessarily cause for worry. As long as there is demand for the product, which makes supply growth economically justifiable, there will be supply. It really is as simple as that.