Russia Is Losing The Energy Battle
“Russia has lost the energy battle,” Fatih Birol, Executive Director of the International Energy Agency (IEA), told French newspaper Liberation in March, a year after Russia invaded Ukraine. In the year and a half since Putin ordered troops into Ukraine and cut off natural gas supply via pipeline to many EU customers, Europe has managed to replace much of the piped gas with LNG imports, and has banned imports of Russian crude and petroleum products. The U.S. has stepped up to fill part of the oil and gas supply gap left by Russia. It was quite a gap, and American oil producers and exporters of LNG have been happy to fill it. “Trade flows have been turned on their head with Middle East and the US exporters the key beneficiaries,” Amrita Sen, head of research at consultancy Energy Aspects, told the Financial Times. Russia Loses European Energy Market Since the invasion of Ukraine, Russia has lost Europe as an energy customer and is now reduced to China and India for selling its crude oil. China and India are the world’s largest and third-largest crude oil importers, respectively, so the potential Chinese and Indian markets for Russian crude are huge. However, we may have already seen peak Indian crude oil imports from Russia, analysts say. Europe, for its part, is buying more oil and gas from the United States and is signing long-term LNG supply deals with U.S. exporters—deals that were not so ‘welcome’ in Europe just two years ago when climate goals were top of developed nations’ energy priorities. Russian gas is neither sanctioned nor embargoed anywhere, but some buyers in North Asia may have become wary of depending on Russian LNG too much. Before the war and the embargoes on its oil, Russia accounted for nearly 40% of all European imports of crude, refined products, and natural gas. Currently, the EU doesn’t import Russian crude, except Bulgaria, due to an EU derogation until 2024. Natural gas supply via pipelines from Russia now accounts for less than 10% of the EU’s gas supply, down from nearly 40% before the Russian invasion of Ukraine. Europe’s single biggest gas supplier now is Western Europe’s top oil and gas producer Norway, a close EU ally and a founding member of NATO. Some Asian Customers May Be Nearing Limits For Russia’s Energy As Europe is shifting away from Russian fossil fuels, Asian customers China and India have become the key customers of Russia’s crude. India’s oil imports from Russia continued to surge in the first half of 2023 as cheaper Russian crude exports find more and more buyers in the world’s third-largest crude oil importer. More than a year since the war began, India has turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo. But India may have seen the peak crude imports of Russian crude, due to infrastructure constraints and the need to keep good trade relations with other crude oil suppliers, according to analysts at Kpler. “India will look to continue Russian crude imports, but perhaps it has reached its limit, hampering any additional barrels,” Janiv Shah, senior analyst at Rystad Energy, told CNBC this week. In natural gas, Asia looks to have limited spot purchases of Russia’s LNG, as major buyers in North Asia are estimated to have slashed imports from Russian export projects to the lowest in two years. Buyers are looking to diversify and avoid potential future problems with payments and deliveries, according to Bloomberg. U.S. Oil And Gas Exporters Win As buyers in Europe retreated from Russian oil, U.S. crude oil exports to Europe rose and are expected to continue rising. Last year, Europe ranked a close second after Asia in terms of U.S. crude oil purchases. European imports of crude from the United States averaged 1.51 million barrels per day (bpd) in 2022, accounting for 42% of American crude exports, just shy of the 43% of U.S. exports that went to Asia, per EIA data. “EU sanctions implemented in December 2022 that prohibit all seaborne imports of Russia’s oil to Europe make it likely that demand for U.S. crude oil will continue in 2023,” the EIA said earlier this year. “The US came out ahead with rising oil and gas exports and a new multibillion congressionally mandated plan to win in clean tech,” Amy Myers Jaffe, a New York University research professor and energy expert, told FT. In the LNG market, Europe and China are in an intensifying competition to sign long-term supply deals with U.S. LNG developers and exporters. Long-term LNG contracting has seen a flurry of deals in recent months, including from buyers in Europe, where energy security has taken center stage at the expense of concerns about emissions from natural gas imports. For the U.S. LNG developers and exporters, more long-term purchase deals with Europe – and Asia – mean more chances for projects to contract future volumes from planned export facilities and underpin financing and final investment decisions for a greater number of U.S. LNG export terminals.
VOC Port allots land to ACME for green hydrogen plant
V O Chidambaranar Port Authority, the state-owned entity that runs the port at Thoothukudi in Tamil Nadu, has issued a letter of intent to ACME Cleantech Solutions Pvt Ltd to lease 222.79 acres of port land for setting up a green hydrogen and green ammonia project with an investment of Rs 52,474 billion. V O Chidambaranar Port has become the first port in India to allocate land for production and export of green hydrogen. The land will be leased on annual rentals set by the port authority for 30 years, government sources said. V O C Port Authority has also leased 10 acres of land to ReNew Power Ltd for storage and export of green hydrogen and ammonia. The ACME plant will produce 3,000 tonnes per day of hydrogen. ACME and ReNew Power were among 25 entities that responded to an expression of interest issued by V O C Port Authority to set up green hydrogen and green ammonia projects on port land.
Pakistan to import 100,000 tonnes of Russian oil every month
In a bid to ensure cheap energy in the country, the government will import 100,000 tons of Russian crude oil every month. The Minister of State for Petroleum, Dr Musadik Malik, while talking to reporters here on Saturday said that the government is making all-out efforts to ensure the supply of cheap energy in the country. He said Russian crude oil is cheaper than other oils in the global market. The State Minister said that the government is expected to sign an agreement with Azerbaijan to buy cheap LNG very soon. He said that the deal to buy cheap LNG would be made, keeping in mind the local demand and condition of the country’s foreign exchange reserves. He also announced that private sector is allowed to purchase cheap LNG for their industry. However, he made it clear that the private sector will not be allowed to resale the cheap LNG. He said an agreement with Saudi Arabia for setting up oil refinery in Pakistan with the estimated investment of $10 billion is also expected soon.
Domestic crude oil production at 2.4 MMT in June, import bill declines to $9.5 billion YoY: PPAC
India produced a total of 2.43 million metric tonnes (MMT) of crude oil in June 2023, compared to the same level of 2.4 MMT reported in the year-ago period, according to Petroleum Planning & Analysis Cell (PPAC). Out of 2.5 MMT, Oil and Natural Gas Corporation (ONGC) produced 1.6 MMT of crude oil while Oil India Limited (OIL) and private sector producers contributed 0.27 MMT and 0.56 MMT, data released by the Oil Ministry showed. Crude oil imports increased by 0.6 per cent and decreased by 1.2 per cent during June 2023 and April-May 2023 respectively, compared to the corresponding period of the previous year. The net import bill for oil and gas was $9.5 billion in June 2023 compared to $13 billion in June 2022, according to PPAC. Out of this, the crude oil imports constitutes $10 billion, liquified natural gas (LNG) imports stood at $1.4 billion and the exports were $3.5 billion during June 2023, the data showed. During June 2023, the Indian basket crude price averaged $74.93 per barrel as against $74.98 per barrel during May 2023 and $116.01 per barrel during June 2022. The price of Brent Crude averaged $74.70/bbl during June 2023 as against $75.55/bbl during May 2023 and $123.70/bbl during June 2022. The production of petroleum products came in 23.1 MMT during June 2023 which is 4.6 per cent higher than June 2022, where 22.8 MMT was from refinery production and 0.3 MMT was from fractionator. On the other hand, natural gas consumption (including internal consumption) for June 2023 stood at 5,066 MMSCM (million metric standard cubic meters), which was 1.2 per cent lower than the corresponding month of the previous year, according to the official data. The cumulative natural gas consumption for the current financial year till June 2023 stood at 15,943 MMSCM, which was higher by 1.2 per cent compared with the corresponding period of the previous year. In addition, LNG import for June 2023 was 2,221 MMSCM which was 1.6 per cent lower than the corresponding month of the previous year. The cumulative import of 7,590(P) MMSCM for the current financial year till June 2023 was higher by 4.4 per cent compared with the corresponding period of the previous year. India is dependent on imports to meet over 85 per cent of its crude oil requirements and around 50 per cent of its natural gas requirements.
Russia is not ruling out quotas on fuel exports, deputy PM says
In a bid to stabilise global gasoline (petrol) prices, Russia may consider introducing quotas on the export of oil products, news agency Reuters quoted Russian Deputy Prime Minister Alexander Novak as saying on Friday. Gasoline wholesale prices are currently at an all-time high amid risk-on sentiment in broader markets and signs that Russia is making good on its pledge to curb supplies. Average gasoline prices at Saint-Petersburg International Mercantile Exchange (SPIMEX) rose on Wednesday by 1.8% to 62,653 roubles ($694.5) per tonne, reaching a new all-time high. As Russian oil is becoming more expensive, buyers such as India are now considering boosting purchases from traditional sources in the Middle East instead. Adding to supply shortages, Moscow aims to reduce its third-quarter crude export plans by 2.1 million tons, in line with its previously stated pledge to cut overseas shipments by 500,000 barrels a day. Earlier pledges by Russia and Saudi Arabia to cut back production helped spark the rally in crude that started in late June. “In principle, it is being considered. But there are other proposals too. We need to weigh the pros and cons,” he replied to a question on possible quotas for oil products exports, the RIA news agency reported. He added that some refineries had postponed planned maintenance to a later date to meet rising demand. An increase in production at refineries could facilitate Russia’s pledge to cut crude oil exports by 500,000 barrels per day in August in order to prop up the global oil market, Reuters report said. IIndia bought 60% of all Russian Urals oil exports in June with strong demand from all refiners, while shipments to China dropped to just 7% as independent refiners slowed buying, trading sources and Refinitiv Eikon data showed. Russia produces several different types of crude oil, but its main export blend is Urals, which is a medium sour crude, per IEA. Urals is Russia’s main export grade from its European ports and represents about a half of total Russian oil exports. The country, subject to severe Western sanctions over its actions in Ukraine, also exports oil from its Pacific ports, its Arctic ports and via a direct pipeline to China. The steep discounts on Russia crude oil that India gorged on since the Ukraine war, have plunged but the shipping rates charged by Russia-arranged entities continues to remain ‘opaque’ and higher than normal, sources told news agency PTI recently. Russia bills Indian refiners at a price shade less than the USD 60 per barrel price cap imposed by the West but charges anything between USD 11 to USD 19 per barrel, twice the normal rate, for delivery from the Baltic and Black Sea to the west coast, three sources with knowledge of the matter said. The USD 11-19 per barrel shipping costs from the Russian ports to India – some of it on the 100+ tankers reportedly acquired by Russian actors for a shadow fleet – are higher than rates for comparable distances, such as a voyage from the Persian Gulf to Rotterdam. Russia has heavily relied on India, China, Turkey and Bulgaria for oil sales since the imposition of sanctions. Retail fuel prices have been relatively stable as they are being regulated by the state.
Oil Prices Set For Fourth Consecutive Weekly Gain As Supply Tightens
Oil prices were up slightly in Asian trading early on Friday and set for a small weekly gain, the fourth in a row, as the market is starting to see signs of tightening supply. WTI Crude was up by 0.91% at 76.34 in Asian trading, while the international benchmark, Brent Crude, traded 0.88% higher at $80.34. Both benchmarks were on course to finish the week higher. However, gains have been limited, after China reported early this week second-quarter GDP growth below expectations. But the market is now more optimistic that China will roll out more stimulus to support domestic demand and help its economy which has struggled to rebound strongly after the end of the Covid lockdowns more than six months ago. China vowed on Tuesday that it would “formulate and introduce more effective policies for restoring and expanding consumption as soon as possible.” This pledge has improved sentiment across the commodity markets. While the economic data from China and the U.S. remain mixed, the fundamentals are increasingly pointing to a tighter oil market this summer. Russian crude oil exports have shown signs of decline for a second consecutive week and are estimated to have sunk to a six-month low in the four weeks to July 16. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month. Saudi Arabia’s crude oil exports have also started to decline, to below 7 million bpd in May, for the first time in many months. Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August. In the United States, crude oil and gasoline inventories dropped last week, the EIA’s weekly data showed on Wednesday.
After outlier record high global diesel cracks in 2022, margins plunge
Russia’s invasion of Ukraine in February last year pushed diesel and petrol cracks to record in the following quarter, giving oil refiners globally unprecedented profits but they have crashed this year, denting refiners’ profits. A crash in global cracks in April-June this year will shrink profits of refiners when compared with the outlier period of last year, an analysis of data and industry experts said. Rising demand, low inventories and oil market disruption centered around Russia’s invasion of Ukraine pushed cracks — the differential between a barrel of crude oil (raw material) and the petroleum products refined from it — upwards starting March last year. Diesel cracks shot to over USD 30 per barrel and petrol inched closer to USD 20 and the upward trajectory continued in April-June quarter. Diesel cracks in June last year soared to USD 74.95 a barrel while petrol cracks neared USD 42. Jet fuel cracks soared to USD 62. An analysis of data for past five years showed petrol cracks barely touching double digits, while diesel cracks never crossed USD 20. That rise gave refiners bumper profits but now when the margins have stabilised to near normal levels, the earnings would look dwarfed, experts said. Diesel cracks in June this year hovered between USD 16 and 19 while petrol cracks were in the range of USD 10 and 14. This unusual situation will result in refiners reporting lesser earnings in the April-June quarter, they said. Reliance Industries Ltd, the operator of the world’s largest single location refining complex, is due to announce its first quarter earnings on Friday. Indian Oil Corporation (IOC), the nation’s largest oil firm, would announce Q1 results on July 28 and Bharat Petroleum Corporation Ltd (BPCL) would do so on July 26. Global petrol prices crashed in June, denting refiners’ profits, pushing up inventories in key trading hubs around the world. Margins on petrol in Asia have plunged more than 102 per cent in July to a discount of 14 cents a barrel to Brent crude — the lowest for this time of the year since at least 2000, the data showed.
Crude oil boosted as EIA forecasts price rise in H2
Crude oil futures traded marginally higher on Thursday morning as the US Energy Information Administration (EIA) estimated an increase in crude oil prices through 2024. At 9.53 am on Thursday, September Brent oil futures were at $79.53, up by 0.09 per cent, and September crude oil futures on West Texas Intermediate (WTI) were at $75.38, up by 0.12 per cent. August crude oil futures were trading at ₹6,196 on Multi Commodity Exchange (MCX) in the initial trading hour of Thursday morning against the previous close of ₹6,206, down by 0.16 per cent, and September futures were trading at ₹6,215 as against the previous close of ₹6,224, down by 0.14 per cent. US EIA forecast higher crude oil prices in the second half of 2023 and into 2024 because of moderate but persistent inventory drawdowns, which occur when demand exceeds supply. “We expect production cuts from OPEC members and forecast higher petroleum consumption will lead to an average inventory drawdown of 0.4 million barrels per day between July 2023 and the end of 2024,” it said. It forecast an increase in Brent crude oil price to mid-$80 a barrel by the end of 2024, up from the June 2023 average of $75 a barrel. It forecast a similar path for the WTI crude oil price, to maintain a discount to Brent of $5 a barrel. US EIA estimated that Saudi Arabia accounted for about 10 per cent of the global production of petroleum and other liquid fuels, or 10.1 million barrels a day, in June 2023. “We forecast OPEC production of petroleum and other liquid fuels will average 33.9 million barrels a day in 2024, down 1.2 million barrels a day from the group’s 2022 peak of 35.1 million barrels a day. These production cuts will keep total OPEC production below the pre-pandemic five-year (2015–19) average of 36.2 million barrels a day and reduce OPEC’s share of world production to 33 per cent in 2024, down from the pre-pandemic average share of 37 per cent,” it said.
India’s oil & gas import bill contracts 33% y-o-y in April-June quarter as prices drop
India’s oil and gas import bill contracted by a third from a year earlier to $35 billion in the April-June quarter as prices sharply dropped, as per the oil ministry data. Crude oil worth $31.4 billion was imported during the April-June period, lower than $48.1 billion in the same period last year. The volume of oil imports marginally reduced to 60.1 million metric tonnes (mmt) in the first quarter from 60.7 mmt in the same period last year. Liquefied natural gas (LNG) imports rose 4.3% in volume terms to 7590 mmscm but in value terms dropped 19% to $3.8 billion Oil and gas prices were extremely volatile in the April-June quarter last year due to the uncertainties induced by the Russia-Ukraine war and the consequent Western sanctions imposed on Moscow. The global crude benchmark Brent averaged $116 per barrel in the April-June of 2022. It was 35% lower at $76 per barrel in the same period this year.
HPCL setting up green hydrogen plant in Andhra: MoS Rameswar Teli
State-owned Hindustan Petroleum Corporation Limited (HPCL) is setting up a 370-tonne-per-annum electrolyzer-based green hydrogen plant at Visakh Refinery in Andhra Pradesh, Union Minister of State (MoS) for petroleum and natural gas Rameswar Teli informed Parliament on Thursday In a written reply to a question in Lok Sabha, the minister said the state-owned entity spent INR 110 million out of a total fund allocation of INR 330 million for this project. The scheduled completion date of the project is September this year, the minister added. Union Cabinet in early January approved the National Green Hydrogen Mission, aiming to make India a global hub for such technologies’ production, utilization, and export.