Widespread Russian oil price violations likely took place in Asia in the first quarter
Widespread breaches of the Group of Seven oil price cap likely took place in Asia in the first quarter, according to a team of researchers who analyzed official data on Russia’s foreign trade alongside shipping information. In December, the G-7 imposed a $60 a barrel price cap on Russian oil, barring companies in those nations from providing a wide range of services, particular insurance and shipping, if the cargoes were bought above that level. But in the first quarter of this year, almost all the oil from the Pacific port of Kozmino sold for well above $60 and over half the shipments were carried out using some type of G-7 service, according to a study of trade and shipping data by KSE Institute, a part of the Kyiv School of Economics that’s pushing for stiffer enforcement. “The fact that a substantial share of voyages from Kozmino involves Western-owned and/or -insured vessels while essentially all transactions show prices above $60/barrel points to potentially considerable price cap violations,” the researchers said. The data underpin concern that was raised on April 17 in an alert by the US Treasury that violations could be happening for shipments from Kozmino. While the report suggested ways in which sanctions enforcement could be bolstered, it also painted a bigger picture of plunging prices for Russian oil because of a European Union imports ban, hurting the Kremlin’s access to petrodollars to fund its war in Ukraine. Russian oil was exported at an average price of $58.62 a barrel in the first three months of the year, the study showed. The average price in the four weeks of December that followed the cap was $73.70. The European Union stopped buying almost any Russian oil at the end of last year and simultaneously joined the G-7’s cap. Europe’s embargo was the driving force behind the depressed prices, rather than the price cap, according to the report’s authors Benjamin Hilgenstock, Elina Ribakova, Nataliia Shapoval, Tania Babina, Oleg Itskhoki and Maxim Mironov. Prior to the ban, the EU had been the biggest buyer of Urals, Russia’s top export grade. Once the 27-nation bloc’s measures began, Russian barrels had to discount at the point of export in order to win customers in India and China, and freight bills also soared. “Demand conditions changed dramatically, resulting in sharply lower prices,” researchers said. The exports that were analyzed mostly reflected deals where the buyers paid for transport, the cost of which remains extraordinarily high. Urals at the point of import cost about $18 a barrel more than at the point of export price in March, according to data from Argus Media Ltd., whose prices are at the heart of the G-7’s price-cap program. “We can speculate that a portion of shipment costs may ultimately end up in Russia,” the authors of the report said in a separate comment to Bloomberg about the spread between export and import prices. The research is based on a database of Russian crude oil and oil product exports drawing on data from Russian authorities, statistics from trading partners, information from commercial data providers, investigative reporting, and material provided by the Free Russia Foundation.
MGL to expand into CBG, LNG & EV segments
In a bid to diversify its portfolio, state-run city gas distributor (CGD) Mahanagar Gas Ltd (MGL) is planning to expand into business areas other than city gas distribution (CGD), a senior executive said. The company is planning to enter the compressed biogas (CBG) segment, the electric vehicles market, equipment manufacturing for CGD companies and retailing LNG as fuel for long-haul transportation. “We have some cash on our balance sheet and we would like to expand our portfolio in terms of seeing how we can make its best use,” said Ashu Shinghal, managing director, MGL. “Our net worth is around ₹4,000 crore. We are a zero-debt company, so we can also take a loan in case required,” added Shinghal. Last month, MGL acquired 100 percent shareholding of Unison Enviro Pvt. Ltd. (UEPL) for ₹531 crore to enter new geographical areas for pursuing inorganic growth opportunities. MGL said Unison Enviro would become a subsidiary and would be rebranded.
Top 10 Countries With Largest Oil Reserves
We all know who the biggest producers of crude oil in the world are and can list the top three without effort. But here’s the thing – the biggest producers are not necessarily the countries with the biggest reserves. There are various reasons for that, as we shall see below. For now, suffice it to say it is one thing to have a natural resource and quite another to develop it fully. Here are the top ten countries richest in crude oil in ascending order. #10 Libya The North African country is estimated to have some 48.3 billion barrels of crude oil in reserves. Yet it is a relatively minor producer, with its daily average at around 1.2 million barrels. Political instability and power struggles among different factions following the civil war is the main reason for Libya’s consistent trouble in making the most of its oil resources. Yet it seems things may be starting to turn around with Europe looking to the North African country as a bigger source of oil. #9 USA Sources estimate the U.S. crude oil reserves differently. Some, such as the Energy Information Administration, put these at a little under 36 billion barrels and count condensate reserves separately. Others, such as the World Population Review, count crude and condensates together, coming up with reserves of 68.8 billion barrels for the U.S. Per the EIA figures, crude and condensates together come in at around 74 billion barrels. Yet the country is the biggest crude oil producer in the world. #8 Kuwait Kuwait has some 101.5 billion barrels in proven oil reserves, according to OPEC. The tiny Gulf state produces between 2.4 million and 2.67 million barrels of oil daily and exports some 1.7 million bpd. Related: Four Scenarios That Could Send Oil Prices To $200 The state has big plans for its oil riches – by 2030, Kuwait Petroleum Corporation plans to boost the country’s production capacity to as much as 4 million barrels daily. Clearly, Kuwait is not particularly worried about predictions anticipating the demise of oil demand. #7 UAE OPEC’s third-biggest oil producer, the United Arab Emirates, holds an estimated 111 billion barrels of crude oil and produces an average of 2.7 million barrels of it daily. Of this, it exports 2.3 million barrels daily, according to OPEC data. Besides a major oil producer and home to some of the world’s biggest reserves, the UAE is also an example of an economy that is using its main export commodity to diversify away from it. Thanks to its oil wealth, the UAE has turned into a luxury tourism magnet and has high hopes as a high-tech hub. #6 Russia Russia has some 80 billion barrels in proven crude oil reserves, according to the EIA, and as of this month, produces around 9.4 million barrels daily, excluding condensates. A couple of years ago, Russia was producing more than 11 million barrels daily, including condensates, but the invasion of Ukraine and the Western sanctions that followed prompted a response, and one of the forms it took was a production cut. Even so, exports of crude and fuels have returned to pre-war levels. #5 Iraq Iraq, OPEC’s number-two producer, is home to proven reserves of some 145 billion barrels, with production at around 4.5 million barrels daily. Exports average 3.4 million bpd but, like Kuwait, Iraq has big plans. Baghdad’s ambition is to match the output of its bigger fellow OPEC member Saudi Arabia but, according to analysts, it won’t be able to do that, with production capacity seen peaking at some 6.3 million barrels daily over the next five years. #4 Iran Iran has oil reserves of 208.6 billion barrels and produces around 2.39 million barrels daily. Of this, it only exports a little over 760,000 bpd, per OPEC data. The reason for the substantial gap between reserves, production, and exports are, of course, U.S. sanctions that the former administration re-imposed on Iran. Despite the sanctions—and the failed negotiations for their removal—Iran has been exporting more crude, topping 1.13 million bpd in late 2022 and starting this year on an upward trajectory, too. There are plans to boost production as well. #3 Canada Canada is home to 171 billion barrels of crude oil, most of it in the form of bitumen in oil sands: as much as 166.3 billion of the total is oil sands, concentrated in Alberta. That’s a tenth of the world’s total oil reserves. The country is the fourth-largest oil producer in the world, with its daily average at over 5 million barrels last year—a record high. Interestingly, production is on the rise despite the federal government’s efforts to shrink the industry because of its carbon footprint. Demand for oil, however, keeps producers pumping. A recent Ipsos survey found that Canada is also the most preferred oil supplier on a global scale. #2 Saudi Arabia The world’s second-largest producer and OPEC’s largest, Saudi Arabia, has proven reserves of some 267 billion barrels. Production was a little over 9 million barrels daily in 2021, which rose to 11.5 million bpd in 2022, only to be cut recently by half a million bpd as part of the latest round of output cuts in OPEC+. Despite its tight hold of the production reins, the kingdom plans to expand its production capacity from the current 12 million barrels daily to 13 million barrels daily in 2027. Some analysts, however, have warned that Saudi Arabia is close to reaching its oil peak. #1 Venezuela One of the most troubled countries in the world, Venezuela is also the country with the world’s largest oil reserves, pegged at over 300 billion barrels. Yet U.S. sanctions, a now chronic economic crisis, and corruption have combined to prevent the country from making the most of its oil riches. After a period of flourishing in the nineties and early 2000s, the first oil price slump of the new millennium crippled the Venezuelan economy. Before it had a chance to recover, the U.S. slammed
Petroleum product exports from India decline by 10.9% in March 2023
According to the monthly data by the Petroleum Planning and Analysis Cell (PPAC), a body of petroleum ministry, India’s export of petroleum products decreased by 10.9 per cent in March 2023. As per the data, the petroleum products witnessed a decline of 2.7 per cent during April 2022-March 2023 as compared to the corresponding period of the previous year. Decrease in POL (petroleum, oils and lubricants) products exports during April -March 2022-23 were mainly due to decrease in exports of motor spirit (MS), naphtha, superior kerosene oil (SKO) and high speed diesel (HSD),” it said. This comes after India’s crude oil imports increased by 8.9 per cent and 9.5 per cent during March 2023 and April 2022-March 2023, respectively. As per reports, the production of indigenous crude oil and condensate production was down by 1.7 per cent in March 2023. Crude oil processed increased by 5.6 per cent during April-March 2023 as compared to last year. The petroleum product imports decreased by 0.7 per cent and increased by 12.3 per cent during March 2023 and April 2022-March 2023, respectively.
India could rely on Russia for half its oil imports soon as Moscow continues to sell cheap barrels
Russia accounted for 30% of India’s oil imports in March, according to a Nikkei analysis, and that new high could jump further to 40%-50% in April. That figure is up from less than 2% in January 2022, just before Russia invaded Ukraine and when India at the time primarily relied on the Middle East for its oil. With a series of Western sanctions and price cap mechanisms imposed on energy supplies coming out of Moscow, Russia’s benchmark Urals crude is trading at about $65, about 20% lower than Brent crude, the international benchmark. The discount has encouraged countries that haven’t shunned Russia for its war on Ukraine to snap up cheap supplies. In March, India imported over 6 million tons of Russian oil, and China imported over 4.7 million tons, per Nikkei, second to India. Beijing’s dependence on Russia hit 10% of its oil imports, the report said. With Europe largely out of the picture now, India and China are responsible for roughly 90% of Russia’s oil export volumes, per Kpler data. Led by their demand, Russia’s crude exports have since returned to pre-war levels, the International Energy Agency reported in April. In the first quarter, Russian seaborne crude exports hit 3.5 million barrels a day, compared to the 3.35 million barrels in the year-ago quarter. To be sure, Russia’s export revenues are 43% lower than a year ago despite its elevated sale volumes as prices have fallen, per the IEA.
India’s crude imports at record high in 2022-23
India’s crude imports rose during the April 2022-March 2023 fiscal year to a record high because of increased fuel demand and lower domestic crude production. Imports rose to 232.56mn t (4.67mn b/d) during 2022-23, up by 9.5pc from a year earlier, according to preliminary oil ministry data. This is the highest level since the ministry began publishing data in 1998-99. Imports were last highest at 4.55mn b/d during 2018-19. Imports rose in 2022-23 as fuel demand hit an all-time high of 222.3mn t, up by 8.8pc from 204.23mn t during 2021-22, while domestic crude production fell to 586,000 b/d from 596,000 b/d over the same period. Imports also rose because of record purchases from Russia, which increased to 1.14mn b/d against 92,000 b/d a year earlier. Receipts rose for the fifth straight month in March and above 1mn b/d for the tenth consecutive month, Vortexa data show. India stepped up its purchases of discounted Russian oil, taking advantage of the embargo imposed by many developed countries like the US and regions like the EU on Russian exports following the conflict in Ukraine from February 2022. India’s total crude imports rose to 4.9mn b/d in March, up by 8.9pc from a year earlier but fell by 2.9pc from February. India’s crude import dependency rose to 87.3pc in 2022-23 from 85.5pc a year earlier and 84.4pc during 2020-21, according to oil ministry data. Import dependency was at 88.6pc in March compared with 87.7pc a year earlier. India is seeking to reduce import dependency by boosting domestic crude output to meet demand, according to oil minister Hardeep Singh Puri in November 2022. The government is focusing on increasing oil exploration, with development of sedimentary basins rising from 6-7pc in 2021 to 15pc, Puri had said. Indian crude demand was at 5.14mn b/d in 2022 and will rise to 5.39mn b/d this year, according to Opec’s Monthly Oil Market Report for April.
Oil Prices Unmoved Despite Large Crude Draw
Crude oil inventories in the United fell this week by 6.083 million barrels, the American Petroleum Institute (API) data showed on Tuesday, with analysts expecting a 1.667 million barrel draw. The total number of barrels of crude oil gained so far this year is still more than 38 million barrels. This week, SPR inventory dropped for the fourth week in a row losing 1.1 million barrels for the week to reach 366.9 million barrels—the lowest amount of crude oil in the SPR since October 1983. U.S. crude oil production held steady during the week ending April 14, at 12.3 million bpd. U.S. production is now 800,000 bpd lower than the peak production seen in March 2020, but 400,000 bpd higher than this time last year. The price of WTI was trading down on Tuesday in the run-up to the data release, well below $80 per barrel on renewed market fears over a possible bank collapse contagion after Q1 figures from First Republic bank showed deposits were down 40%. Brent crude was also trading down on the day. By 4:20 p.m. EST, WTI was trading down $1.67 (-2.12%) on the day at $77.09 per barrel, a loss of about $3.70 per barrel on the week. Brent crude was trading down $2.03 (-2.45%) on the day at $80.71—down roughly $4 per barrel from this same time last week. WTI was trading at $77.13 shortly after the data release. Gasoline inventories fell also, by 1.919 million barrels after falling in the week prior by 1 million barrels. Distillate inventories rose by 1.693 million barrels after decreasing by 1.9 million barrels in the week prior. Inventories at Cushing, Oklahoma, increased by 465,000 barrels—after falling by 600,000 barrels last week.
Russia on track for 2023 oil output of 9.6 mbpd in line with cuts
Russia’s oil output this year is on course to top 480 million tonnes, or about 9.6 million barrels per day (bpd), a Russian government source familiar with the data told Reuters. The figure, which excludes gas condensate, is in line with Russia’s pledge to cut production by 500,000 bpd to 9.5 million bpd from March until year-end, according to Reuters calculations and the source. “If you extrapolate for the whole year, production will be 480 million tonnes,” the source told Reuters on condition of anonymity due to the sensitivity of such data. Russia’s energy ministry did not reply to a request for comment. OIL AND CONDENSATE In 2022, Russia’s combined oil and gas condensate production rose to 535 million tonnes (10.7 million bpd). Condensate is excluded from the production quotas used by the OPEC+ producers group for Russia. Such production may reach around 520 million tonnes (10.4 million bpd) this year, according to the source, taking some 40 million tonnes of gas condensate into account. That is significantly higher than official forecasts which put Russia’s expected 2023 oil and gas condensate production at between 490 million and 500 million tonnes (9.8 million to 10 million bpd).
India to remain unaffected by Pakistan’s purchase of Russian oil: Experts
Pakistan placed its first order for discounted crude oil from Russia after the latter diverted most of its supply to Asian countries. India and China have emerged as the major consumers of Russian crude oil since the war broke out between Moscow and Ukraine In March, Russia supplied 1.64 million barrels per day (bpd) of crude to India — becoming the country’s largest supplier. Energy experts believe that India would be unaffected by Pakistan sourcing crude from Russia as India has a much bigger appetite than its neighbour. Hitesh Jain, Lead Analyst at Yes Securities, said, “Pakistan is a small economy. Its (crude oil) requirement is one-sixth of India’s, hence, Pakistan cannot cannibalise India’s share in Russian oil exports.” Pakistan is going through a serious economic crisis as the country’s currency has fallen to a record low. The country, which is highly dependent on imported fuel, is on the verge of economic collapse. Reuters reported that Pakistan will buy only crude oil from Russia, and not refined fuels. Imports are expected to reach 100,000 bpd if the first transaction goes through smoothly, a Reuters report said. Diverting oil to Asian countries Russia has been diverting the supply of its crude oil to Asian countries, especially India and China, at discounted rates as the European Union (EU) and the US have imposed a slew of sanctions on Moscow. “In the medium term, Europe does not seem likely to source crude from Russia. Therefore, Russia is building a relationship with countries in Asia to supply its oil to them. The deal with Pakistan is one such attempt,” said an analyst with a domestic brokerage firm who did not wish to be identified. Russia’s share in India’s import basket, which was less than 1 percent until January 2022, has now increased to over 30 percent. The Eurasian country has been the top supplier of crude to India for the last six consecutive months, from October 2022 to March 2023. Discounted Russian oil One of the major factors for Russia becoming India’s top crude oil supplier is the discounts offered by the country. Experts say that the discounts offered by Russia might go away with Moscow increasing the number of destination countries for its crude. Prashant Vasisht, VP and Co-head of Corporate Ratings, ICRA, said, “Though the availability of Russian crude oil would not be a problem, with more countries buying Russian oil the discounts may go away.” India has been enjoying discounts on Russian crude since February last year. Moneycontrol had reported in December 2022 that India is estimated to have saved over Rs 350 billion by importing cheap Russian crude since February 2022, when Russia sent troops into Ukraine.
Piped natural gas growth remains slow in India despite government push
The government has been pushing for the use of piped natural gas (PNG) in households, with the objective of increasing the share of natural gas in India’s energy basket. But most Indian kitchens still depend on the traditional energy source, liquefied petroleum gas (LPG) cylinders, as the PNG rollout continues to be slow due to infrastructure bottlenecks and even consumer hesitancy. According to government data, over 10 million PNG connections had been provided by city gas distribution (CGD) companies as of 31st January. Compared to this figure, LPG connections had soared to 313.6 million by the end of March. India aims to raise the share of natural gas in its energy mix to 15 percent in 2030 from a little over 6 percent now. Experts say that LPG and PNG have almost the same price in terms of energy units. PNG, however, is more convenient as consumers do not have to bother booking new cylinders “PNG connections are hassle-free compared to gas cylinders but the hesitance lies in giving the one-time security deposit of around Rs 6,000 while getting a new connection. Most people already have LPG connections, so they continue using that,” said Prashant Vasisht, VP and Co-head of Corporate Ratings, ICRA. Companies have lately been offering incentives such as EMIs for the deposit to promote PNG connections, Vasisht added. He, however, pointed out that at times consumers face billing-related issues with PNG connections as well. The Central government wants to provide 123.3 million PNG connections across the country by 2030. PNG price drop Major gas players have reduced prices of domestic PNG this month after the government accepted the Kirit Parikh committee’s recommendations on the gas pricing mechanism. In April, Indraprastha Gas Ltd (IGL) lowered the price of domestic PNG by Rs 5 per unit, bringing PNG prices in the national capital down to Rs 48.59 per SCM (standard cubic metre) from Rs 53.59. On the contrary, the price of a domestic LPG cylinder increased by Rs 50 per cylinder in March. A 14.2 kg domestic gas cylinder in Delhi now costs Rs 1,103, against Rs 1,053 earlier, an increase of 4.75 percent. The price was increased after eight months. Hurdles in PNG expansion Experts say that commercial viability is one of the biggest hurdles in expanding PNG infrastructure across the country. “Laying of pipelines is an expensive process as companies have to dig up roads and get official permissions for various procedures,” said Deepak Jasani, Head of Retail Research at HDFC Securities. Jasani added that in tier 2 and tier 3 cities, the return on pipelines is not assured as many areas in these cities are not densely populated and consumers may prefer to stick with gas cylinders.