OPINION: Oil price will be driven by consumers rather than OPEC
Oil traders’ attention is focused this week on Vienna, where ministers from the Organization of the Petroleum Exporting Countries and its allies must decide whether to increase their output in the second half of 2018. But the direction of prices over the next year will be more influenced by less visible developments in the major oil-consuming countries, especially the United States, Europe, China and India. With available production capacity fairly fixed in the short-term, oil market rebalancing will depend on consumer reactions to higher prices Stocks of crude oil and refined products are now below their five-year averages and expected to continue falling in the second half of 2018 and through 2019. OPEC’s spare production capacity has shrunk to less than 2 million barrels per day (bpd) and is expected to fall to less than 1 million bpd by the end of 2019. OPEC and its allies are discussing an output increase of 1 million bpd or more to avert future shortages and stock declines. By adding barrels to the market now, OPEC can stabilise or even increase inventories and ease shortages later in 2018/19. But the cushion of spare capacity is already low and will shrink further as OPEC boosts its output, leaving the market without much capacity to absorb further disruptions. U.S. oil production is expected to rise by 1.4 million bpd in 2018 and another 1.1 million bpd in 2019 but may not be able to rise much faster because of pipeline bottlenecks. From the supply side, therefore, the oil market’s production capability now appears fairly fixed for the rest of 2018 and into 2019. Any further rebalancing will have to come from the demand side, where prices will have to rise high enough to moderate consumption growth. REARVIEW MIRROR Global consumption has increased by an average of 1.7 million bpd for the last three years, accelerating from an average of 1.1 million bpd in the three previous years. Slower growth in consumption will almost certainly have to play a significant role in pushing the oil market back towards balance. Benchmark oil prices have already risen by around 70 percent over the last year, which should help restrain consumption growth. The critical question is whether the rise in prices has already been enough to promote a slowdown, or whether prices will have to rise even further. The problem for traders and ministers trying to estimate the price needed to rebalance the market is that consumption responds to price changes with a delay of six to 18 months. And in most important consuming countries, reliable statistics on consumption are available only with a delay of three to four months. A sharp rise in prices almost always leads to a slowdown in consumption growth, especially in the advanced economies, but the slowdown is always more apparent in retrospect than at the time. By the time a slowdown shows up in official statistics, it will already be too late, and prices will probably have risen too high to be sustainable. In 2006-2008 and again in 2011-2014, surging oil prices resulted in a sharp slowdown in consumption growth in the advanced economies, though at the time many analysts dismissed signs of a slowdown. In both cases, the oil market was eventually forced back to balance, but not before prices had overshot on the upside, creating conditions for the subsequent collapse. Tim Williams Womens Jersey
Govt planning to set up bio-CNG plants in rural India soon: Oil minister Pradhan
Union Minister for Petroleum and Natural Gas Dharmendra Pradhan on Thursday said there are plans to set up bio-Compressed Natural Gas (CNG) plants in India. He made this comment after visiting a bio-CNG plant in Stuttgart, Germany, where he was briefed by officials on how agricultural waste can be converted into energy. Pradhan told ANI, “Materials like straw and dung are considered waste in India. This can be used to produce energy. I had come to see a plant that uses similar materials to produce bio-CNG. Such plants can be made in India. We are understanding the business model and technology. If it’s successful, we can set up bio-CNG plants in all villages of India.” Pradhan added that the Centre is working to ensure the doubling of farmers’ income by 2022. Explaining the working of a bio-CNG plant, Pradhan said, “The farmers first collect the agricultural waste. It is then processed and gives rise to raw gas. Then, it is converted into electricity. After certain mechanical and chemical processes, it gives rise to pure CNG, which can also be used in energy farming.” Asked where the central government was planning to set up such plants on a pilot basis in India, Pradhan said it could be done in some big villages and towns. Indian Oil Corporation (IOCL) Chairman Sanjeev Singh later said that Memoranda of Understanding (MOUs) have been signed in the energy sector with business partners. Pradhan is currently on a two-day visit to Germany, after attending the 7th Organisation of the Petroleum Exporting Countries (OPEC) International Seminar at the Imperial Hofburg Palace in Vienna, Austria on Wednesday. In the seminar, Pradhan stressed on the need for responsible pricing of fuel. “It is high time to move to responsible pricing, one that balances the interests of both the producer and consumer. We also need to move to transparent and flexible markets for both oil and gas,” he said. Pradhan further sought for the intervention of OPEC members to ensure sustainable fuel price. “Crude prices are creating stress throughout the global economy. It is giving pain to us in India. The global economic outlook already has threats from trade wars. My fear is that his will lead to energy poverty in many parts of the World,” he added. The Union Minister also pitched for “responsible pricing” which balances the interests of both producer and consumer. Isaiah Oliver Jersey
Australia says no longer faces natural gas shortfall before 2030
Australia no longer faces a looming gas shortage, thanks to government pressure on exporters to divert gas into the domestic market and reduced demand forecast for gas-fired power, according to the latest estimates from the nation’s energy market operator. “No supply gaps are forecast before 2030 under expected market conditions,” the Australian Energy Market Operator said on Friday in its annual outlook for gas. The outlook is starkly different from a year ago, when dire warnings from the market operator about potential shortfalls in eastern Australia from 2018 onward prompted the government to threaten to curb liquefied natural gas (LNG) exports. Wade Boggs Authentic Jersey
India’s crude oil production dropped 3 per cent in May on lower ONGC output
India’s crude oil production dropped 3 per cent to just over 3 million tonnes in May on the back of dip in output from fields operated by state-owned ONGC. Oil and Natural Gas Corp (ONGC) produced 1.84 million tonnes of crude oil in May as compared to 1.93 million tonnes in the same period last year, an official statement said here. The firm’s output in April-May dipped 4.3 per cent to 3.62 million tonnes. This resulted to a drop in the country’s oil production to 5.9 million tonnes from 6.03 million tonnes in April-May of 2017. Natural gas output dropped 1.4 per cent to 2,768 billion cubic meters in May as private sector firms like Reliance Industries produced less. Oil refineries, however, produced 6.8 per cent more fuel at 22.24 million tonnes in May with private sector units of Reliance and Nayara Energy operating at over 100 per cent capacity, the statement added. Chris Hogan Authentic Jersey
BPCL seeks extra Iran oil amid sanctions threat
Indian state refiner Bharat Petroleum Corp. has requested an extra one million barrels of oil from the National Iranian Oil Co. (NIOC) for June, two industry sources said, amid a looming threat of stringent U.S. sanctions. The move by BPCL indicates that refiners will try to front-load their purchases from Iran ahead of a November U.S. deadline for re-imposing sanctions on the country’s petroleum sector. Uncertainties cloud Iran’s oil exports after U.S. President Donald Trump abandoned a 2015 nuclear agreement this month and ordered the re-imposition of U.S. sanctions on Tehran. Some sanctions take effect after a 90-day “wind-down” period ending on August 6, and the rest, notably on the petroleum sector, after a 180-day “wind-down period” ending on November 4. “At this point of time Iranian crude is attractive … it is faring better than spot cargoes and other crudes,” said one of the sources. Free shipping Iran has agreed to provide almost free shipping to Indian refiners in 2018/19, an incentive that significantly reduces the landed cost of Iranian oil compared to rival regional grades. “When the going is good, BPCL thought it should take it,” this source said. BPCL did not respond to Reuters’ request for comment. Top client India is Iran’s top oil client after China and was one of the few nations that continued to trade with Tehran during the previous round of Western sanctions as New Delhi follows only the restrictions imposed by United Nations. So far India’s oil imports and payment mechanism have not been hit by the threat of U.S. sanctions. India’s Reliance Industries Ltd., owner of the world’s biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said this week, in a sign that new U.S. sanctions are forcing buyers to shun oil purchases from Tehran. Reliance’s move is expected to take effect in October or November. Europe visit An Indian delegation with officials from the finance, petroleum and foreign ministries will visit European nations for a week from Monday to explore ways to continue to trade with Iran despite U.S. sanctions, a government official said. European states have been scrambling to save the 2015 nuclear deal and planning a package of economic relief to persuade Iran to stay in the deal. “Europe has taken a position, which is different this time. This time we are in the same boat,” this official said. The Indian delegation would visit France, Germany, Britain and Brussels to meet governments and bankers. Currently India settles oil payments in euros through Germany’s EIH Bank. “(It’s) not only oil imports, we (European nations and India) are also impacted by concomitant things like banking. We will discuss all these and the way forward,” the official added. Rashod Hill Jersey
Revenue earned during lean crude market utilised for developmental projects: Piyush Goyal
Revenue earned by the government during low crude prices in the International market has gone into the developmental projects of various nature and magnitude, Union Minister Piyush Goyal said today. Goyal was talking to media here ahead of flagging of Bandra — Jodhpur Hamsafar Express from Bhagat ki Kothi railway station. “The revenue earned by the government during the lean crude market by not reducing the prices accordingly, has been utilised in developmental projects, which were of very high importance,” the Minister for Railways, Coal and Corporate Affairs said. On spurt in fuel prices He, however, said the government was concerned about the spurt in fuel prices in the country and the inconvenience caused to the common man because of the price rise. “It is matter of concern for us and we are working desperately on the issue to bring a reduction in the prices of fuel in order to provide relief to the common man,” Goyal said. The minister said Prime Minister Narendra Modi assumed office amid a highly adverse financial condition both on national and international level, but due to efficient and determined handling of the situation by the government, situation has come on track. “As a result the GDP which was around 4.5% then, has touched a mark of 7.5% on account of revolutionary steps,” he said. On GST Referring to GST, Goyal said it was passed unanimously for a radical change in the economy and the result was that the tax collection under GST has touched new high. He also said that not only on the financial front but the government has equally worked with efficiency on social security front. Jerome Baker Womens Jersey
Russia’s Rosneft: Oil product export curbs may help domestic market – Interfax
Russia’s largest oil producer Rosneft said on Thursday that restrictions on oil product exports should be one of the measures the government should look at to help stabilise the domestic fuel market, Interfax news agency reported. Retail gasoline and diesel prices have skyrocketed on the domestic market in Russia following a recent strong global oil rally as well as an increase in fuel taxes. Gasoline prices broke through the psychologically important level of 40 roubles ($0.6429) per litre this month. Samson Ebukam Jersey
Delhi HC orders extension of Cairn India contract by 10 yrs on same terms
The Delhi High Court has ordered extension of Cairn India Ltd’s Rajasthan oil block contract for 10 years beyond 2020 on old terms and conditions, the company said in a regulatory filing. The court in an order yesterday directed the government to extend till 2030 the Production Sharing Contract (PSC) for Rajasthan block on the same terms and agreements when it was first entered into in 1995. “The Delhi High Court whilst pronouncing the judgment also directed Government of India to formally communicate its decision extending the Rajasthan Block Production Sharing Contract within two weeks,” Vedanta Ltd, formerly Cairn India, said in the filing. The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 is due for renewal on May 14, 2020, but Cairn India has to, as per a new policy, apply for a 10-year extension. The government had in March last year approved a new policy for extension of PSCs that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state’s share of profit by 10 per cent. “The Delhi High Court on May 31, 2018, allowed the writ petition filed by Vedanta Ltd, directing Government of India to extend the Production Sharing Contract for the Rajasthan Block for a period of 10 years beyond the current contract term in accordance with Article 2.1 of the Production Sharing Contract on the same terms and conditions,” the filing said. The company moved Delhi High Court as it felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there are oil and gas left to be produced. But the government had midway retrospectively changed fiscal terms. State-owned Oil and Natural Gas Corp (ONGC), which as a government nominee picked up 30 per cent stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on same terms. ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn’s interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms. Vedanta had moved the court after its request to the government in 2009 to extend the PSC did not elicit any response. It had claimed that the delay in a decision by the government was preventing it from infusing further investment of over Rs 30,000 crore in the project. Derrick White Jersey
Fuel price hike: A typo that could have cost Rs 18 crore a day
On Wednesday, a faux pas by the Indian Oil Corporation (IOC) led to an embarrassment of sorts after a ‘technical glitch’ on its website wrongly notified that petrol and diesel prices have been cut by 60 paise and 59 paise respectively, before it was found out that the reduction actually was of 1 paise per litre on both the petro products. The country’s largest fuel retailer later said in a statement, “There was a technical glitch in posting the selling prices of petrol and diesel. The selling prices of petrol and diesel with effect from May 30, 2018 have been rectified. Today, there is a minor reduction in fuel prices.” But what does 1 paisa really add up to for India and the oil companies? Here’s a look at some numbers: India consumed 7.6 crore litres of petrol a day in April. Thus, at 1 paisa a litre, India saves Rs 7.6 lakh a day on petrol. Similarly, India consumed 23.85 crore litres of diesel a day in April and the country saves Rs 23.85 lakh a day, courtesy a 1 paisa per litre cut on diesel. The typo or the ‘technical glitch’ as IOC likes to put it, if had gone unnoticed, would have cost oil companies Rs 18.5 crore a day (Rs 14 crore for diesel and Rs 4.5 crore for petrol). Meanwhile, on Wednesday evening Kerala took the 1 paisa cue and turned it into a real Re 1 a litre relief for its people. Wednesday’s cut albeit marginal, was the first time in 16 days that prices were cut since May 14 when fuel retailers ended a 19-day pre-Karnataka poll hiatus to pass on a spike in global oil rates. Petrol price was on Thursday has been cut by 7 paise a litre and diesel by 5 paise. Nate Prosser Jersey
Fuel price revision: IOC clarifies on erroneous price revision, cuts prices by 1 paisa after “glitch”
Indian Oil Corporation (IOC), the nation’s largest fuel retailer, today committed a faux pas on fuel price revision. The company slashed petrol and diesel prices by 60 paise and 56 paise, respectively, at 6 am in the morning in line with the daily routine of informing price revision, but issued a clarification 5 hours later stating a “technical glitch” had led to erroneous revision. “There was a technical glitch in posting the selling prices of petrol and diesel on our website today. The selling prices of petrol and diesel w.e.f 30th May 2018 have been rectified on our website. Today, there is a minor reduction in fuel prices,” IOC said in a statement. Petrol and diesel prices post IOC’s correction across the four metros including Delhi, Kolkata, Mumbai and Chennai have been reduced by 1 paise per litre. A company spokesperson clarified IOC had communicated the correct price revision to dealers despite the error in posting the prices on its website. Post the revision, petrol prices stood at Rs 78.42 per litre in Delhi. Prices in Kolkata Mumbai and Chennai were Rs 81.05, Rs 86.23 and Rs 81.42 per litre respectively, a decrease of one paise overTuesday’s prices. Diesel price in Delhi on Wednesday post revision stood at Rs 69.30 per litre. Prices in Kolkata Mumbai and Chennai were at Rs 71.85 per litre, Rs 73.78 and Rs 73.17 per litre respectively, a decrease of one paise over Tuesday’s prices. Domestic retail prices of petrol and diesel had been rising for the past 16 days following the 19-day price freeze initiated by OMCs before Karnataka polls. IOC had between 14 May and 29 May increased petrol prices by Rs 3.80 per litre and diesel prices by Rs 3.38 per litre in the national capital. Similar price hikes were implemented in other cities across the nation fuelling nation-wide protests and a call for excise duty cut. Mark Messier Jersey