Reliance renews bid for US license to import Venezuelan oil, sources say
Indian oil refiner Reliance Industries has resubmitted a request to the U.S. for an authorization to import crude oil from sanctioned Venezuela, three people close to the matter said, and resume oil trade between the OPEC producer and the once second-largest destination for its oil. French oil producer Maurel & Prom separately on Monday said the U.S. on Friday granted it a license to conduct oil and gas operations in Venezuela for the next two years. The U.S. in April did not renew a general license for Venezuela to export oil and fuel to its chosen markets, and gave 45 days to companies to wind down transactions. But the U.S. had said some individual authorizations to foreign firms seeking to do oil business with Venezuela would be issued. The license had broadly eased Venezuela oil sanctions first imposed in 2019, moving to reimpose punitive measures in response to President Nicolas Maduro’s failure to meet his election commitments.
April fuel consumption rises by 6.1% year-on-year: Oil ministry data
India’s fuel consumption rose by 6.1 per cent year-on-year in April, data from the Petroleum Planning and Analysis Cell of the oil ministry showed on Tuesday. WHY IT IS IMPORTANT India is the world’s third-biggest oil importer and consumer. The data is a proxy for the country’s oil demand. KEY QUOTE “The rise in total fuel consumption in April can be attributed to the increased activity in the run up to elections across the country,” said Prashant Vasisht, vice president and co-head, corporate ratings at ICRA. “We expect Indian fuel demand to grow by 3 per cent-4 per cent, with the GDP set to grow. The bulk of the rise will be lead by petrol and diesel demand. Air travel in India also has shown good growth.” BY THE NUMBERS Total consumption totalled 19.86 million metric tons (4.85 million barrels per day) in April, up from 18.71 million tons last year, data showed. Demand was down 5.8 per cent on a monthly basis from the 21.09 million metric tons consumed in March. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose by 1.4 per cent year-on-year to 7.93 million tons in April. Sales of gasoline in April rose 14 per cent from the previous year to 3.28 million tons. Demand for bitumen, used for making roads, fell by over 5 per cent annually. Cooking gas, or liquefied petroleum gas sales rose by nearly 10 per cent to 2.36 million tons, while naphtha sales gained by 3.9 per cent to about 1.16 million tons, compared with last April, the data showed. Fuel oil use decreased by more than 16 per cent year-on-year in April. CONTEXT Asia’s third-largest economy is the fastest growing among major peers and its GDP is expected to expand 6.5 per cent this fiscal year. Growth in India’s manufacturing sector slowed marginally in April but remained robust thanks to strong demand, prompting firms to ramp up purchases of raw materials at a near-record pace, a business survey showed last week.
Oil Demand Likely To Surprise To The Upside
Oil prices have recorded the biggest weekly decline in three months thanks in large part to challenging economic indicators and growing demand concerns. Last week, U.S. crude inventories posted an unexpected rise, with the American Petroleum Institute (API) reporting a build of 4.91 million barrels, a sharp contrast from the anticipated decrease of 1.1 million barrels. This build has come after reports that U.S. crude production surged to 13.15 million barrels per day in February, up from 12.58 million barrels in January, suggesting supply is outpacing demand. But it’s not just bearish crude oil metrics driving the oil price decline. The EIA has provided an initial estimate that U.S. gasoline demand declined 4.4% Y/Y in April, a negative sign for oil bulls that has triggered a rapid pivot by speculative funds towards the short side of the market. However, commodity analysts at Standard Chartered have argued that the demand pessimism is overblown. According to StanChart, there appears to be a systemic downwards bias in the weekly estimates of U.S. fuel demand, with actual gasoline demand exceeding estimates in 22 of the past 24 months, while distillate demand (mainly diesel) has been revised higher in all of the past 24 months. The analysts point out that last September, the EIA put gasoline demand at 8.014 million barrels per day (mb/d), a stark contrast from the 9.465 mb/d recorded for in September 2022. Across the whole month, the EIA data implied a y/y demand drop of 5.6%, eliciting talks of demand destruction with some experts contending that demand was at its weakest since 1999. However, it later turned out that actual gasoline demand only fell 0.4% Y/Y, far milder than the EIA estimate of a 5.6% decline. StanChart believes the EIA’s estimate for April gasoline demand is too low with actual demand likely to be surprise to the upside. May & June Critical To Oil Fundamentals Weekly data by the Energy Information Administration (EIA) reveals U.S. crude stockpiles shot up to 7.3 million barrels for the week to April 26, a sharp swing from a draw of 6.4 million barrels posted the previous week marking the highest inventory levels since last June. Adding to the bearish data are expectations that the Fed will keep its benchmark federal-funds rate unchanged at around 5.3% as inflation appears to have reversed course. However, Standard Chartered has predicted that global oil markets will record the biggest stock draws in the first half of 2024 in May and June, implying we have entered a key period for oil fundamentals that will determine whether the market will tighten further or disappoint. StanChart says to watch global oil demand closely, predicting demand will hit an all-time high of 103.1 mb/d in May and increase further to 103.8 mb/d in June. The analysts have also predicted a y/y demand growth of 1.62 mb/d in May and 1.74 mb/d in June. Meanwhile, OPEC+ is set to hold its next ministerial meeting on June 1 in Vienna. StanChart’s model shows that the organization has ample room to increase output by over 1 mb/d in Q3 without negatively impacting global inventories. However, analysts have pointed out that OPEC is unlikely to make any drastic moves when it meets in June because it won’t have full information on whether the expected H1 tightening was fully delivered. Given this backdrop, StanChart sees the global supply deficit exceeding 2 mb/d in August if production stays at current levels, noting the markets are yet to price in the potential deficit. In contrast to oil markets, natural gas markets have suddenly turned bullish thanks to EU mulling cutting off more Russian gas as well as a late cold snap in Europe forcing EU gas inventories to reverse course. TotalEnergies (NYSE:TTE) CEO Patrick Pouyanne has predicted that natural gas and LNG prices will spike after the EU sanctions Russian gas from the Yamal LNG project. Henry Hub prices are up 4.7% in Friday’s intraday session and have gained 24.4% over the past week to trade at $2.14/MMBtu. However, it’s going to be interesting to see whether these gains will hold considering that experts still expect Europe’s spare storage capacity to become constrained in late summer, although the cold snap has pushed back the timing of the tightness by about three weeks.
LNG spot prices have fallen. What does it mean for India
Global LNG market has been well-supplied in 2024, which has resulted in lower prices of the fuel since the beginning of the year. India—which is dependent on gas imports for 50 percent of its needs—has been a beneficiary of this ample supply in the market and has ramped up its consumption so far. Increasing natural gas consumption has been a priority of the government given lower emissions of the fuel. India aims to increase the share of gas in its energy basket to 15 percent by 2030. What resulted in softer LNG prices in the global market? From the highs reported in 2023 and 2022 due to the Russia- Ukraine war, global LNG prices have significantly cooled down in the current year. The drop in prices comes amid weaker-than-expected gas demand in Europe due to milder winters and high inventories in the market especially from the US. Spot gas prices are trading around $10 per million metric British thermal unit (mmBtu) currently compared to highs of $23 per mmBtu in early 2023. Gas prices have, however, risen since mid-April due to the geopolitical crisis in the Middle-East. Spot prices had declined to around $8- $9 mmBtu in the first quarter of 2024. How did India respond to lower LNG prices? Price-sensitive India has witnessed a rise in consumption of natural gas in 2024 amid lower prices of LNG. Sectors including power, fertilisers and industries ramped up intake of the fuel as prices hit three-year low due to ample supply in the market. On account of low gas prices, the power ministry said in April that it is considering to impose a mandate on generating companies to mandatorily operate their gas-based power plants to meet the country’s increasing power demand this summer. Why has India shied away in using the cold fuel? According to official data, total natural gas consumption in March was around 3 percent higher at 5,594 MMSCM from last year. However, consumption of gas in India has remained limited due to higher prices and difficultly to compete with other fuels such as oil and coal. Despite the push given by the government, consumption of gas in the power sector remains low. Power sector contributes only around 13 percent of the total gas consumption in India while fertiliser, CGD and industrial sector contribute for the rest. Where does India’s domestic production stand? India’s domestic gas production has remained steady despite efforts by the government to boost production. In March, domestic gas production rose 6.2 percent compared with the corresponding month of the previous year. The cumulative gross production of natural gas for the financial year 2023-24 was higher by 5.8 percent from last year. Why is it important for India to scale up gas consumption? Natural gas is seen as a transition fuel as the world moves from coal to renewable energy sources, given that it generates less carbon than most other fossil fuels. Globally, natural gas-based power generation is commonly used as back-up for the intermittent wind and solar power. With India moving towards its target of net-zero emissions by 2070, the Indian government is pushing for an increase of natural gas use in the country. The target is to increase the share of natural gas in the total energy basket to 15 percent from the current six to seven percent. For the same, the government has increased focus on city gas distribution (CGD) companies to PNG connections and wide-spread CNG network. Meanwhile, the government is also working towards using LNG as a fuel in transportation.
Indian gas exchange expects trading in green certificates
Indian Gas Exchange, India’s only gas trading platform, expects trading in green gas certificates to start early next year as the mandatory usage of compressed biogas by city gas distribution companies gets triggered next April. The Union government has made it mandatory that the CGD companies must use 1% of their requirement as CBG from financial year 2026 and take it to 5% by fiscal 2029. “We have proposed to (the) government to create green gas certificates on the lines of renewable energy certificates used by companies to meet their mandatory renewable targets,” Rajesh Mediratta, chief executive officer of IGX, told NDTV Profit in an interview. Compressed biogas producers can sell it to the local buyers at nominal rate and take CBG certificates for the premium price that can be sold on the exchange to the buyers in need of the certificates, according to Mediratta. The CGD companies, in locations where there is no access to the CBG, can buy green gas certificates. It will also increase adoption of green gas produced by using agricultural and municipal waste. It will also have a larger shelf life and will save lots of expenses in transmission tariffs for buyers to transport gas over large distances. “We expect the government to come out with the guidelines detailing the green gas certificates this year that could be implemented from April 2025 when the mandatory CBG usage will get triggered,” Mediratta said.
Indian Energy Exchanges overall trade volume rises 14% to 9,044 million units in April
The Indian Energy Exchange (IEX) posted 14.1 per cent growth in its overall trade volume at 9,044 million units in April as compared to the year-ago period. The exchange achieved 7,928 MU overall trade volume in April 2023, including green market trade of 280 MU, 1,99,000 RECs (renewable energy certificates equivalent to 199 MU) and 1,23,000 ESCerts (energy savings certificates equivalent to 123 MU), as per IEX data. RECs at 618 MU increased 211 per cent YoY (year-on-year). At Rs 204 per certificate, the REC market recorded an all-time low price in the trading session held on April 24, 2024, a statement said. REC prices declined 80 per cent YoY. These prices provide an opportunity to obligated consumers to meet their Renewable Purchase Obligations, and voluntary customers to meet their sustainability aspirations. The Market Clearing Price in Day Ahead Market (DAM) during April 2024 at Rs 5.1/unit reduced approximately 6 per cent year-on-year. The sell bids on the exchange (Day Ahead Market plus Real Time Market) during the month increased 21 per cent YoY. The DAM prices were lower by almost 45 per cent as compared to prices discovered under bilateral contracts. Favourable policy and regulatory interventions by the government and regulators led to an improved sell scenario, leading to increased sell liquidity at IEX, despite an increase in the country’s energy demand, it stated.
Aramco Leads Oil Industry Investment in AI
Saudi Aramco is the biggest investor in artificial intelligence in the oil industry. The fact was recently revealed in a report by GlobalData, which also showed the Saudi state major was investing heavily in all sorts of cutting-edge technology. Because this is where competition will be in the future. Saudi Aramco spent $3.5 billion on research and development last year, GlobalData said in its report, noting the company was active in as many as 250 areas of innovation including, besides AI, drone technology, robotics, and electric vehicles. As for AI itself, the technology was deployed in areas such as oil exploration, fault monitoring, and cyber threat detection. On the one hand, this adds to evidence about the versatility of artificial intelligence that is driving its growing popularity in the information technology sector and elsewhere. On the other, the information suggests Aramco is actively working on attaining a new sort of competitive edge: a tech-driven one. The Saudi company is not alone in this, of course. Oil and gas, while traditionally slow to adopt emerging technology, has moved quite fast recently. Bloomberg reported earlier this year that U.S. shale drillers were deploying artificial intelligence to improve drilling efficiency and increase well recovery rates. The U.S. shale patch is a natural early adopter of such technology because production costs there tend to be generally higher than they are in conventional oil and gas drilling, motivating a higher appetite for new solutions. Now, thanks to tech, these costs are coming down as drilling times accelerate—and accuracy is improving too. Aramco, on the other hand, is as traditional as oil companies come, at least on the face of it. Below this face, the company appears to be—if not an early, then an eager—adopter of cutting-edge tech to improve its operations, even in lean years like 2023. It also seems Aramco is open to more adventures in tech. GlobalData reports that Aramco has set up a digital innovation ecosystem dubbed SAIL, or Saudi Accelerated Innovation Laboratory, to partner with other entities, including government agencies and startups, “to foster the development of digital innovation products,” per the report. “Aramco is also betting on futuristic technologies. The company is closely monitoring the startup ecosystem and has in the recent past invested in several companies such as Pragmatic, which develops flexible semiconductor chips, and Sunrate, a fintech company,” said Sourabh Nyalkalkar, practice head of innovation at GlobalData. It sounds like Aramco specifically and Saudi Arabia generally are trying to do what the UAE did with construction as a diversification strategy to reduce its almost exclusive income reliance on crude oil. That artificial intelligence, robots, and the rest of the new tech coming out of startups and Big Tech field, can be used to boost oil production as well must be a very welcome bonus. According to Evercore ISI, AI and other tech could bring costs in the shale patch down by double digits as soon as this year. “There’ll be significant cost savings, at a minimum double digits, but probably in the 25% to 50% of cost savings in certain scenarios,” Evercore analyst James West told Bloomberg in March. If it can bring costs down for shale drillers, AI could certainly bring them down for everyone else as well, even for the lowest-cost producers in the world – the Saudis. But cost reduction is only one of what seems like a lot of benefits that the oil industry stands to gain from using the technology such as more productive wells, more accurate exploration, and better threat detection, including not just cybersecurity but spills and leaks. Best of all, the industry has the commodities needed to power the use of electricity-thirsty AI.
India’s crude oil imports from Russia jump 18% in April amid decline in total imports
India’s crude oil imports fell around 8 percent in April from the previous month amid the country’s efforts to ramp up domestic production and reduce reliance on imports. According to energy tracker Vortexa, India’s total crude oil imports stood at 4.5 million barrels per day (bpd) in April, lower than 4.9 million bpd in March. Despite decline in total oil imports, Russia’s supply of crude oil to India increased by 18 percent in April from last month. Moscow supplied 1.7 million barrels of crude oil to India in April, as against 1.5 million bpd in March. Russian Urals—sour grade—was India’s major import from Moscow. The rise in oil supply from the Eurasian country comes despite reports of narrowing discounts on Russian oil and tighter US sanctions on the country. Meanwhile, India’s import of crude oil from other countries including Iraq, Saudi Arabia, UAE and the US fell in the month. Iraq supplied 776,000 bpd of crude oil to India in April, lower than 1.11 million in March while India purchased 681,000 bpd and 103,000 bpd of oil in the month from Saudi Arabia and the US, respectively. Imports from Venezuela also declined to 66,000 bpd in April compared to 161,000 bpd in the previous month. India started buying crude oil from Venezuela in late 2023 after a gap of three years. India last imported Venezuelan oil in 2020 after which the country came under sanctions from the US
Reliance Industries Ltd starts trading US oil setting Brent oil benchmark
Reliance Industries Ltd (RIL) has made its first foray into trading a type of U.S. crude oil that underpins the global Brent benchmark in a process run by oil-index publisher S&P Global Commodity Insights, the publisher said. RIL, operator of the world’s biggest refining complex, on Wednesday offered a cargo of WTI Midland in the Platts Market on Close process, known as the Platts window. It was Reliance’s first time offering WTI in the window, Platts spokesperson Kathleen Tanzy told Reuters. A Reliance spokesperson did not immediately respond to a Reuters request for comment. India, the world’s third-biggest oil importer and consumer, is looking to diversify its oil supplies as fresh U.S. sanctions on Moscow threaten to dent Russian oil sales to India, the biggest buyer of Russian seaborne crude. India was the top buyer of Russian oil last year after other groups retreated from purchases following Western sanctions on Moscow for its full-scale invasion of Ukraine in February 2022. RIL made its first oil purchase from Canada’s new Trans Mountain pipeline last month, trade sources said. More players have become involved in trading crude that can set the Brent price in the Platts window since Platts added WTI to the benchmark last year. Saudi Aramco, the world’s largest oil firm, made its first purchases of WTI in the window in February and has participated regularly since. U.S. WTI Midland is one of six crude oil grades assessed by Platts that can set the value of dated Brent, part of the wider Brent complex used to price more than three-quarters of the world’s traded oil. The price of dated Brent is set by the cheapest of the six crudes and Midland, by far the largest of the six crude streams, often plays a role in setting its value. The other five are North Sea crudes.
BP appoints Kartikeya Dube as India unit chief
BP has appointed Kartikeya Dube as its India unit chief, the energy major said in a statement on Tuesday Dube’s appointment will be effective from July 1. He will take over from Sashi Mukundan who will retire from BP after serving the company for over 42 years. Kartikeya has been with BP for more than 20 years, serving in finance, commercial and business transformation in India, Singapore, and the UK, according to the statement. Last year he assumed the position of vice president of group investor relations in the company’s London head office. Previously, Kartikeya was involved with setting up the BP joint ventures with Reliance in India. He was the chief financial officer for BP’s mobility joint venture with Reliance in India from 2020 until 2023.