Asia’s March LNG imports surge amidst favorable spot prices
Asia’s imports of liquefied natural gas (LNG) rose sharply in March as the top-buying region took advantage of lower spot prices to draw cargoes away from Europe, as Reuters reported. A total of 24.16 million metric tons of the super-chilled fuel landed in Asia in March, up from February’s 22.73m and also up 11.5% from the 21.67m in March 2023, according to data compiled by commodity analysts Kpler. The strength in imports came as spot prices for LNG for delivery to North Asia remained muted in February and early March, when the bulk of cargoes would have been arranged. The spot price hit the lowest in nearly three years in late February, when it dipped to $8.30 per million British thermal units (mmBtu) in the week to Feb. 23. This was down from the northern winter peak of $17.90 per mmBtu in the week to Oct. 20. The spot price has shifted slightly higher in recent weeks, ending at $9.5 per mmBtu in the seven days to April 5, up from $9.4 the prior week. The small lift in prices is probably not enough yet to deter the price-sensitive buyers of LNG in Asia, which include India and South Asian neighbors Pakistan and Bangladesh, but also increasingly China. China’s imports of LNG rose to 6.61m tons in March, up from February’s 5.82m and 5.43m in March 2023, according to Kpler. China is the world’s largest LNG importer and it tends to buy more spot cargoes when the price is below $10 mmBtu as this allows the fuel to remain competitive in some areas of China’s partially regulated natural gas market. India’s LNG imports rose to a 40-month high of 2.29m tons in March, up from 1.98m February and 1.84m in March last year. This is the future home of the Rixos Baghdad, a luxury hotel financed by Qatar in the city’s heavily fortified Green Zobe
Russia’s Yamal LNG to resume LNG supplies to India’s GAIL – Kommersant
Russia’s Yamal LNG plant is set to resume liquefied natural gas (LNG) supplies to India’s GAIL under a long-term contract involving a Gazprom unit, Kommersant daily reported on Wednesday citing Russian government sources. Novatek, Yamal LNG’s main shareholder, has not replied to a request for comment. Kommersant said that supplies under the deal were suspended in 2022 when Germany seized assets of Russian energy giant Gazprom. GAIL agreed to a 20-year deal with Gazprom Marketing and Trading Singapore (GMTS) in 2012 for annual purchases of an average of 2.5 million tonnes of LNG on a delivered basis. At the time, GMTS was a unit of Gazprom Germania, now called SEFE, but the Russian parent gave up ownership of SEFE after Western sanctions. The initial contract with GMTS was also for supplies from the Yamal project in the Arctic, but the former Russian entity was arranging supplies from elsewhere to cut freight costs as the deal was done on delivered basis, industry sources said earlier this year. Kommersant said on Wednesday that the issue of LNG supplies to India has been resolved. It said, citing a source, that the deliveries are set to resume in the previous volumes in nearest future
India’s fuel demand hits new FY record, up about 5%
India’s fuel consumption fell 0.6% year-on-year in March, but demand for the 2024 financial year was up about 5%, primarily driven by higher automotive fuel and naphtha sales. Total consumption, a proxy for oil demand, totalled 21.09 million metric tons (4.99 million barrels per day) in March, down from 21.22 million tons (5.02 mbpd) last year, preliminary data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Saturday. However, fuel demand for the 2024 financial year, ending in March, hit a record high of 233.276 million tons (4.67 mbpd) compared to 223.021 million tons (4.48 mbpd) a year earlier. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose 3.1% year-on-year to 8.04 million tons in March and was up 4.4% for the previous fiscal year. Sales of gasoline in March rose 6.9% year-on-year to 3.32 million tons and were up 6.4% for the fiscal year. Sales of bitumen, used for making roads, were largely steady in March, but were up 9.9% for the fiscal year. Sales of cooking gas, or liquefied petroleum gas, rose 8.6% to 2.61 million tons, while naphtha sales jumped 5.5% to about 1.19 million tons, compared with last March, the data showed. The usage of fuel oil fell 9.7% year-on-year in March and declined 6.3% for the fiscal year.
Oil at $100? Will oil prices hit a century this summer as a global shortage takes hold?
When oil jumped above $90 a barrel just days ago, military tensions between Israel and Iran were the immediate trigger. But the rally’s foundations went deeper — to global supply shocks that are intensifying fears of a commodity-driven inflation resurgence. A recent move by Mexico to slash its crude exports is compounding a global squeeze, prompting refiners in the US — the world’s biggest oil producer — to consume more domestic barrels. American sanctions have stranded Russian cargoes at sea, with Venezuelan supply a potential next target. Houthi rebel attacks on tankers in the Red Sea have delayed crude shipments. And despite the turmoil, OPEC and its allies are sticking with their production cuts. It all adds up to a magnitude of supply disruption that has taken traders by surprise. The crunch is turbocharging an oil rally ahead of the US summer driving season, threatening to push Brent crude, the global benchmark, to $100 for the first time in almost two years. That’s amplifying the inflation concerns that are clouding US President Joe Biden’s reelection chances and complicating central banks’ rate-cut deliberations. For oil, “the bigger driver right now is on the supply side,” Amrita Sen, founder and director of research at Energy Aspects Ltd., said in a Bloomberg Television interview. “You have seen quite a few pockets of supply weakness, and demand overall on a global basis is healthy.” Oil shipments from Mexico, a major supplier in the Americas, slid 35% last month to their lowest since 2019 as President Andres Manuel Lopez Obrador tries to make good on promises to wean the country off costly fuel imports. The country’s exports of so-called sour crude — the heavy, dense kind that many refineries are designed to process — now stand to shrink even further as state-controlled oil company Pemex has canceled some supply contracts to foreign refiners, Bloomberg News reported last week. That decision has roiled oil markets around the world. Mars Blend, a medium-density sour crude from the US Gulf Coast, has in recent days risen to a multi-year premium over lighter West Texas Intermediate, the national benchmark. Mars usually trades at a discount to WTI. Brent crude hit $90 a barrel on Thursday, the highest since October, and extended gains on Friday. JPMorgan Chase & Co. has said it could hit $100 by August or September. Canadian Cold Lake oil priced at the Gulf Coast traded at the narrowest discount to WTI in almost a year. Key indicators for Middle Eastern medium-sour crude, such as Oman and Dubai contracts, are rallying too. Before Mexico’s move, there was a sequence of supply disruptions both large and small. In January, a deep freeze ate away at crude output and inventories in the US at a time when they would normally grow, keeping stockpiles below seasonal averages through late March. Mexico, the US, Qatar and Iraq cut their combined oil flows by more than 1 million barrels a day in March, tanker tracking data compiled by Bloomberg show. Baghdad has pledged to limit output to make up for non-compliance with prior pledges to the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. Adding to the tightness, OPEC member the United Arab Emirates curbed shipments of Upper Zakum, a medium-sour oil, by 41% in March compared with last year’s average, according to data from maritime intelligence firm Kpler. The state oil company is diverting more supplies of that crude to its own refinery, traders said. Though the cuts were expected and Abu Dhabi National Oil Co. is offering buyers another type of crude as a substitute, the decline in Upper Zakum exports is contributing to higher regional prices amid the broader OPEC+ curtailment. Crude markets in Europe, meanwhile, were pressured higher by the Houthi attacks in the Red Sea, which sent millions of barrels of crude on a detour around Africa, delaying some supplies for weeks. Disruptions to a key North Sea pipeline, unrest in Libya and a damaged pipe in South Sudan also contributed to the rally, while US sanctions have deprived Russia of tankers that previously transported its oil to buyers including India. The supply pinch could become even more acute in the weeks ahead. With President Nicolas Maduro showing no sign of heeding promises to move toward free and fair elections, the Biden administration could reimpose sanctions this month. The market for heavier, dirtier oil “has been rangebound to bearish for some time now, but this tightness in sour markets and the outlook for the summer driving season in the US suggest the market is turning a corner,” said Samantha Hartke, an analyst with analytics firm Sparta Commodities. It’s a stark contrast from just a few months ago, when oil plunged to multi-month lows as US production climbed and Russian seaborne crude exports ratcheted higher despite sanctions, which have since been expanded. The US Energy Information Administration, after forecasting global inventories to remain unchanged this quarter, now predicts they’ll fall by 900,000 barrels a day. That’s the equivalent to the production from Oman. The supply squeeze comes as demand is ramping up. US refiners are preparing to boost fuel production for the summer, when millions of Americans take to the roads and gasoline consumption peaks. Gasoline stockpiles on the populous East Coast are tightening and manufacturing activity in the US and China is also signaling a boost in fuel use. In Asia, refining margins are around 50% higher than the five-year seasonal average, suggesting healthy demand. Crude’s rally has snarled the Biden administration’s plans to refill emergency US oil reserves, which reached a 40-year low following an unprecedented drawdown after Russia’s invasion of Ukraine. It’s also a political risk for Biden as prices for food and energy remain stubbornly high. Oil’s advance threatens to push retail gasoline, now near a daily national average of $3.60 a gallon, toward $4, a key psychological level. That’s contributing to concern that commodities will reverse the recent slowdown in consumer price gains. Oil prices are now boosting
Gas Glut? Not for Long.
Natural gas prices are falling all over the world. There is abundant supply, and demand has been lukewarm this northern hemisphere winter, which was relatively mild. Indeed, the global gas market is in oversupply. This prompted Morgan Stanley to recently forecast a gas glut that we have not seen in decades. It was going to materialize as a result of strong growth in LNG production capacity, the bank’s commodity analysts said. They cited numbers showing that there was 400 million tons in such capacity to date, but another 150 million tons were under construction—“a record wave of expansion”. It appears the forecast was based on an assumption of not very strong demand growth—but it may be the wrong assumption. Because natural gas demand is set to grow, and grow quite robustly. At the same time, some producers, notably in the United States are already starting to withhold production, because of the low price of the commodity. Asia imported record volumes of liquefied natural gas last month, data from Kpler showed recently. The biggest buyers were China, India, and Thailand, with India’s LNG purchases up by 30% from a year earlier and China’s 22% higher than in March 2023. That record would not have been possible had prices not fallen—and prices had fallen because Europe was buying less LNG. The reason Europe was buying less LNG were its full gas storage sites. Winter was once again mild in Europe and it never got to exhaust the gas it had purchased in anticipation of the heating season. In fact, Europe saw record gas in storage as of the end of this heating season, and that contributed to the weakness of natural gas prices—along with the depressed industrial activity on the continent. The fact that demand for LNG immediately rebounded as prices fell suggests that the longer they stay low, the stronger demand will get, especially among countries that have been trying to reduce their consumption of coal in favor of gas. There are a lot of these, under pressure from transition-focused governments that, though no fans of any hydrocarbons, acknowledge that natural gas has a lower emissions footprint than coal. Two years ago, Europe priced these countries out of the market. Now, with prices so low, they may well consider returning to it, driving higher demand. Supply, on the other hand, may not grow as much as Morgan Stanley expects. The bank’s analysts point to U.S. gas exporters that are planning a lot of new LNG capacity. But whether all of this capacity would end up getting built is another question. Tellurian’s Driftwood LNG project is one example. The facility has been in the works for years, but it has kept failing to secure the necessary long-term buyer commitments to proceed. The future of Venture Global’s second LNG plant is also uncertain—as is the future of all new LNG plants as the federal government paused new capacity approvals. Demand, meanwhile, may be set for even stronger growth, thanks to artificial intelligence. Data centers, which already consume substantial amounts of electricity, are about to become an even bigger drain on the grid as AI gets incorporated in more services. This will automatically mean stronger demand for natural gas for generation—because wind and solar will not be able to handle the surge. “Gas is the only cost-efficient energy generation capable of providing the type of 24/7 reliable power required by the big technology companies to power the AI boom,” the founder of Energy Capital Partners, an investor in both alternative and hydrocarbon sources of energy, told the Financial Times recently. Doug Kimmelman added that gas will be critical for the power supply of data centers in the AI era. Demand for electricity from data centers, according to the International Energy Agency, is set to swell twofold from 2022 by 2026, potentially topping 1,000 TWh. This is a lot of electricity consumption and for all the pledges that Big Tech has made for using low-carbon energy to power its data centers, most of its actual energy comes from hydrocarbons, simply because there is no low-carbon energy that is available around the clock without interruption—and carbon credits can and are bought separately from the electricity they are tied to. All this means that the outlook for natural gas demand in the coming years is quite bullish. Low prices invariably stimulate stronger demand and in this case the ambition for lower emissions helps gas demand specifically grow even more strongly. Then there is the question of supply. It may look abundant now, but in a few months, U.S. drillers’ move to curb supply by drilling but not completing new wells will begin to be felt. Besides, no one can say how the next winter in the northern hemisphere will turn out. It may be mild, but it may be harsh. It is a little bit ironic that if the milder winters of the last two years were driven by climate change, Europe has climate change to thank for its lower use of hydrocarbons.
Reliance Industries, Tata Motors & IOC Key Bidders For Government’s Big Pilot Project On Green Or Grey Hydrogen In Transport Sector
Reliance Industries (RIL), Tata Motors, and Indian Oil Corporation (IOC) are set to be the primary bidders for the government’s experimental project involving green/grey hydrogen (H2) in the transportation sector. This initiative aligns with the government’s goal to decarbonize the Indian economy, lessen reliance on fossil fuel imports, and position India as a leader in green hydrogen technology and market. The pilot projects aim to address operational challenges and identify gaps in technology readiness, regulations, implementation methods, infrastructure, and supply chains, as per the revised request for proposal (RFP) document reviewed by ET.
Former Gazprom unit rejects GAIL demand for compensation over non-supply of LNG
A former unit of Russian energy giant Gazprom has rejected state-owned GAIL (India) Ltd’s demand for compensation for non-delivery of LNG supplies in the aftermath of Russia’s invasion of Ukraine In a stock exchange filing, GAIL said SEFE Marketing Trading Singapore Pte Ltd has stated that it does not owe anything other than the defaulted cargoes. GAIL in December last year filed an arbitration claim before the London Court of International Arbitration seeking USD 1.8 billion for “non-supply of LNG cargoes under a long-term contract.. This included compensation for non-supply besides making up for the defaulted volumes. GAIL in 2012 signed a 20-year deal to buy as much as 2.85 million tonnes per annum of liquefied natural gas (LNG) with Russian energy giant Gazprom. The deal was signed with Gazprom Marketing and Singapore (GMTS), which at the time was a unit of Gazprom Germania, now called Sefe. The Russian parent gave up ownership of Sefe after Western sanctions were imposed on Moscow over its invasion of Ukraine in 2022. Sefe had stopped supplying LNG to the Indian company in June 2022 to meet its own demand. The German government acquired Sefe after the start of the Ukraine war in February 2022 and prohibited it from taking volumes from Russia. Supplies were resumed in March last year.
‘Not dictating…’: US officials say they haven’t asked India to reduce purchase of Russian oil
The United States has not asked India to stop or reduce its oil imports from Russia, nor has it sanctioned any Indian entity for buying and refining crude oil purchased from Moscow since the beginning of its war with Ukraine, according to two senior Biden administration officials who are currently in India to visit their government and private sector counterparts. Acting Assistant Secretary for Terrorist Financing Anna Morris and PDO Assistant Secretary for Economic Policy Eric Van Nostrand are travelling to New Delhi and Mumbai from April 2 to 5. They will urge India to maintain the implementation of the oil price cap aimed at limiting profits to Russia while promoting stable global energy markets, according to the White House. “There is no restriction, we have not asked India to reduce Russian oil buying…Not dictating that no trade can be done with Russia,” Morris said while responding to a query at the Ananta Centre in the national capital. She also said once the Russian oil is refined it is technically no longer Russian oil. India’s decision to implement price cap lauded In the same event, the Assistant Secretary for Economic Policy, Eric Van Nostrand, hailed India’s decision to implement price cap on Russian oil and acknowledged India’s position in the Russian oil trade, saying that the decision made Russia sell oil at discounted rates to other countries, including India. “We know that the Indian economy has much at stake in the Russian oil trade, and has much at stake from the global supply disruptions that the price cap is designed to avoid. The price cap’s goals are to limit Putin’s revenue and maintain global oil supply–essentially by creating a mechanism for India and other partners to access Russian oil at discounted prices,” he said. This comes after the US Department of Treasury issued a statement regarding the price cap on Russian oil in February this year, saying that the G7, the European Union and Australia have agreed to prohibit the import of crude oil and petroleum products of Russian origin. “The price cap is intended to maintain a reliable supply of crude oil and petroleum products to the global market while reducing the revenues the Russian Federation earns from oil after its own war of choice against Ukraine inflated global energy prices,” it added. Why is the price cap for oil important? Following Russia’s February 2022 invasion of Ukraine, the G7 nations, the European Union, and Australia jointly implemented a price cap. This cap prohibits the utilisation of Western maritime services, including insurance, flagging, and transportation, for tankers transporting Russian oil priced at or above $60 per barrel.
Oil Surges Over $90 as UAE Cuts Diplomatic Ties with Israel
At this point Israel’s ties with key Gulf countries like the UAE are near breaking point, after only a few short years ago diplomatic normalization was hailed through Trump’s Abraham accords. But international and Israeli press reports are confirming the UAE has announced it is halting all coordination on humanitarian aid with Israel. Further, as Israeli media reports: “The United Arab Emirates (UAE) has announced a suspension of diplomatic coordination with Israel in the wake of the death of seven World Central Kitchen humanitarian workers in Gaza.” Simultaneously, Israel is busy putting its embassies across the world on high security alert due to the “heightened Iranian response threat” in the wake of Monday’s Israeli attack on the Iranian embassy in Damascus. All of this served to send Brent soaring in the last two hours, with Brent spiking above $90 for the first time since October…. With Iran vowing that its retaliation is coming at any moment, Israel’s military is scrambling for readiness, with the latest measure being to pause all home leave for all combat troops. “The IDF is at war and the issue of the deployment of forces is constantly reviewed as needed,” the Israeli military said. President Biden is meanwhile is said to be “pissed” with PM Netanyahu over the killing of seven World Central Kitchen aid workers in Gaza, though Israel acknowledged that it was a “grave mistake”. So far this sounds like more mere empty words of “concern” – a talking point that’s been on repeat from the White House even as its Gaza policy continues slowly fracturing the Democratic base – but Biden is said to have pressed Bibi for “an immediate ceasefire”. The call readout further said ceasefire is needed to “protect innocent civilians” in Gaza and improve the humanitarian situation. Axios writes that Biden gave his Israeli counterpart an “ultimatum” as the US president “emphasized that the strikes on humanitarian workers and the overall humanitarian situation are unacceptable.”
India’s green hydrogen value chain a $125-billion investment opportunity by 2030: Avendus Capital
The green hydrogen value chain in India is likely to create a cumulative investment opportunity of as much as $125 billion by 2030, driven by the rising focus on sustainability, demonstrated commercial viability, expanding use-cases and a strong regulatory push, according to Avendus Capital. The biggest chunk within this opportunity is renewable energy production, the key component in the green hydrogen value chain, with an investment potential of almost $80 billion by 2030. Green hydrogen and green ammonia production offer investment opportunities worth $30 billion and $10 billion, respectively, while electrolyser production offers a $5 billion opportunity, the investment bank said in a report. “India is home to one of the cheapest renewable electricity costs globally, has abundant availability of fresh water and is emerging as a global manufacturing hub – three essential elements required for the production of green hydrogen at a competitive cost,” said Prateek Jhawar, managing director & head of infrastructure & real assets investment banking at Avendus Capital. Jhawar said that while the commercial and industrial (C&I) business model for domestic consumption of green hydrogen will drive the first set of investments in the sector, the steel industry will form the largest share of offtake contracts in the near term with the imposition of the Carbon Border Adjustment Mechanism (CBAM) in the EU.