Oil prices rise as supply concerns outweigh demand fears
Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global oil supply outweighed fears that further possible U.S. interest rate hikes could dent fuel demand, but they were still headed for a weekly loss in four. Brent futures for climbed 21 cents, or 0.2%, to $93.51 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude (WTI) futures gained 23 cents, or 0.3%, to $89.86. Both benchmarks were on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply as the Organization of the Petroleum Exporting Countries and allies (OPEC+) maintain production cuts. “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd. “Going forward, investors will focus on whether the OPEC+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand,” he said, predicting WTI to trade in a range of around $90-$95. Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilise the domestic fuel market, the government said on Thursday. The shortfall, which will force Russia’s fuel buyers to shop elsewhere, caused heating oil futures Hoc1 to rise by nearly 5% on Thursday. The U.S. Federal Reserve on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end. That buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the U.S. dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies. The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.
India to get its first green hydrogen fuel cell bus
Union Minister of Petroleum and Natural Gas Hardeep Singh Puri is all set to inaugurate India’s first green hydrogen fuel cell bus at Kartavya Path in Delhi on Monday. According to Press Information Bureau (PIB), the initiative is part of Indian Oil’s efforts to conduct operational trials on designated routes in Delhi, Haryana, and Uttar Pradesh with 15 fuel cell buses propelled by green hydrogen. The green hydrogen fuel cell bus will be flagged off at Kartavya Path in the national capital. Green hydrogen at 350 bar pressure will be made available for the first time in India with this project, making it possible to run fuel cell buses. At its research and development campus in Faridabad, Indian Oil has also installed a refueling station that can replenish green hydrogen created by electrolysis using solar PV panels. Fuel cell technology In the world of e-mobility, fuel cell technology is acquiring prominence, with hydrogen serving as a fuel for fuel cells. The electrochemical mechanism in fuel cells converts hydrogen and oxygen into water efficiently, generating electricity. Green Hydrogen, produced through the use of renewable energy, has the potential to play a crucial role in such low-carbon and self-sufficient economic pathwAustin.
How The Transition Push Contributed To Higher Oil Prices
Earlier this week, Morgan Stanley said in a note that all signals for crude all were “flashing tightness”. The investment bank joined a growing number of forecasters expecting Brent crude to top $100 per barrel before the year’s end, again. What all these forecasters have in common is that all of them point out a discrepancy between demand for oil, which has remained strong, and supply, which has become increasingly constrained. At a time when governments in the West are making a huge effort to reduce that demand. And supply, too. For now, they can only claim success in the supply area. And a major contribution to higher prices with that. When President Biden came into office, his first order of business was to effectively ban oil and gas drilling on federal lands. He later revoked his ban as retail fuel prices began climbing and the White House reconsidered its attitude to local supply of hydrocarbons. Not that it helped. Not when the whole energy policy of the administration has been oriented against the oil industry. We see the same situation in Europe, where the push against oil and gas is even stronger, and in other parts of the world, as well. Reuters reported this week, citing Rystad Energy data, that investment in oil and gas on a global scale would only grow moderately this year to $579 billion. That compared to an average annual investment rate of $521 billion for the period between 2015 and 2022, after the 2014 peak, which stood at $887 billion. Also this week, the Energy Information Administration reported that oil production from the U.S. shale patch was set to decline in October from September after the September average was also forecast to be lower than the average for August. In fairness, the EIA has been proven too pessimistic in its forecast by the actual production data, with its forecast production decline for August actually turning out to be a modest monthly increase in production. Yet production did indeed decline this month, albeit still quite modestly. The bigger problem is it did not increase in any meaningful way, contributing to global tightness. Production is not increasing in any meaningful way elsewhere, either, even if we set aside for a moment the Saudi and Russian cut of a combined 1.3 million barrels daily. But demand is still strong, which has led to suggestions from transition campaigners that governments should switch targets and, instead of supply, focus on curbing demand by taxing the use of hydrocarbons. This state of affairs does not bode well for the future energy security of a world that will consume close to 103 million barrels of crude oil every day this year, according to the latest to forecast peak oil demand, the International Energy Agency. The chief executive of Aramco, who has been one of the most vocal critics of the transition push as it is being conducted, recently leveled a new dose of criticism at its planners: “The current transition shortcomings are already causing mass confusion across industries that produce and/or rely on energy. Long-term planners and investors do not know which way to turn,” Nasser said at the World Petroleum Congress in Canada. Exxon’s CEO was more succinct: “If we don’t maintain some level of investment in the industry, you end up running short of supply, which leads to high prices” – a scenario that is currently unfolding in Europe and the United States. The reason there is no sufficient investment, according to the industry, is the uncertainty caused by the transition agenda of the governments where they operate. Indeed, when you have no clarity of the regulations that your government would direct your way as part of its efforts to fight climate change, investment decisions become even harder than usual to make. As the executive chair of Canada’a Cenovus told Reuters, “If you want to add 100,000 barrels a day of production, you’re going to spend billions and billions of dollars. In terms of any real meaningful investment in large projects, that’s probably going to have to wait for some more clarity on the government front.” The situation is even worse for African countries that want to pursue their energy independence by developing their own hydrocarbon resources. Banks and international lenders such as the World Bank and the International Monetary Fund have made it quite clear they would not be lending for oil and gas development. “We are being intimidated into running away from fossil fuel investment,” the secretary general of the African Petroleum Producers’ Organization, Omar Farouk Ibrahim, said as quoted by Reuters. Yet Big Oil is still big enough to be able to put some money into new production without too much worry about the future. TotalEnergies recently said it could commit $9 billion to exploration in Suriname. Shell is drilling in Namibia and making discoveries that will require fresh investments to develop. Whether these new exploration ventures would be enough to make up for lower production in legacy regions is hard to say. Perhaps, if governments really get down to curbing demand, balance could return to oil markets. For a short while. Because people really don’t like to be told how little energy to use.
Everyone wants a pie of India’s largest renewable power producer
French energy giant TotalEnergies SE’s USD 300 million investment in clean energy projects of Adani Green Energy Ltd has taken the total investments poured in by global investors in India’s largest renewable power producer to USD 1.63 billion or about Rs 140 billion, sources close to the company said. Last week, Total announced it will hold a 50 per cent stake in the new joint venture firm where Adani Green Energy Ltd (AGEL) will hold the rest. The joint venture will hold a portfolio of 1,050 MW, including 300 MW of already operational capacity, 500 MW under construction and 250 MW under-development assets with a blend of solar and wind power. Total already has a 19.7 per cent stake in AGEL. It also has an equal joint venture with AGEL, called AGE23L that holds a portfolio of 2,353 MW. The USD 300 million investment Total is making in the joint venture is the first since the Hindenburg report in January highlighted Adani Group’s debt pile and alleged accounting fraud and stock manipulation, which Adani denies. Sources said AGEL is one company within the Adani Portfolio, which has attracted a range of investors over the past few months including repeat strategic investor Total, one of the largest emerging market funds GQG Capital Partners and one of the world’s largest sovereign funds Qatar Investment Authority. Together these three investors have invested USD 1.63 billion or close to Rs 140 billion over the past few months, taking advantage of the attractive valuations post the short-seller report, they said.
Oil prices rise as supply concerns outweigh demand fears
Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global oil supply outweighed fears that further possible U.S. interest rate hikes could dent fuel demand, but they were still headed for a weekly loss in four. Brent futures for climbed 21 cents, or 0.2%, to $93.51 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude (WTI) futures gained 23 cents, or 0.3%, to $89.86. Both benchmarks were on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply as the Organization of the Petroleum Exporting Countries and allies (OPEC+) maintain production cuts. “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd. “Going forward, investors will focus on whether the OPEC+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand,” he said, predicting WTI to trade in a range of around $90-$95. Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilise the domestic fuel market, the government said on Thursday. The shortfall, which will force Russia’s fuel buyers to shop elsewhere, caused heating oil futures Hoc1 to rise by nearly 5% on Thursday. The U.S. Federal Reserve on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end. That buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the U.S. dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies. The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.
India’s LNG imports rose in August
India’s liquefied natural gas (LNG) imports rose in August compared to the same month last year, according to the preliminary data from the oil ministry’s Petroleum Planning and Analysis Cell. The country imported 2.23 billion cubic meters, or about 1.7 million tonnes of LNG, in August, a rise of 10.1 percent compared to the same month in 2022, PPAC said. During April-August, India took 12.21 bcm of LNG, or some 9.3 million tonnes, up by 3.5 percent, PPAC said. India paid $1.3 billion for August LNG imports, down from $1.5 billion last year, while costs dropped from $8 billion in the April-August period last year to $6 billion during the same five months this year, it said. As per India’s natural gas production, it reached 3.16 bcm, up by 9.3 percent compared to the corresponding month of the previous year. During April-August, gas production rose by 3.6 percent to 14.85 bcm, PPAC said. At the moment, India imports LNG via seven facilities with a combined capacity of about 47.7 million tonnes. India’s Adani and France’s TotalEnergies started supplying natural gas in April to the grid from their 5 mtpa Dhamra LNG import facility located in Odisha, on India’s east coast. During April-August, Petronet LNG’s 17.5 mtpa Dahej terminal operated at 93.4 percent capacity, while Shell’s 5 mtpa Hazira terminal operated at 36 percent capacity, PPAC said. The Dhamra LNG terminal operated at 18.9 percent capacity, it said.
Sizzling oil worldwide, rising worries in India
The ghost of rising oil prices is back to haunt the economy. Brent crude oil prices are now hovering around $96 per barrel, up more than 30% since 31 May. The recent upward pressure on oil prices is primarily led by supply-side concerns, with Saudi Arabia and Russia deciding to extend their voluntary output cuts till the end of December. When oil prices rise, India tends to feel the heat as we import most of our oil requirements. Costlier oil pushes up the oil import bill, which ultimately weighs on the country’s current account deficit. But note that other Asian economies are also vulnerable to rising oil prices. “Within Asia, India, Thailand and the Philippines appear more vulnerable to higher oil prices,” said a Nomura Global Markets Research report dated 15 September.
Energy transition in uncharted waters: Panel
Oil India intends to remain focused on oil and natural gas, with the revenue from those sectors supporting the pursuit of other energy sources, Oil India chairman and managing director Ranjit Rath said on a panel today at the conference in Calgary, Alberta. “We would always look for more and more energy,” Rath said. “Biofuel will actually be a major, major game changer as far as the transition is concerned.” Brazil, which is a net exporter of oil but a net importer of fuel, has focused on the development of its biofuel industry, Brazilian oil and gas regulator ANP director general Rodolfo Saboia said. “If you ride a car on ethanol in Brazil, you would have a smaller footprint than riding an electric car which is moved by the energy matrix in Europe,” Saboia said. “This shows how important a role biofuels have to play during the energy transition.” Natural gas will be the fossil fuel of choice in the transition, according to Saboia, as Brazil strives to develop that market. Rath agreed with that assessment. “At the end of the day, you would like to have more natural gas as part of your primary energy basket,” Rath said, even as his company pursues partnerships to develop biofuels, green hydrogen and critical minerals. “So, there will be a strong focus on exploration and production.” Saboia’s organization regulates everything from the well to the retail fuel station and is keeping an eye on what policy-makers might do with the challenges they face. How the transition is managed could be quickly disrupted by technological advances, such as biofuels and synthetic fuels for internal combustion engines, Saboia said. “We are sailing in uncharted waters right now, so to articulate policies that might lead to a reasonable and effective way of addressing the energy transition is not a clear scenario,” said Saboia. “It’s always hazy.” With so many unanswered questions, the role of government and interactions between countries striving to find solutions will be critical, he said
Gas price for Reliance to be reduced by 14% from next month
The price of natural gas produced from difficult areas like KG-D6 of Reliance Industries is likely to be cut by about 14 per cent from next month in line with softening energy prices, sources said. For the six-month period starting October 1, the price of gas from deep-sea and high-pressure, high-temperature (HPTP) areas is likely to be cut to around USD 10.4 per million British thermal unit from the current USD 12.12, they said. The government bi-annually fixes prices of the locally-produced natural gas — which is converted into CNG for use in automobiles, piped to household kitchens for cooking and used to generate electricity and make fertilizers. Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and for newer fields lying in difficult-to-tap areas, such as deep-sea. Rates are fixed on April 1 and October 1 each year. In April this year, the formula governing legacy fields was changed and indexed to 10 per cent of the prevailing Brent crude oil price. The rate was however capped at USD 6.5 per mmBtu. Rates for legacy fields are now decided on a monthly basis. For September, the price came to USD 8.60 per mmBtu but because of the cap, the producers would get only USD 6.5. Brent crude oil has averaged around USD 94 per barrel this month but rates will continue to be capped at USD 6.5. Sources said the price for difficult area gas continues to be governed by the old formula that takes one-year average of international LNG prices and rates at some global gas hubs with a lag of one quarter. International prices had fallen in the reference period of July 2022 to June 2023 and so it will translate into lower prices for difficult fields, they said. The price for gas from difficult fields was cut to USD 12.12 per mmBtu for a month period, beginning April 1 from a record USD 12.46 earlier. The global spurt in energy prices after Russia’s invasion of Ukraine has led to rates of locally-produced gas climbing to record levels – USD 8.57 per million British thermal unit for gas from legacy or old fields and USD 12.46 per mmBtu for gas from difficult fields between October 2022 and March 2023. On April 1, prices of gas from legacy fields were slated to climb to USD 10.7 per mmBtu using the old formula. But the government changed the formula and put a cap to keep inflation under check. Rates of CNG and piped gas for kitchens had risen by 70 per cent because of the previous gas price hike. The ceiling price covers the cost of production of producers while protecting consumers, particularly CNG users, kitchens using piped cooking gas and fertiliser plants which had grappled with soaring input costs. India is aiming to become a gas-based economy with the share of natural gas in its primary energy mix targeted to rise to 15 per cent by 2030 from the existing level of around 6.3 per cent.
Strong Crude Draw, Falling Inventories At Cushing Support Oil Prices
The American Petroleum Institute (API) has reported a large 5.25-million-barrel draw in U.S. crude inventories, offsetting last week’s 1.174-million-barrel build. Analysts were expecting an inventory draw of 2.667 million barrels for the week. The total number of barrels of crude oil moves so far this year is now squarely in the red, according to API data, and there is a net draw in crude inventories since April of more than 52 million barrels. On Monday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) rose by 600,000 barrels last week, with the SPR inventory still sitting at a near 40-year low of 351.2 million barrels. The amount being purchased to put back into the SPR is a small portion of the hundreds of millions of barrels that were sold off out of the SPR over the last couple of years. Oil prices were trading up on Tuesday ahead of API data release, with Brent trading up 0.23% at $94.65 at 4:11 p.m. ET—a $2.50 gain week over week, while WTI was trading up 0.15%, at $91.62 per barrel—a gain of more than $2.50 per barrel from this time last week. Gasoline inventories saw the only rise this week, by 732,000 barrels, on top of the 4.21 million barrel build in the week prior. Gasoline inventories are roughly 2% less than the five-year average for this time of year. Distillate inventories fell by 258,000 barrels, partially offsetting the 2.592-million barrel build in the week prior, and are 13% below the five-year average for this time of year. Cushing inventories fell by another large 2.564 million barrels after falling 2.417 million barrels last week, leaving just over 22 million barrels in Cushing.