Oil Prices Set For Fourth Consecutive Weekly Gain As Supply Tightens
Oil prices were up slightly in Asian trading early on Friday and set for a small weekly gain, the fourth in a row, as the market is starting to see signs of tightening supply. WTI Crude was up by 0.91% at 76.34 in Asian trading, while the international benchmark, Brent Crude, traded 0.88% higher at $80.34. Both benchmarks were on course to finish the week higher. However, gains have been limited, after China reported early this week second-quarter GDP growth below expectations. But the market is now more optimistic that China will roll out more stimulus to support domestic demand and help its economy which has struggled to rebound strongly after the end of the Covid lockdowns more than six months ago. China vowed on Tuesday that it would “formulate and introduce more effective policies for restoring and expanding consumption as soon as possible.” This pledge has improved sentiment across the commodity markets. While the economic data from China and the U.S. remain mixed, the fundamentals are increasingly pointing to a tighter oil market this summer. Russian crude oil exports have shown signs of decline for a second consecutive week and are estimated to have sunk to a six-month low in the four weeks to July 16. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month. Saudi Arabia’s crude oil exports have also started to decline, to below 7 million bpd in May, for the first time in many months. Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August. In the United States, crude oil and gasoline inventories dropped last week, the EIA’s weekly data showed on Wednesday.
After outlier record high global diesel cracks in 2022, margins plunge
Russia’s invasion of Ukraine in February last year pushed diesel and petrol cracks to record in the following quarter, giving oil refiners globally unprecedented profits but they have crashed this year, denting refiners’ profits. A crash in global cracks in April-June this year will shrink profits of refiners when compared with the outlier period of last year, an analysis of data and industry experts said. Rising demand, low inventories and oil market disruption centered around Russia’s invasion of Ukraine pushed cracks — the differential between a barrel of crude oil (raw material) and the petroleum products refined from it — upwards starting March last year. Diesel cracks shot to over USD 30 per barrel and petrol inched closer to USD 20 and the upward trajectory continued in April-June quarter. Diesel cracks in June last year soared to USD 74.95 a barrel while petrol cracks neared USD 42. Jet fuel cracks soared to USD 62. An analysis of data for past five years showed petrol cracks barely touching double digits, while diesel cracks never crossed USD 20. That rise gave refiners bumper profits but now when the margins have stabilised to near normal levels, the earnings would look dwarfed, experts said. Diesel cracks in June this year hovered between USD 16 and 19 while petrol cracks were in the range of USD 10 and 14. This unusual situation will result in refiners reporting lesser earnings in the April-June quarter, they said. Reliance Industries Ltd, the operator of the world’s largest single location refining complex, is due to announce its first quarter earnings on Friday. Indian Oil Corporation (IOC), the nation’s largest oil firm, would announce Q1 results on July 28 and Bharat Petroleum Corporation Ltd (BPCL) would do so on July 26. Global petrol prices crashed in June, denting refiners’ profits, pushing up inventories in key trading hubs around the world. Margins on petrol in Asia have plunged more than 102 per cent in July to a discount of 14 cents a barrel to Brent crude — the lowest for this time of the year since at least 2000, the data showed.
Crude oil boosted as EIA forecasts price rise in H2
Crude oil futures traded marginally higher on Thursday morning as the US Energy Information Administration (EIA) estimated an increase in crude oil prices through 2024. At 9.53 am on Thursday, September Brent oil futures were at $79.53, up by 0.09 per cent, and September crude oil futures on West Texas Intermediate (WTI) were at $75.38, up by 0.12 per cent. August crude oil futures were trading at ₹6,196 on Multi Commodity Exchange (MCX) in the initial trading hour of Thursday morning against the previous close of ₹6,206, down by 0.16 per cent, and September futures were trading at ₹6,215 as against the previous close of ₹6,224, down by 0.14 per cent. US EIA forecast higher crude oil prices in the second half of 2023 and into 2024 because of moderate but persistent inventory drawdowns, which occur when demand exceeds supply. “We expect production cuts from OPEC members and forecast higher petroleum consumption will lead to an average inventory drawdown of 0.4 million barrels per day between July 2023 and the end of 2024,” it said. It forecast an increase in Brent crude oil price to mid-$80 a barrel by the end of 2024, up from the June 2023 average of $75 a barrel. It forecast a similar path for the WTI crude oil price, to maintain a discount to Brent of $5 a barrel. US EIA estimated that Saudi Arabia accounted for about 10 per cent of the global production of petroleum and other liquid fuels, or 10.1 million barrels a day, in June 2023. “We forecast OPEC production of petroleum and other liquid fuels will average 33.9 million barrels a day in 2024, down 1.2 million barrels a day from the group’s 2022 peak of 35.1 million barrels a day. These production cuts will keep total OPEC production below the pre-pandemic five-year (2015–19) average of 36.2 million barrels a day and reduce OPEC’s share of world production to 33 per cent in 2024, down from the pre-pandemic average share of 37 per cent,” it said.
India’s oil & gas import bill contracts 33% y-o-y in April-June quarter as prices drop
India’s oil and gas import bill contracted by a third from a year earlier to $35 billion in the April-June quarter as prices sharply dropped, as per the oil ministry data. Crude oil worth $31.4 billion was imported during the April-June period, lower than $48.1 billion in the same period last year. The volume of oil imports marginally reduced to 60.1 million metric tonnes (mmt) in the first quarter from 60.7 mmt in the same period last year. Liquefied natural gas (LNG) imports rose 4.3% in volume terms to 7590 mmscm but in value terms dropped 19% to $3.8 billion Oil and gas prices were extremely volatile in the April-June quarter last year due to the uncertainties induced by the Russia-Ukraine war and the consequent Western sanctions imposed on Moscow. The global crude benchmark Brent averaged $116 per barrel in the April-June of 2022. It was 35% lower at $76 per barrel in the same period this year.
HPCL setting up green hydrogen plant in Andhra: MoS Rameswar Teli
State-owned Hindustan Petroleum Corporation Limited (HPCL) is setting up a 370-tonne-per-annum electrolyzer-based green hydrogen plant at Visakh Refinery in Andhra Pradesh, Union Minister of State (MoS) for petroleum and natural gas Rameswar Teli informed Parliament on Thursday In a written reply to a question in Lok Sabha, the minister said the state-owned entity spent INR 110 million out of a total fund allocation of INR 330 million for this project. The scheduled completion date of the project is September this year, the minister added. Union Cabinet in early January approved the National Green Hydrogen Mission, aiming to make India a global hub for such technologies’ production, utilization, and export.
National Gas Grid: 68 Per Cent Work Complete, All States Likely To Get Connected By 2026
A total of 23,173 kilometre of natural gas pipelines, including spur lines, are operational in the country and another 12,206 kilometre length of pipeline is under various stages of construction. This information was provided by Union Minister for Petroleum and Natural gas, Hardeep Singh Puri, while replying to a question in Lok Sabha on 20 July. The Petroleum and Natural Gas Regulatory Board (PNGRB), which is the regulator for gas pipeline infrastructure, has authorised the development of 33,592 km natural gas pipeline network in the country. The pipeline projects are being implemented by various entities including oil companies as per the authorisation by PNGRB. All natural gas pipelines are part of the ‘Gati Shakti National Master Plan’. Under-Construction Projects The Minister in his reply also furnished target dates for the completion of various natural gas pipeline network under implementation. Kakinada-Vizag-Srikakulam: This natural gas pipeline in Andhra Pradesh, which is being executed by Andhra Pradesh Gas Distribution Corporation, will be completed by June 2024. Kakinada-Vijayawada-Nellore: This pipeline, in Andhra Pradesh which has been allotted to IMC Limited, is to be completed by March, 2024. Srikakulam-Angul: The 744-km-long pipeline project from Srikakulam in Andhra Pradesh to Angul in Odisha via Ganjam, Nayagarh, Khordha, Cuttack, and Dhenkanal is to be completed by July 2023. Ennore-Nellore: The pipeline connecting Chennai’s northern suburb of Ennore to Nellore in Andhra Pradesh was scheduled to be completed by April 2020, but is currently stalled due to litigation. North-East Natural Gas Pipeline Grid: The 1,656-km-long North-East gas grid, will cater to eight states of Northeastern India in a phased manner. Being executed by Indradhanush Gas Grid Limited — a joint venture company of five central public sector enterprises, namely, IOCL, Oil India Ltd, Numaligarh Refineries, ONGC, and GAIL — the entire project is targeted to be completed by 31 March 2024. Kanai-Chhata-Panitar Pipeline: Being developed by Hooghly Pipelines Private Limited, a subsidiary of H-Energy, the natural gas pipeline from Haldia to Panitar is to be completed by September 2023. Mumbai-Nagpur-Jharsuguda: The 1755-km-long ambitious project, encompassing vast geographical areas across Maharashtra, Madhya Pradesh, Jharkhand, and Odisha is under the advanced stage of completion and has sought an extension till 30 October 2024. Jamnagar-Dwarka: The pipeline between Jamnagar and Dwarka in Gujarat will be completed by August 2024. The 33,592 kilometre pipeline network will create a national gas grid in the country and help increase the share of natural gas in the primary energy mix to 15 per cent in 2030, from about 6.3 per cent currently.
China Snaps Up Record-High Volumes Of Russian Crude In The First Half Of 2023
Despite an apparent weakness in its economy, China is importing record volumes of oil and is buying record amounts of Russian crude to add to stockpiles. During the first half of 2023, Chinese imports of Russian crude oil averaged 2.13 million barrels per day (bpd), which helped Russia oust its OPEC+ partner Saudi Arabia from the top spot as the single biggest supplier to the world’s top crude importer so far this year, per Financial Times estimates based on Chinese customs data. Imports from the world’s top crude oil exporter, Saudi Arabia, averaged 1.88 million bpd between January and June, according to FT’s calculations. In June alone, China broke – for yet another month – the record for importing Russian crude oil, per data from the Chinese General Administration of Customs cited by Reuters. Chinese imports from Russia averaged 2.56 million bpd last month, a surge of 44% compared to the same month in 2022, the Chinese customs data showed. The previous record, of 2.29 million bpd, was set in May as Chinese refiners continued to buy discounted Russian oil. The discounts for Russia’s crude narrowed relative to the benchmarks in June, but this didn’t stop China from boosting imports and breaking in June the record from May. China’s imports from Saudi Arabia also rose in June, compared to May and June last year. But at 1.93 million bpd in June 2023, those imports still trailed behind the record-breaking Chinese crude oil imports from Russia. Total Chinese oil imports are also surging. China’s crude oil imports in June jumped by 45.3% on the year to the second-highest monthly figure on record, as refiners continued building up inventories despite weak domestic demand. Oil imports in June totaled 12.67 million bpd—a sharp increase from a year ago when the country was still under Covid-19 lockdowns.
Has India’s appetite for Russian oil peaked? What latest data shows
India’s imports of oil from Russia rose to an all-time high in June. However, the growth in import was the slowest pace since October 2022 This is being seen as a signal that India’s appetite for Russian oil may have peaked, Reuters reported citing tanker data. Indian refiners have been buying Russian oil heavily ever since Russia began selling it at a discount following western sanctions in the wake of the Ukraine war. Discounts have now narrowed and problems have arisen in payments settlement. That has lately sent Indian refiners on the lookout for for alternative sources in the Middle East. India bought nearly 2 million barrels per day (bpd) of Russian crude in June. It accounted for a marginal growth from over May, data showed. Before the Ukraine war, India rarely bought oil from Russia because of high freight costs. India’s June imports of Russian oil exceeded its combined purchases from Iraq and Saudi Arabia, the second- and third-biggest sellers to New Delhi. The United States emerged as the fourth-largest supplier to India, pushing UAE to the fifth place, the data showed. In terms of market share, Russia supplied about 42% of India’s crude oil imports in April-June, the first quarter of India’s fiscal year, the data showed, while the Middle East share rose to about 41% after slipping in the previous three months. Imports from the Middle East fell by about 34% in the June quarter from a year ago, while those from the C.I.S. nations – Azerbaijan, Kazakhstan and Russia – nearly trebled, the data showed. Lower imports from the Middle East dragged down OPEC’s share in India’s overall crude imports.
GAIL, LanzaTech Enter Strategic Partnership to Explore Biorecycling Carbon Waste into Fuels and Chemicals
GAIL (India) Limited, India’s largest natural gas company and LanzaTech Global, Inc., USA, an innovative carbon capture and utilization (“CCU”) company that converts waste carbon into products that people use in their daily lives, have entered a partnership to explore innovative technology solutions that advance GAIL’s Net Zero 2040 goals and have the potential to support wider decarbonization applications globally. GAIL and LanzaTech will explore setting up a pilot scale CO2 capture and conversion project that has the potential to be a role model for converting CO2 into useful materials instead of emitting it to the atmosphere. Combining LanzaTech’s carbon capture and utilization technology with GAIL’s renewable H2 and CO2 gas streams, the project will enable resource utilization where the building blocks of everyday consumer goods viz. Fuel, Packaging and Clothing can be made from biorecycled material instead of virgin fossil fuel. “The possibilities coming out of this collaboration with LanzaTech are very promising and significant to improving our carbon footprint,” said Sandeep Kumar Gupta, Chairman and Managing Director of GAIL. “Using LanzaTech’s cutting-edge technology will enhance our environmental stewardship and open up new avenues for driving sustainability across our operations.” “Waste CO2 can be used to make the things we need,” said Dr. Jennifer Holmgren, LanzaTech’s CEO and Board Member of the US-India Strategic Partnership. “By combining LanzaTech’s expertise in carbon recycling with GAIL’s commitment to reducing emissions and implementing renewable projects, this project has the potential to turn CO2 from an environmental liability to a value added product. CO2 can be the raw material of the future, enabling fossil carbon to stay underground. We look forward to launching our collaboration with GAIL to make this vision a reality.”
Amid supply concerns, Indian crude basket rises 4% in July
The Indian crude oil basket which was largely subdued in May and June has witnessed over 4% increase in its average price in July amid global supply concerns. The average Indian crude basket for July stands at $78.22 per barrel, compared to $74.93 a barrel in June. In May, it averaged at $74.98 a barrel as prices eased amid growing concerns of a global slowdown.