Morgan Stanley cuts oil price forecasts, sees surplus in H1 2024
Morgan Stanley on Wednesday lowered its oil price forecasts, predicting a market surplus in the first half of 2024 with non-OPEC supply growing faster than demand next year The Wall Street bank cut its Brentprice outlook for the third quarter this year to $75 from $77.50 per barrel and lowered its fourth quarter forecast to $70 from $75. It also cut its forecasts for 2024 by $5, and now sees prices at $70 in the first quarter, at $72.50 in the second, and at $75 and $80 for the final two quarters, respectively
Discounted Russian crude imports saved Indian refiners $7 billion
Indian refiners saved at least $7.17 billion in foreign exchange in the 14 months that ended May 2023 by ramping up purchases of discounted Russian crude oil following the outbreak of the war in Ukraine, an analysis of India’s trade data for the period shows. India, the world’s third-largest consumer of crude oil, depends on imports to meet over 85 per cent of its oil needs. With Western buyers cutting oil imports from Russia in the wake of its February 2022 invasion of Ukraine, Moscow has been offering discounts on its crude. Indian refiners have been lapping up these discounted barrels, so much so that Russia, which used to be a marginal player in India’s oil trade, is now New Delhi’s biggest oil supplier The total value of India’s oil imports for the 14-month period from April 2022 to May 2023 was $186.45 billion
Oil Prices Diverge As Uncertainty Persists
Crude oil prices, which had been rallying on the news that Saudi Arabia will extend its production cuts, began trade on Wednesday with a slight decline before WTI jumped even higher while Brent remained in the red. Uncertainty in oil markets has traders struggling to balance economic risks with supply cuts, although those aren’t their only concerns. A new analysis by the Financial Times suggests that the rising cost of capital is keeping prices depressed while leaving the market more vulnerable to shocks in the future. On the supply side, Saudi Arabia announced earlier this week that it will extend its voluntary cut of 1 million bpd in production to August and likely beyond. While the news did not come as a surprise, the size of the cuts prompted a positive response from the market. “This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil market,” the Saudis said on Tuesday. Meanwhile, Russia’s Deputy Prime Minister Alexander Novak said the country will reduce exports by half a million barrels daily next month. As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Novak said. The combination of these reports should have sent prices higher for at least a week under normal circumstances but this week the market’s reaction to the news lasted less than a day. At the time of writing, Brent crude was trading with a decline from opening while West Texas Intermediate was up by more than a percentage point. “Oil prices came under pressure again due to lingering worries over a slowdown in the global economy and further hikes of interest rates in the United States and Europe,” a Mitsubishi JFG analyst told Reuters. Bloomberg noted that traders will be tuning into the Saudi Arabian energy minister’s address to the 8th OPEC International Seminar later today to get more insight into the group’s future plans. The Commonwealth Bank of Australia, meanwhile, pointed out that attention may soon shift to the state of global oil inventories, as a Reuters poll predicted the API will later today report a third weekly inventory decline in a row.
Green hydrogen to be India’s future fuel, says union minister R K Singh
Union Minister R K Singh on Wednesday said green hydrogen is going to be the future fuel in India, while urging investors to invest in the country to manufacture the clean energy source. The remarks by the minister for power, new and renewable energy were made at the first International Conference on Green Hydrogen 2023. “We will help you in developing (green hydrogen) projects. We will also help you with demand as well. Come and partner with us,” PTI quoted Singh as saying while addressing the conference attended by over 2,500 participants. The investors can partner for development of electrolysers, mechanism for transportation of green hydrogen, usage of green hydrogen in manufacturing for green steel and cement etc, he said adding India is the biggest market in the world. Like the field of renewable energy, India shall emerge as a leader in green hydrogen also, Singh said. There are industries which have started working to set up 3.5 MT capacity of green hydrogen. They are engaged with various states for acquisition of land, he informed the attendees which included diplomats and industry leaders across various countries. That’s the pace at which India is growing, he noted. In January 2023, the Centre approved the National Green Hydrogen Mission with an outlay of Rs 19,744 crore with an aim to make India a global hub for manufacturing green hydrogen. The mission seeks to promote development of a production capacity of at least 5 MMT (Million Metric Tonne) per annum with an associated renewable energy capacity addition of about 125 GW in the country by 2030.
Russian Oil Prices Jump Ahead Of Export Cut
The price of Russian ESPO crude, which goes to China, rose to the highest in seven months as Chinese buyers rushed to buy it ahead of an announced 500,000-bpd cut in exports next month. Per Reuters, ESPO is currently trading at a $4 per-barrel discount to Brent crude, which puts it $6 above the G7 price cap. Before the announcement of the export cut, ESPO was trading at a discount of $4 to Brent crude, still above the price cap. ESPO has been trading consistently above the price cap because it is the preferred Russian blend of Chinese refiners. The ESPO blend is lighter and sweeter than the flagship Urals blend, which has normally traded at a more significant discount to Brent crude. This discount only deepened after the imposition of sanctions on Russian crude exports. Yet even the discount of Urals to Brent has narrowed lately, with the blend last trading at over $55 per barrel, compared with close to $76 for Brent at the time of writing. The trades with ESPO above the price cap suggest that, for months now, Russia has had the tankers and insurance firms to provide coverage and shipping for the ESPO grade, which can reach China from Russia’s Far East in less than a week. Demand is on the rise, too, as Chinese independent refiners get their new import quotas. “The price increase comes as the private refiners have just received new crude imports quotas. They are now out for shopping and Russian oil remains relatively cheap,” an unnamed trader told Reuters. Earlier this week, meanwhile, Russia announced it would further reduce its supply of oil. “As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Russia’s Deputy Prime Minister and top OPEC negotiator Alexander Novak said earlier this week. The announcement came minutes after Saudi Arabia said it would extend its unilateral oil production cut of 1 million bpd into August. Novak went on to say that the cut in exports would also mean a cut in production but Reuters noted in a report earlier this week that Russian oil supply for the international markets would be already lower this month as refineries ramp up after the end of maintenance season.
Oil Prices Diverge As Uncertainty Persists
Crude oil prices, which had been rallying on the news that Saudi Arabia will extend its production cuts, began trade on Wednesday with a slight decline before WTI jumped even higher while Brent remained in the red. Uncertainty in oil markets has traders struggling to balance economic risks with supply cuts, although those aren’t their only concerns. A new analysis by the Financial Times suggests that the rising cost of capital is keeping prices depressed while leaving the market more vulnerable to shocks in the future. On the supply side, Saudi Arabia announced earlier this week that it will extend its voluntary cut of 1 million bpd in production to August and likely beyond. While the news did not come as a surprise, the size of the cuts prompted a positive response from the market. “This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil market,” the Saudis said on Tuesday. Meanwhile, Russia’s Deputy Prime Minister Alexander Novak said the country will reduce exports by half a million barrels daily next month. As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Novak said. The combination of these reports should have sent prices higher for at least a week under normal circumstances but this week the market’s reaction to the news lasted less than a day. At the time of writing, Brent crude was trading with a decline from opening while West Texas Intermediate was up by more than a percentage point. “Oil prices came under pressure again due to lingering worries over a slowdown in the global economy and further hikes of interest rates in the United States and Europe,” a Mitsubishi JFG analyst told Reuters. Bloomberg noted that traders will be tuning into the Saudi Arabian energy minister’s address to the 8th OPEC International Seminar later today to get more insight into the group’s future plans. The Commonwealth Bank of Australia, meanwhile, pointed out that attention may soon shift to the state of global oil inventories, as a Reuters poll predicted the API will later today report a third weekly inventory decline in a row.
India mulls bilateral deals for green hydrogen-linked carbon credits
India is considering bilateral agreements with countries such as Japan to allow them to use carbon credits linked to green hydrogen production in India in exchange for investment and purchase deals, two government sources and one industry source told Reuters. New Delhi this year approved a 174.9 billion rupee ($2.13 billion) incentive plan to promote green hydrogen in a bid to cut carbon dioxide emissions and become a major exporter in the sector. Indian companies such as Reliance Industries, Indian Oil and Adani Enterprises have big plans for green hydrogen, a fuel generated using renewable energy. Trading in carbon credits – earned by projects for reduction of greenhouse gases and each equivalent to one tonne of carbon dioxide – can bring in more investments and assured offtake to India, said the sources, all of whom declined to be named as the discussions are not public. Any agreements will see overseas companies or financial agencies signing investment and purchase deals with Indian green hydrogen makers, the sources said, adding that India is already in talks with Japan. On March 17, Japan and India signed a preliminary agreement to establish a joint crediting system (JCM) for decarbonisation under Article 6 of the Paris Agreement, which is a legally binding international treaty on climate change, according to a document seen by Reuters. Article 6 provides for sharing of carbon credits between countries and private companies. This would allow buyers of green hydrogen to also get carbon emissions credit for green hydrogen production, which would otherwise be credited to the producers. Japan already has agreements with 26 countries including Bangladesh, Ethiopia, Kenya, Indonesia and Saudi Arabia. The Indian ministries of environment, renewable energy and external affairs have held discussions on the proposed carbon-trading agreements, said the sources. The government has spoken with the industry too ahead of a three-day international summit on green hydrogen on Wednesday in New Delhi, they said. The three ministries did not respond to emails seeking comment. Japan’s Indian embassy said their response might be delayed. Reuters could not immediately determine the other countries India was in talks with. “The Global North’s capacity and technology, combined with the Global South’s vast potential for green development, can lead to impactful climate action,” said Shekhar Dutt, director general of Indian industry body Solar Power Developers Association.
Russia Says It Will Reduce Oil Exports By 500,000 Bpd In August
Russia will cut its crude oil exports by 500,000 barrels per day (bpd) in August in a bid to ensure a balanced market, Russia’s Deputy Prime Minister Alexander Novak said on Monday. “As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Novak said in a brief statement. The top oil official in Russia didn’t give any figures as to the volume of the Russian production and exports for August, nor the baseline from which the cut would be made. The August cut in exports would mean an additional cut in oil production by 500,000 bpd in August, Novak’s office told Russian daily Vedomosti. The Russian announcement came minutes after Saudi Arabia said it would extend its unilateral oil production cut of 1 million bpd into August. Saudi Arabia will be producing around 9 million bpd in both July and August after extending the voluntary cut into next month. “This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil market,” Saudi Arabia said today. Russia, for its part, has enjoyed resilient crude oil exports – much higher than anticipated last year – even after the Western sanctions and the price cap on its crude and petroleum products. China and India are snapping up cheap Russian barrels, and Russian exports for most of June were still around 250,000 bpd higher compared to February, which serves as a baseline for the 500,000-bpd production cut Russia has promised this year. Today’s nearly simultaneous announcements from Russia and Saudi Arabia are noteworthy, after Saudi Energy Minister Prince Abdulaziz bin Salman said at the latest OPEC+ meeting in early June, referring to Russia, “We discussed with Russia the issue of its production and asked it to clarify its data, and we have strengthened the concept of transparency with Russia about its oil production figures.”
GAIL India to see higher realisation as PNGRB hikes tariff: Kotak Institutional Equities
With the Petroleum and Natural Gas Regulatory Board (PNGRB) raising unified tariff for the national gas grid, Kotak Institutional Equities sees higher realisation for GAIL India. PNGRB raised the unified tariff for the national gas grid by approximately 10 percent to Rs 81 per mmbtu with varying increases of 1 percent, 5 percent, and 15 percent for zones 1, 2, and 3, respectively. At revised volume projections, GAIL India can realise even higher, approximately Rs 66 per mmbtu as compared with Rs 64 per mmbtu earlier, as it now projects less volume in zone-2 and higher volume in farther zones, highlighted Kotak Institutional Equities.
Inside Qatar’s multi-billion LNG expansion
In the heart of the Arabian Gulf, amidst the shimmering skyline and ambitious visions, lies a nation that has carved its path to global prominence through its abundant natural resources. Qatar, a small peninsula, has long been synonymous with energy wealth, thanks to its vast reserves of natural gas. Now, as the world grapples with an energy crisis amid a rapidly evolving global energy market, Qatar is positioning itself as a key player in meeting the rising demand for cleaner energy sources. In recent years, Qatar has embarked on an ambitious journey to expand its gas production capabilities and significantly increase its Liquid Natural Gas (LNG) export capacity. This strategic shift not only reflects Qatar’s sharp understanding of global energy trends but also underscores its commitment to long-term economic prosperity. When the Russia-Europe conflict triggered an energy crisis, Qatar’s Energy Minister Saad Al-Kaabi declared that Qatar would stand in “solidarity with Europe” and not divert gas supplies from the continent even for financial gain. Over the past year, Qatar has fulfilled its pledge. While the US supplied more than half of Europe’s LNG imports, Qatar redirected significant flexible volumes to the European market. “As one of the largest producers of LNG, Qatar will make a significant impact on the dynamics of global LNG markets with its ambitious expansion plans,” notes Rawan Oueidat, CFA, Corporate Ratings at S&P Global Ratings. Qatar’s plan to inject billions of dollars into its LNG sector and increase gas production capacity by 64% is poised to have far-reaching consequences for global markets, she adds. Oueidat explains that by 2027, QatarEnergy plans to expand Qatar’s LNG production about 64% to 126 mtpa (equivalent to approximately 3.1 million barrels [bbl] of oil equivalent per day) from about 77 mtpa currently, through the North Field East and the North Field South expansions. “This should help the company perform its critical role for the government’s long-term development strategy and should keep positioning Qatar as a large supplier of the global gas market,” Oueidat adds. As Qatar’s LNG expansion unfolds, the global LNG markets can expect a more stable supply outlook and increased diversification. Qatar’s long-standing expertise in LNG production, coupled with its strategic vision, positions the country as a key player in meeting the world’s growing energy demands. Although recent events have demonstrated that the demand for LNG remains strong and there will be an increase in capacity in all the major markets, Deloitte’s Holliday notes that the long-term future of LNG will likely depend on external factors, including geopolitical disruptions and the energy strategies taken by some of the major economies across the globe.