How cheaper crude oil from Russia has changed India’s fuel trade matrix
Sourcing cheaper crude oil from sanction-hit Russia has opened new doors for boosting exports for India while it seems to have alienated traditional buyers of processed petroleum products from the country. While countries like Singapore (-41.7 per cent), USA (-13.2 per cent), Australia (-58.8 per cent), South Korea (-23.9 per cent) and Malaysia (-52.8 per cent) have reduced their purchase of petroleum products from India in FY23, countries like the Netherlands (70.6 per cent), Israel (85 per cent), Brazil (114 per cent), South Africa (60.6 per cent) and Togo (32 per cent) have substantially increased their purchase of fuel products from India.
Russia Tells U.S. Not To Lecture Saudi Arabia On Oil
The United States should not tell Saudi Arabia how to manage its crude oil production, Kremlin spokesman Dmitry Peskov said on Friday. “Saudi Arabia is a sovereign state, a responsible state, and a very important player in the international energy markets. Of course, this sovereign state is capable of making decisions that concern its own economy. Hardly anyone, even the US, should lecture (Saudi Arabia) on how to be in this or that case,” Peskov said in a Moscow press briefing on Friday. Saudi Arabia voluntarily agreed over the weekend to cut the country’s crude oil production targets for the month of July by an additional 1 million barrels per day. President Biden did not make any noteworthy response to the decision, with oil prices only briefly rallying in response to the oil production curtailments. Peskov’s rebuke, then, does not follow any new backlash from U.S. President Joe Biden. A rather way back response to OPEC’s oil cuts came in October 2022, when President Biden threatened “consequences.” In the same press briefing, Peskov also said that its Russian atomic energy sector would continue developing despite the US and UK forming a new economic alliance that looks to box out Russia from the international nuclear energy markets. Peskov referred to the situation as “unfair competition.” President Biden and PM Sunak signed a declaration on Thursday on the new pact “for a new age”, referred to as the New Atlantic Declaration, Sunak said of the deal that it was a deal “of a kind that has never been agreed before,” adding that it included $17.5 billion in new U.S. investments that were promised to the UK. A UK government document providing details about the deal says in part, “We face new challenges to international stability — from authoritarian states such as Russia and the People’s Republic of China (PRC); disruptive technologies; non-state actors; and transnational challenges like climate change.”
Kerala can save Rs 90 billion by switching to renewable energy, says study
The state can save up to Rs 90 billion in five years if coal power purchases are replaced with renewable energy contracts, according to a recent study. The study gains significance in the backdrop of a recent decision by the state government to move to 100 per cent renewable energy by 2040. The report has suggested a transition pathway that proposes phasing out of the central power sector, saving the state Rs 45.05 billion in five years. According to the report, the state can replace its scheduled purchases of coal power from central plants with new renewable energy and can save around Rs 9.69 billion per annum. The total replacement of coal power contracts with renewable energy can save the state an estimated Rs 18.43 billion annually. The report brought out by the think-tank Climate Risk Horizons, was released on Friday in the state capital. Additional chief secretary power, Forest and general Administration K R Jyothilal released the report at a Round-table on Energy Transition in Kerala’s Electricity Sector, jointly organised by Asar, Equinoct and SEEM. The state has immense capacity to generate green power and become India’s green energy exporting hub, said KR Jyothilal. “Kerala imports close to 70 % of its power. Now it’s time to move on to energy independence. We are set on harnessing wind power in the state and developing green hydrogen,” he said.
IndianOil top bidder for Reliance’s KG gas for 2nd auction in a row
Indian Oil Corporation (IOC), the nation’s largest oil firm, has walked away with half of the natural gas that Reliance Industries Ltd and its partner bp of the UK offered in the latest auction of the fuel used to generate power, produce fertilizer, turned into CNG and used for cooking purposes. IOC got 2.5 million standard cubic meters per day out of the 5 mmscmd of gas auctioned last month, sources with knowledge of the matter said. The oil refining and marketing company, which was the top bidder even in the previous auction of gas from the eastern offshore KG-D6 block of Reliance-bp, bid the volumes on behalf of seven fertilizer plants. City gas companies including GAIL Gas Ltd, Mahanagar Gas Ltd, Torrent Gas, Indian Oil Adani Gas Ltd, and Haryana City Gas secured a total of 0.5 mmscmd of gas for turning into CNG for sale to automobiles and piped to household kitchens for cooking purposes.
Oil Prices Headed For Weekly Loss Despite Saudi Arabia’s Production Cut
Crude oil was heading for the second week of losses in a row despite the additional production cut Saudi Arabia announced at last Sunday’s OPEC+ meeting. In morning trade in Asia today, Brent crude was changing hands for less than $76 per barrel and West Texas Intermediate was trading at below $71. Both were down from close on Thursday. It appears that traders are still more concerned about oil demand than they are about the adequacy of supply. With news like Germany’s and the eurozone’s recession, a decline in Chinese manufacturing activity instead of continued expansion, and shrinking manufacturing activity in the U.S., demand worry is quite justified. Even the possibility that the Federal Reserve might not announce another rate hike at its next meeting on June 13-14 did nothing to change the dominant sentiment on the oil market. Earlier this week, these new developments prompted Energy Aspects to revise its forecast for oil prices, slashing them by $15 for the second half of the year. As reasons for the revision, the consultancy cited higher interest rates, the inclusion of a U.S. crude into the Brent basket, and the supply differences in sour and sweet crudes. According to Energy Aspects, OPEC is reducing the production of predominantly sour crudes, while Brazil and the United States are expanding the production of sweet crudes that make up both the Brent crude and WTI benchmarks. One additional factor that affected prices this week specifically was a news report that the U.S. and Iran were close to reaching a deal on sanctions and Iran’s nuclear program. Both sides promptly denied the report, which stopped the oil price slide but did not reverse it. There are some expectations that with the start of summer driving season in the U.S. prices will start climbing higher again but any climb could be tempered by demand indications from China.
India to dominate polyvinyl chloride capacity additions in Asia by 2027, says GlobalData
India is set to register the highest polyvinyl chloride capacity additions in Asia, contributing about 49% of the region’s capacity additions by 2027, according to GlobalData, a leading data and analytics company. GlobalData’s latest report, ‘Polyvinyl Chloride Industry Installed Capacity and Capital Expenditure (CapEx) Forecast by Region and Countries including details of All Active Plants, Planned and Announced Projects, 2023-2027’ reveals that India leads with the largest capacity additions, with a capacity of 3.79 million tonnes per annum (mtpa) from six planned and announced projects. Increased application of polyvinyl chloride in the construction, agriculture and packaging industries is expected to result in a growth in demand for polyvinyl chloride in India. Nivedita Roy, Oil and Gas Analyst at GlobalData, comments: “In India, the main capacity addition will be from a planned project, Mundra Petrochem Mundra PVC Plant, with a capacity of 2 mtpa. It is expected to commence production of polyvinyl chloride in 2026.” Reliance Industries Dahej PVC Plant 2, a planned project follows next with second highest capacity addition of 1.20 mtpa. The plant is expected to commence operations by 2026. Nivedita concludes: “Chemplast Sanmar Cuddalore PVC Plant, a planned project is the third highest contributor in terms of capacity additions in the country, accounting a capacity of 0.30 mtpa. The plant is expected to commence production of polyvinyl chloride in 2023.”
Petronas to pick 49% in ReNew project
Energy Global PLC on Wednesday said it has entered into a partnership with Petroliam Nasional Bhd, Malaysia’s state-run oil and gas company. As part of the collaboration, Gentari Sdn Bhd, a subsidiary of Petronas, will acquire a 49% equity stake in NASDAQ listed ReNew’s 403 megawatt (MW) peak power project. First reported by Mint on 8 August 2022, the deal is part of Petronas’ plans to back green energy projects in India by tying up with ReNew at the project level. The move reflects a broader trend of global oil companies, including industry leaders like Shell Plc, Total, and Thailand’s PTT Group, establishing a significant presence in the burgeoning green energy sector in India. As the hydrocarbon sector faces disruptions, other major players, such as Eni SpA from Italy, Statoil ASA from Norway and Russia’s Rosneft are also exploring opportunities in the green energy space. “On 31 May, ReNew entered a partnership with PETRONAS’ clean energy subsidiary Gentari, , which will purchase a 49% equity stake in ReNew’s 403 MW Peak Power project. As a part of the partnership ReNew will invest approximately ₹3,130 million (~$38 million) for its 51% stake in the project and through its affiliates will undertake EPC, O&M, and project management for the project,” ReNew said in a statement, while announcing its Q4 FY23 results. In June 2022, Petronas set up Gentari Sdn Bhd, to accelerate adoption of clean energy and build a renewable energy capacity of 40GW. It plans to supply 1.2 metric tonnes per annum (mtpa) of green hydrogen and establish electric vehicle (EV) charging points across the Asia Pacific, with a focus on Malaysia and India.
Falling global crude prices won’t reduce your petrol, diesel bills anytime soon. Here’s why
Despite a consistent fall in global crude prices, which went through the roof after the start of the Russia-Ukraine war last year, common consumers will have to wait for a drop in petrol and diesel prices in India. Though margins on petrol and diesel have turned positive for the oil marketing companies following the softening of international oil prices, they would require more time to recover their losses accumulated due to high crude prices last year. As far as a revision in oil retail prices is concerned, it may happen only after state-owned oil firms recoup losses they incurred last year, PTI reported, quoting officials. State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have temporarily abandoned the daily price revision since last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are now being recouped with rates dropping. Officials said the three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year, but diesel, which accounts for the bulk of the fuel sales, had been in red. But last month, margins on diesel turned positive with a small 50 paise a litre profit, they said, adding, this, however, was not enough to make up for the past losses. International oil prices had spiked to USD 139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They have since cooled to USD 75-76. At peak, oil firms lost Rs 17.4 per litre on petrol and Rs 27.7 a litre on diesel. In the October-December quarter, oil firms earned Rs 10 a litre margin on petrol but lost Rs 6.5 on diesel. In the following quarter, the margins on petrol moderated to Rs 6.8 a litre while diesel earned Rs 0.5 per litre. Officials said besides past losses, oil companies want to see if the drop in oil prices will last. “I guess they will watch for the prices for one more quarter (April to June) before deciding to restart fuel price revision,” an official said. Holding prices when input cost was higher than retail selling prices led to the three firms posting net earnings loss. They posted a combined net loss of Rs 21,201.18 crore during April-September despite accounting for Rs 22,000 crore announced but not paid LPG subsidy. International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 — climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85 per cent dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic. So, the three fuel retailers, who control roughly 90 per cent of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices. The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 per litre increase in taxes on petrol and diesel effected during the pandemic. That followed the current price freeze that began on April 6, which still continues.
EIA: Oil Prices Will Not Rally Despite Saudi Output Cut
Oil prices will not average more than $80 per barrel in the second half of this year, despite the most recent production cut announced by Saudi Arabia, the U.S. Energy Information Administration (EIA) said in its latest Short-Term Energy Outlook (STEO) released this week. At Sunday’s meeting, OPEC+ producers decided to extend their crude oil production cuts through 2024, while Saudi Arabia said it would voluntarily reduce its production by 1 million bpd in July to around 9 million bpd. The Saudi cut could be extended beyond July, Saudi Energy Minister, Prince Abdulaziz bin Salman, said. Despite the Saudi cut and the extension of the current OPEC+ cuts through 2024, the EIA expects non-OPEC producers to drive global liquids production to growth of 1.5 million barrels per day (bpd) in 2023 and 1.3 million bpd in 2024, limiting the upside for oil prices. Production growth in the United States, Norway, Canada, Brazil, and Guyana will be the primary drivers of the increase in global liquids output. The cuts, however, will result in draws in global oil inventories in each quarter between the third quarter of 2023 and the third quarter of 2024, the EIA reckons. Oil inventories will drop slightly next year, compared to last month’s STEO that forecast inventory growth of 300,000 bpd for 2024. This, the U.S. administration says, will put gradual pressure on oil prices. But oil is not expected to rally, and Brent Crude prices will average $79 per barrel in the second half of 2023, which is $1 a barrel higher than in May’s STEO estimate. The 2024 oil price forecast was raised to an average of $84 per barrel, up by $9 per barrel compared to last month’s assessment. Early on Wednesday, Brent Crude prices traded just below $76 per barrel as the Saudi cut failed to lift prices with the market focused more on the economic slowdown instead of expectations of a tighter market further out this year. Oil consumption will rise by 1.6 million bpd this year, and by another 1.7 million bpd next year, the EIA said, but noted that “Significant uncertainty remains around global economic growth and the potential impact on oil demand over the forecast period.” The EIA also revised down its estimates for the U.S. economy and diesel consumption for this year and next. The latest forecasts assume U.S. GDP growth of 1.3% in 2023 and 1.0% in 2024, which is down from last month’s forecast of 1.6% in 2023 and 1.8% in 2024, based on the S&P Global macroeconomic model for the U.S. economy and EIA’s energy price forecasts. The reduction in forecast GDP growth has led to lowered estimates for distillate fuel – mostly diesel – consumption. The EIA now expects U.S. distillate consumption to fall in 2024, which is a change from last month’s forecast that had expected distillate consumption to grow next year. “Recently, service sector production has been the primary driver of GDP growth, which requires less diesel consumption,” the EIA said in its discussion about diesel consumption and economic growth as part of the latest STEO. “We expect this trend to continue; we forecast in our STEO that U.S. diesel consumption in the second half of 2023 will be below the 2015−2019 average before a slight further decline in 2024 despite an expected increase in GDP over the same periods.” EIA’s forecast assumes that the Fed’s interest rate increases will slow inflation without causing major disruptions to U.S. employment or economic activity. “If GDP growth does decline, we could see a further slowdown in U.S. diesel consumption,” the EIA noted. Despite the Saudi attempts to further tighten the oil market and push prices higher, macroeconomic concerns about the U.S. and European economies and a possible slower-than-expected Chinese recovery continue to weigh on oil prices.
Rerouted Oil to Soften Russian Economy Contraction: World Bank
Oil shipment volumes from Russia “have not changed materially” despite war sanctions, and the absorption of its losses in Europe by the likes of China and India would help keep its economic contraction at 0.2 percent this year from an estimated 2.1 percent in 2022, the World Bank said Tuesday. “Clear signs of trade diversion emerged following the invasion, with the value of Russian fuel exports to the EU declining by over 40 percent last year, while exports to India and China increased”, the United Nations lender said in its outlook report for 2023 and 2024. Traditionally the top destination for Russian energy, the European Union accounted for eight percent of Russia’s mineral fuels exports in December 2022, having consistently fallen since March 2022, when the region comprised 17.4 percent of the total. Europe’s intake March 2022, the month after President Vladimir Putin launched his war on Ukraine, was its highest in the January 2019-March 2023 data the World Bank presented in the report. The 27-member bloc’s share of imports of Russian mineral fuels stood at 2.2 percent March 2023. In contrast world number two economy China saw its share of imports of Russian mineral fuels rise to 8.2 percent in March this year from six percent in March 2022 and 5.8 percent in December 2021. India saw a sharper increase, accounting for five percent of Russian mineral fuels shipments March 2023 from 0.9 percent March 2022 and 0.6 percent December 2021. “Russian imports from Türkiye more than doubled”, the World Bank said. Türkiye’s share stood at 1.4 percent March 2023 from 0.7 percent March 2022 and 0.5 percent December 2021. “Those trends were also reinforced since the beginning of the year, with Russia’s fuel exports to the EU falling by 87 percent in March from a year earlier”, the Washington-based World Bank added. “In Russia, the contraction this year is envisaged to be milder than initially forecast, partially due to the continued flow of energy exports”, it said. “Output in Russia is projected to contract slightly, by 0.2 percent in 2023, a 3.1 percentage point upgrade from the January 2023 forecast. This change mainly reflects the unexpected resilience of oil production and higher-than-expected growth momentum from 2022”, the report stated. Russia’s rerouting of its oil helped limit its output contraction last year to 2.1 percent. “The recession was less severe than projected earlier, due to higher oil production, the redirection of oil exports away from traditional markets, and more government fiscal support than initially assumed”, the World Bank said. But while Russia’s fuel exports found alternative markets, the World Bank said, “Continued contraction in export volumes, weak domestic demand, policy uncertainty, and sanctions due to Russia’s invasion of Ukraine will continue to weigh on activity”. Slowdown in Other Oil Economies Other oil exporting economies are also likely to slow down this year “as the boom in industrial activity associated with high energy prices fades”, the report stated. “Crude oil prices are projected to average $80/bbl [barrel] in 2023, a $8/bbl downward revision from the January forecast, and to edge up to $82/bbl in 2024, reflecting a modest pickup in demand”, the World Bank said. “Prices for natural gas and coal are expected to moderate in 2023 and decline further in 2024, as Europe has made substantial progress in improving efficiency and reducing energy demand. Natural gas prices in Europe are expected to remain well above their pre-pandemic five-year average, despite elevated inventories”.