Four Reasons For Europe’s Record-Breaking Drop In Natural Gas Demand
Europe’s natural gas demand fell by the most on record last year, with the decline equivalent to the gas volumes required to supply more than 40 million homes, the International Energy Agency (IEA) said in a commentary on Tuesday. Natural gas consumption in OECD Europe fell by an estimated 13% in 2022, its steepest decline in absolute terms in history, IEA said in its quarterly gas report at the end of February. Demand in Europe fell amid mild winter weather and demand reduction in industry due to high prices. Significant changes in the energy mix, economic activity, weather, and consumer behavior were responsible for the dramatic shift in natural gas consumption in Europe last year, IEA’s analysts Peter Zeniewski, Gergely Molnar, and Paul Hugues wrote in the commentary. Record additions of solar and wind power helped lower gas demand, but record-high gas prices in the summer of 2022 also led to a lot of industry curtailments and lower consumption by industries and businesses, according to the IEA. Yet, the extent to which the high prices will lead to permanent reductions in demand in gas-intensive industrial sectors remains unclear, the IEA’s analysts say. In Europe’s industry, gas use fell by 25 bcm, or around 25%, in 2022, due to production curtailment and fuel switching, as the energy-intensive industries were the first to respond to the gas price shocks last year, the IEA said. In household consumption, “Policy measures – such as renewable support schemes, grants and preferential loans for housing retrofits and heat pump installations, alongside campaigns to encourage behavioural change – all played a part in moderating gas demand,” according to the analysts. The European Union managed to beat its target for cutting gas demand this winter, Eurostat data showed last month. According to the data, the EU’s winter demand has so far dropped by 19.3% compared to the five-year average, beating the 15% goal it set for itself to help it survive the winter without gas shortages.
ING Slashes 2023 Brent Oil Price Forecast To $90
Softer oil market fundamentals than previously expected prompted ING on Friday to slash its Brent Crude forecast for this year to $90 per barrel from $98, as a larger current surplus is likely to leave the market in a better position to handle an expected deficit in the second half of 2023. ING now sees Brent Crude prices averaging $100 a barrel in the fourth quarter, down from a previous projection of $110, Warren Patterson, Head of Commodities Strategy at ING, wrote in a note today. In the first half of this year, the surplus on the market would be higher than anticipated earlier, due to stronger supply out of Russia. The bigger surplus would mean that inventories are looking more comfortable. “This will leave the market in better shape to handle the deficit expected later in the year,” ING said. The bank, like other forecasters including the International Energy Agency (IEA), expects global oil demand to pick up strongly in the second half of 2023, leading to stronger oil prices. Earlier this week, the IEA said in its monthly report that the oil market is set to swing from a supply overhang in the first half of 2023 to a deficit in the latter part of the year as the economic rebound in China will push global oil demand to a record high. Oil prices were tentatively rising early on Friday, following the massive selloff earlier this week sparked by concerns about the banking sector in the U.S. and Europe with the collapse of two American banks and a scare at European giant Credit Suisse. Brent Crude traded at around $75 early on Friday in Europe, while WTI Crude continued to trade below $70, at $68 per barrel. “Recent events will likely question whether the Fed will be able to pull off a soft landing, which raises demand concerns,” ING’s Patterson said on Friday. The bank also believes that OPEC+ “will wait for the dust to settle before coming to a decision,” commenting on the market rout this week, which saw oil hit a 15-month low. Consultants at Energy Aspects also believe that OPEC+ will not be racing to react to this week’s oil price plunge and will wait for financial markets to calm down after the banking sector scare.
India Ranks Third Largest Primary Energy Consumer in the World
India has emerged as a major player in the global energy market, with the country ranking third in the world for primary energy consumption, according to the India Energy Outlook 2021 report by the International Energy Agency (IEA). Additionally, India is now the third-largest consumer of oil, third-largest LPG consumer, fourth-largest LNG importer, and fourth-largest refiner. These impressive statistics have been shared by Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, and have been applauded by the Prime Minister, who stated that India is committed to self-reliance in energy and sustainable growth. India’s energy requirements are met through domestic production and imports from various regions, including the Middle-East, Africa, Europe, North America, South America, and South-East Asia. To meet the increased demand for hydrocarbon fuel, India is adopting various strategies, including attracting investments in Exploration & Production to enhance domestic oil and gas production, shifting to a gas-based economy, improving refinery processes through technological upgradation, increasing energy efficiency and productivity, accelerating the bio-fuel economy, expanding overseas oil and gas portfolios, and diversifying oil and gas supply sources. The government has also taken up the development of a National Gas Grid and City Gas Distribution Networks to provide clean and green fuel to the public across major demand centers in the country. According to the Ministry of Power, India is adding significant thermal, large hydro, and nuclear energy capacity to meet its growing energy needs.
RIL shifts its oil traders to Dubai from Mumbai
Reliance Industries (RIL) has shifted most of its oil traders from Mumbai to Dubai, executing a plan announced in 2021, but which now coincides with the city’s growing stature as a commodities hub after Russia’s war. Most of the refiner’s oil procurement and trading are now conducted out of the UAE’s biggest city, said sources. An RIL spokesperson declined to comment when contacted on the matter. India and China have become key consumers of discounted Russian crude after most others shunned the OPEC+ producer’s barrels following the invasion of Ukraine.
Russia’s oil revenue drops sharply in February as sanctions bite: IEA
Russia’s oil-export revenue fell to lowest in more than a year in February as buyers of the nation’s barrels largely complied with price caps and sanctions, according to the International Energy Agency. The flow of money into the country from international oil sales fell to $11.6 billion last month, down more than 40% from a year earlier, according to the IEA. February crude oil and product exports averaged 7.5 million barrels a day, the lowest since September, the agency estimated. “Although it has been relatively successful in sustaining volumes, Russia’s oil revenue has taken a hit,” the IEA said on Wednesday in its monthly report. Western countries and their allies have taken a number of steps to reduce Russia’s oil proceeds, a key source of revenue for the national budget, in order to limit the Kremlin’s ability to finance its war in Ukraine.
Indian Oil Corporation floats new unit for clean energy business
Indian Oil Corporation (IOC) has floated a new subsidiary under low-carbon, clean and green energy business as the nation’s biggest oil refining and fuel marketing company pivots a transition plan to achieve net zero emissions from its operations by 2046. In a stock exchange filing, IOC said its board in its meeting held on March 14 “has accorded approval for the formation of a wholly-owned subsidiary (WoS) in India, subject to the approval of NITI Aayog, DIPAM etc., to operate in the domain of low carbon, new, clean and green energy businesses”. “The proposed WoS will focus and pursue Indian Oil’s low carbon and green energy business to meet the operational requirements of the net zero target and beyond,” it added. IOC Chairman Shrikant Madhav Vaidya had last month told PTI in an interview that the company is remodelling its business with an increased focus on petrochemicals to hedge volatility in the fuel business, while at the same time turning petrol pumps into energy outlets that offer EV charging points and battery swapping options besides conventional fuels as it looks to make itself future-ready. Also, the company plans to set up green hydrogen plants at all its refineries as part of a ₹2000 billion green transition plan to achieve net-zero emissions from its operations by 2046, he had said. The company intends to expand its refining capacity to 106.7 million tonnes per annum from 81.2 million tonnes as it sees India’s oil demand climbing from 5.1 million barrels per day to 7-7.2 million bpd by 2030 and 9 million bpd by 2040. “Oil will continue to be a mainstay fuel for the next few years, but we are preparing for transition, which will involve a combination of green hydrogen, biofuels, EVs and alternate fuels,” he had said. Hydrogen—the cleanest known fuel that discharges only oxygen and water when burnt—is being touted as the fuel of the future, but its relatively higher cost than alternate fuel currently limits its usage in industries. Refineries, which turn crude oil into fuel, such as petrol and diesel, use hydrogen to lower the sulfur content of diesel fuel. This hydrogen is currently produced using fossil fuels, such as natural gas. IOC plans to use electricity generated from renewable sources like solar to split water to produce green hydrogen. Vaidya said the company will set up a 7,000 tonne per annum green hydrogen producing facility at its Panipat oil refinery at a cost of ₹20 billion by 2025 and similar units will come up at other refineries as well in due course of time. The ₹2000 billion investment planned to achieve net-zero covers the cost of setting up green hydrogen facilities at refineries, improving efficiency, renewable energy capacity addition and alternate fuels.
Russia’s oil revenue drops sharply in February as sanctions bite: IEA
Russia’s oil-export revenue fell to lowest in more than a year in February as buyers of the nation’s barrels largely complied with price caps and sanctions, according to the International Energy Agency. The flow of money into the country from international oil sales fell to $11.6 billion last month, down more than 40% from a year earlier, according to the IEA. February crude oil and product exports averaged 7.5 million barrels a day, the lowest since September, the agency estimated. “Although it has been relatively successful in sustaining volumes, Russia’s oil revenue has taken a hit,” the IEA said on Wednesday in its monthly report. Western countries and their allies have taken a number of steps to reduce Russia’s oil proceeds, a key source of revenue for the national budget, in order to limit the Kremlin’s ability to finance its war in Ukraine.
India’s February fuel demand hits 24 year high
India’s fuel demand hit its highest level in at least 24 years in February, data showed on Thursday, with industrial activity in Asia’s third biggest economy boosted by cheap Russian oil. Consumption of fuel, a proxy for oil demand, rose by more than 5% to 4.82 million barrels per day (18.5 million tonnes) in February, its 15th consecutive year-on-year rise, data showed. Demand was the highest recorded in data compiled by the Indian Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC) going back to 1998. The strength highlights a combination of profitable refining from record Russian crude imports in February, total utilization for primary distillation across India and still-robust domestic consumption, said Viktor Katona, lead crude analyst at Kpler. Katona forecasts demand in March at 5.17 million barrels per day (bpd) and then the seasonal monsoon-driven slowdown will lead to it to drop to 5 million bpd in April-May. Sales of gasoline, or petrol, rose 8.9% year-on-year to 2.8 million tonnes in February, while diesel consumption climbed 7.5% to 6.98 million tonnes. Sales of jet fuel jumped more than 43% to 0.62 million tonnes, the data showed. “For 2023, the strongest demand growth rate is projected to be in jet fuel, followed by gasoline and then diesel/gas oil,” said Alan Gelder, VP Refining, Chemicals and Oil Markets at Wood Mackenzie. While fuel sales data showed total volumes of both gasoline (motor spirit) and diesel (HSD) fell in February relative to January, they grew strongly on a daily consumption basis as February is a short month, Gelder noted. February relative to January, they grew strongly on a daily consumption basis as February is a short month, Gelder noted. Cooking gas, or liquefied petroleum gas (LPG), sales slipped by 0.1% to 2.39 million tonnes. Sales of bitumen, which is used for building roads, jumped 21.5% month-on-month, while fuel oil use declined slightly more than 5% in February, compared with January.
Pakistan Seeks To Buy Russian Oil At $50 Per Barrel
Pakistan is looking to buy Russian oil at $50 per barrel, media reported on Sunday, as the South Asian country is grappling with an economic and foreign reserves liquidity crisis. Pakistan is desperate to import energy at low costs, after it was outspent on the market last year when oil and gas prices surged while Pakistani foreign exchange reserves dwindled. A potential purchase of $50 oil from Russia would be $10 below the G7 price cap on Russian crude, below which shipments are still cleared to enjoy insurance and financing services from Western companies. Russia will have to first arrange and complete formalities such as shipping costs, insurance, and mode of payment before replying to Pakistan’s request for heavily discounted Russian crude, according to a report in The News carried by PTI. Pakistan hopes for “good discounts” from Russia, earlier reports have said. Russia, for its part, was initially uncertain whether Pakistan would want to proceed with an oil deal, according to a report in The Express Tribune. Following a recent meeting between Russian and Pakistani officials, Russia has asked Pakistan to purchase and import one cargo as a test case. According to the News, Pakistan will test the cost of landed oil cargo from Russia by importing one cargo. Other reports said last week that the first cargo from Russia—the one to test the costs and increase the “trust” between the parties – could depart from Russia by next month. Pakistan hasn’t been a major importer of Russian oil and gas so far. Many large customers in Asia haven’t joined the price cap mechanism, but China and India, for example – Russia’s top crude oil buyers now – are demanding steep discounts for the Russian grades. Meanwhile, Pakistan’s economic and energy crises have deepened in recent months as the South Asian country is trying to negotiate a new deal for a loan with the International Monetary Fund (IMF).
China Is Importing Less Iranian Crude As It Buys More Russian Barrels
Russian crude oil imports into China have reduced the country’s intake of Iranian crude, Hellenic Shipping News reported, citing data from shipbroker Xclusiv. According to the data, increased Chinese appetite for discount Russian crude has led to a sharp increase in Russian imports but these have increased at the expense of Iranian oil cargos. Xclusive noted that this month demand for all crude from Chinese refineries might decline due to some of them entering scheduled maintenance. Reuters meanwhile reported earlier that Chinese refiners are now competing with Indian peers for Russian ESPO crude—a blend that’s more expensive than the flagship Urals. The report cited unnamed sources as saying India and China were eager to buy as much ESPO for next month as possible, pushing its price higher. India refiners Reliance Industries and Nayara Energy had already managed to book at least five cargos of a total of 33 offered for delivery in April, attracted by the low price. This is a break from normal when Chinese refiners have been the only buyers of ESPO, which Russia ships from its Pacific coast. Reuters goes on to note that most Russian crude is being traded below the price cap set by G7 and the European Union, yet the price chart for ESPO shows that the crude has not traded at $60 or below for at least a year. Its latest price, as of Wednesday, was $71.61 per barrel. In an earlier report this month, Reuters cited cargo-tracking data as suggesting Chinese imports of Russian crude could hit a record this month before potentially declining as Russian tightens production. Data from tanker trackers Vortexa and Kpler, Reuters reported, suggests that Chinese refiners are set to import some 43 million barrels of Russian crude this month, of which 20 million barrels of ESPO.