Hungary agrees gas deal with Gazprom, views long-term agreement
Hungary has agreed to buy 6.2 billion cubic metres of natural gas from Gazprom and will begin talks on a flexible, long-term gas supply agreement with the Russian energy firm, Foreign Minister Peter Szijjarto told state news agency MTI late on Tuesday. “Our goal is to sign three five-year deals, which allows cancelling the agreement at the end of each five-year period,” Szijjarto said. “This ensures our long-term supply and also our ability to renegotiate the agreement or quit if in the meantime better options arise or the international energy market changes.” Hungary has worked to diversify its gas supply both in terms of source and routes away from the traditional Russian shipments via Ukraine, but progress has been slow as alternative pipeline networks have not been completed. Hungary will buy up to 6 billion cubic metres of gas per year via an extension to the TurkStream pipeline once it is completed in October next year, Szijjarto said. In the meantime, Hungary has agreed to buy 2 billion cubic metres of gas from Gazprom, with shipments already under way, and another 4.2 billion cubic metres to be delivered between October 2020 and October 2021, the minister said.
Gas industry sees strong demand post-COVID, LNG shortfall by mid-decade
The gas industry sees no change to the strong long-run outlook for demand following the COVID-19 crisis, but expects a supply shortfall in the next four years as the pandemic lockdowns and oil price collapse lead to delays on gas projects. Gas producers, buyers, liquefied natural gas (LNG) developers and a major contractor said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally. “We see the need for substantial investment in new projects and new liquefaction,” Exxon Mobil Corp’s Australia Chairman Nathan Fay said at Credit Suisse’s annual Australian Energy Conference. However, lingering uncertainty following a crash in LNG prices to record lows this year below $2 per million British thermal units (mmBtu) means only the lowest cost LNG projects will go ahead, major producers said. More than 140 million tonnes of projects worldwide have been deferred. In Australia and Papua New Guinea alone, five are on hold – Exxon’s expansion of PNG LNG twinned with Total SA’s Papua LNG, Woodside Petroleum’s Scarborough and Browse, and Santos Ltd’s Barossa. “It’s everything to play for – so a very bullish outlook on gas,” said Martin Houston, vice chairman of U.S. LNG developer Tellurian, which recently deferred a final investment decision on its U.S. Driftwood LNG project to 2021. Japan’s Chiyoda, a major contractor to LNG projects, said work has largely dried up and there would need to be stability in the market before developers move ahead with projects. “To be perfectly honest, we don’t see any green shoots right now,” said Chiyoda Oceania’s president Andrew Tan. Royal Dutch Shell sees short term concerns weighing on everyone’s decisions about new projects. “I’m sure all companies, all operators or producers across the globe are going to be focused on that affordability question just because of the uncertainty they see in the macro markets,” said Shell Australia Chair Tony Nunan. Research firm Rystad Energy said with gas prices around the world still trading near $2 per mmBtu, LNG developers with all but the lowest costs will hold off on new projects. “But that will again cause a shortfall for the LNG market four or five years down the road,” Rystad’s head of analysis, Per Magnus Nysveen told the conference.
Exclusive: After BP takes a hit, investors widen climate change campaign
Investors managing £1.8 trillion ($2.2 trillion) in assets are widening a campaign pressing oil majors to better reflect climate risks in their accounting, and will soon target other businesses with heavy fossil fuel exposure, the group said on Monday. The investors believe their campaign is working, noting the “hugely important” news of BP joining other oil majors in lowering the value of its assets amid a global transition to cleaner energy, said Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners. “The question all company directors and their shareholders now need urgently answered is, ‘Where else might company positions be overstated?’” the group of more than 20 leading funds said in a joint statement seen by Reuters. BP declined to comment on the campaign. The investor group can’t be certain whether its efforts played into BP’s decision to reduce the value of its assets by up to $17.5 billion, announced on June 15. But they have already begun lobbying building materials company CRH and plan to write to Anglo-Australian miner Rio Tinto, which supplies the steel industry. Along with cement, steel is a major source of greenhouse gases. “We will be rolling out similar engagements with other fossil fuel-dependent companies,” Landell-Mills, who is coordinating the campaign, told Reuters in an interview. The investors were also planning to include European and U.S. banks financing fossil fuel projects, Landell-Mills added. Rio Tinto and CRH declined to comment. Early last year, the investors began lobbying the Big Four accounting firms – EY, Deloitte, PwC and KPMG – to do more to ensure climate-related risks are adequately reflected in company financial statements they audit. The campaign is one of a number of efforts by investors to push companies on environmental policies, amid concerns many businesses are both contributing to the planet’s warming while also failing to take full stock of the risks they face. Major fund managers including BlackRock have issued increasingly strident public statements about climate change, while other investors have threatened to pull money out of Brazil unless Amazon deforestation is curbed. The campaign led by Sarasin & Partners emphasizes the legal duty companies have to ensure their financial statements fully reflect how government moves to ratchet up climate action and the falling costs of renewable energy are likely to affect future profitability. “It’s a very serious thing from their perspective,” said Landell-Mills. “This is a matter of ensuring there is no misrepresentation going on.” Accounting for potential future losses can weaken a company’s balance sheet, making it harder to finance new investment in carbon-intensive activities such as oil exploration, the investors argue. The coalition includes Sarasin & Partners, M&G Investments, Jupiter Asset Management, NN Investment Partners and pension funds such as the Brunel Pension Partnership and Denmark’s PKA. “POTENTIALLY OVERSTATING” Although it was difficult to independently assess the impact of the campaign, Landell-Mills pointed to a series of moves that align with the investors’ demands in letters https://sarasinandpartners.com/stewardship-post/paris-aligned-accounting-is-vital-to-deliver-climate-promises sent to BP, Anglo-Dutch major Shell and France’s Total in November. In the letters, seen by Reuters, the investors questioned whether the companies’ oil price assumptions, which form the bedrock of their accounts, were aligned with the 2015 Paris climate accord, which implies sharp cuts in fossil fuel use. Before BP’s writedown, the group’s letter to the British oil major said: “We have concerns that, at present, BP’s accounts may be overlooking material climate considerations, and consequently potentially overstating both performance and capital.” The same language was used with Shell and Total. Total did not immediately respond to a request for a comment. Shell said it had “comprehensively responded” to similar demands by the investor group, and included climate risks in its accounts. “Since that time, Shell has also published an ambition to be a net zero energy company by 2050, or sooner,” Shell said in an email to Reuters on Sunday. Last week, BP cut its benchmark Brent oil price forecasts to an average of $55 a barrel until 2050, from $70, saying it expects a collapse in oil demand during the coronavirus pandemic to accelerate a low-carbon transition. BP also said it would have to review some plans for early stage oil and gas exploration projects. Meanwhile, Shell also lowered its long-term Brent crude expectations to $60 a barrel, from the 2018 price of $70, in its 2019 annual report published in March. Total also reduced its price assumptions at about the same time. While majors often adjust price assumptions, the investors noted that Shell’s auditor’s report contained substantially more references to climate risks than the previous year. “It’s tip of the iceberg,” Landell-Mills said. “And investors will have to understand that they (oil majors) are not going to be able to pay dividends like they did before.”
COVID-19 effects likely to accelerate energy transition: Moody’s
The COVID-19 lockdown experience of reduced commuting and business travel alongside better air quality and family time may deliver lasting changes in energy consumption, Moody’s Investors Service said on Monday. Recessionary forces and weaker long term growth expectations will place pressure on both corporate and household demand, it said in the latest credit outlook report. At the same time, the risk of behavioural change along with increasing use of biofuels, electric vehicles and improved engine efficiency adds to the likelihood of oil demand eroding over time. Economic outlook, behavioural shifts and decarbonisation trends combine to increase the challenge of forecasting oil demand. “We consider scenarios for oil demand going into 2021 which are three to five million barrels per day (bpd) lower than 2019 levels as COVID disruption limits oil-based activities.” The strength of post-COVID economic growth will determine oil demand growth drivers, said Moody’s. If economic growth does not offset the potential behavioural and other changes impacting oil demand, it could take a long time to recover to 2019 levels with an increased risk that demand already peaked in 2019. The increased uncertainty and supply-demand imbalance creates a new context for investing in new oil developments that challenge traditional business models, said Moody’s. The potential for an accelerated structural shift in oil demand increases the challenges of forecasting the price of oil, undermining the investment case for new projects with a long lead in times for when oil is produced in the future. Besides, power markets show a preference for a cleaner generation as demand falls. COVID-19 could have a ratchet effect, limiting any rebound in coal generation and accelerating the decline of coal in the United States and Europe by a few years. Coal generation has continued to decline while renewables have shown more resilience across major markets in the United States, Europe, China and India. Renewables make up the majority of recent capacity additions which continue to displace thermal generation, especially with lower power demand. A green stimulus is required to build on temporary carbon emissions drop. Moody’s said 2020 could see a fall in global emissions of around 8 per cent from the previous year instead of the expected growth. The need for further investment in low carbon infrastructure has not lessened due to COVID-19. Some governments are seizing the opportunity to place conditions on economic stimulus packages or on government bail-out funds for carbon-intensive industries.
India’s May crude oil imports post biggest decline since at least 2005
India’s crude oil imports in May fell 22.6% from a year earlier, it’s biggest drop since at least 2005, as fuel demand and refinery production was hurt by a country-wide lockdown to curb the spread of coronavirus. Crude oil imports fell to 14.61 million tonnes, it’s lowest since 2015, Petroleum Planning and Analysis Cell data showed. Oil products imports eased 0.8% to 3.57 million tonnes year-on-year, while exports rose by 5.9% to 5.75 million tonnes, gaining for a ninth straight month in May as slowing demand at home prompted companies to ship more oil overseas. The country has relaxed coronavirus-led restrictions in lower risk areas, which is expected to improve demand and scale up crude processing. The latest data bolstered those expectations with India’s fuel demand jumping nearly 50% in May from the previous month, signalling a slow revival of economic activity. However, industry analysts expect a full-scale recovery to pre-COVID-19 consumption levels in India to be months away as the monsoon season approaches while manufacturing activities remain low and transportation demand takes a hit in some parts of the country. Diesel exports, which continued to account for a major share of exports, increased by nearly 33% to 2.79 million tonnes. India revised down its crude oil imports figure for April to 16.55 million tonnes- a decline of 16% year-on-year, from 17.28 million tonnes reported earlier, the data showed.
India’s crude, gas consumption up but output fell in last 10 years: Report
India’s crude oil and natural gas production declined in the last ten years as consumption increased for each fuel by 60 per cent and 22 per cent, showed BP Statistical Review report. The report, released recently, said growth in global energy markets slowed in 2019 in line with weak economic growth. Oil reserves in India dropped from 5,000 million barrels (mb) in 1999 to 4,700 mb in 2019. The country’s oil production dropped from 838,000 barrels a day in 2009 to 826,000 barrels a day in 2019. Annual oil production fell from 38 million tonne (MT) in 2009 to 37.5 MT in 2019. This is even after touching an all-time high of 42.5 MT in 2013. In contrast, oil consumption simultaneously increased by 60 per cent from 3,298 thousand barrels per day in 2009 to 5,271 thousand barrels per day in 2019. Among the products, the majority of the growth came from methane and LPG, where the consumption increased 118 per cent from 470 thousand barrels per day in 2009 to 1023 thousand barrels per day in 2019. Natural gas reserves increased from 0.6 trillion cubic metre (tcm) in 1999 to 1.3 tcm in 2019. The government pushed to increase the share of natural gas in the energy basket to 15 per cent, but production declined 25 per cent from 36.1 billion cubic metre (bcm) in 2009 to 26.9 bcm in 2019. Production had touched an all-time high of 474 bcm in 2010. On the other hand, consumption during the last 10 years increased 22 per cent from 49.1 bcm in 2009 to 59.7 bcm in 2019. India’s liquefied natural gas imports, too, increased 153 per cent from 13 bcm in 2009 to 32.9 bcm in 2019. “Starting from this year, with new production coming from KG-basin, turnaround is expected to come on gas and production is expected to increase as infrastructure is also coming in place. On the other hand, on the crude side, we should focus on taking equity in overseas producing blocks,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu. Based on a forecast by the International Energy Agency, India is set to see an estimated 28 billion cubic meter (bcm) per year increase in total consumption during 2019-25, owing to a combination of supportive government policies and improved liquefied natural gas (LNG) and pipeline infrastructure. According to IEA, India’s LNG imports may increase by 16 bcm annually and reach 48 bcm by the end of 2025. The BP report said India is the second biggest growth driver of primary energy consumption in the world, behind China, in 2019. This was despite a drop in demand in oil and coal. World coal consumption fell by 0.6 per cent, its fourth decline in six years, displaced by natural gas and renewables, particularly in the power sector. As a result, coal’s share in the energy mix fell to 27 per cent, its lowest level in 16 years. Growth in India, usually a key driver of coal consumption, was only 0.3 per cent: its lowest since 2001.
The big oil turnaround: From negative prices to a bull market
Every day, traders in London congregate at 4 p.m. to buy and sell North Sea oil for half an hour. The window, as it’s known in the industry, is where competition between the most powerful players in the market sets the price of Brent crude. Two months ago, every trader wanted to sell cargoes and none were keen to buy. Now the window has transformed into a bull market, where bids outnumber offers 10 to one and prices are surging. “The physical market is strong,” said Ben Luckock, co-head of oil trading at Trafigura Group. The big oil turnaround: From negative prices to a bull market The turnaround reflects the most torrid period in the history of oil. First, the coronavirus outbreak obliterated demand in China and shattered the oil alliance between Moscow and Riyadh. Next, the global epidemic and destructive Saudi-Russia price war pushed the market to the brink of disaster. The collapse brought the rivals back together for the biggest production cut on record, just as the pandemic ebbed. Mirror Image The renewed strength of the “physical market” for crude — where actual barrels change hands between producers, refiners and traders — is driving a surge in the much larger Wall Street world of oil contracts traded on exchanges in London and New York. West Texas Intermediate futures rose above $40 a barrel on Friday. That’s a mirror image of two months earlier, when the U.S. benchmark made an unprecedented plunge into negative pricing as storage tanks came close to filling. The big oil turnaround: From negative prices to a bull market Beyond the symbolism of that number for the American market, the oil price curve for Brent — the range of futures contracts covering the coming months — shows the international market has transformed too. It flipped last week into so-called backwardation, with crude for immediate delivery trading at a premium to forward contracts. That shape is a telling sign that refiners that saw demand for their products disappear during the lockdown, are now willing to pay top dollar to secure supplies for their facilities. Leaving Lockdown “You can see demand ramping up every week,” said Marco Dunand, co-founder of major oil trading house Mercuria Energy Group Ltd. In China, oil consumption is now back to pre-pandemic levels, according to official data. It’s still down in countries like Italy and Spain, which were badly affected by the coronavirus, but rapidly recovering in others, including India, Japan, France and Germany. Global demand fell as much as 30 per cent in late March and early April, when governments locked down entire countries. The scale of the rebound is still hotly debated, but most say consumption is now 10 per cent to 15 per cent below normal levels. “Our short-term tracking of demand confirms a healthy recovery from the lows of April,” said Giovanni Serio, chief economist at Vitol Group, the world’s largest independent oil trader. Vitol estimates that oil demand is rising by about 1.4 million barrels a day every week in June — that’s roughly equal to adding the whole consumption of the U.K. to the market, weekly. Second Wave The market isn’t out of the woods yet. In many countries, the first wave of the pandemic is still accelerating, while China had to take drastic measures this week to avoid a second wave taking hold in Beijing. The continuing influence of the virus on daily life is visible in the uneven nature of the oil recovery. Gasoline is leading the rebound as people choose to drive their cars and avoid public transport. For the first time since the pandemic, the fuel is more expensive for immediate delivery in the U.S. wholesale market than forward contracts, a sign of demand strength. “We see a V-shape recovery for gasoline,” said Chris Midgley, head of analytics at S&P Global Platts and a former head of oil markets analysis at Royal Dutch Shell Plc. Yet, diesel, a fuel more closely linked to the business cycle because it powers industries and freight movements, is lagging as the world’s economy tips into recession. Demand for jet fuel remains almost as depressed as it was during the peak of the coronavirus crisis. Historic Cuts Oil consumption doesn’t have to come back in full as long as Saudi Arabia, Russia and the rest of the OPEC+ alliance are cutting production sharply. The group has removed about a 10th of supply from the market, while U.S. and Canadian output has also fallen sharply. The scarcity created by the Organization of Petroleum Exporting Countries and its allies has pushed prices to unusually high levels even in Europe, a continent only tentatively emerging from lockdown. Urals, Russia’s flagship export blend, was selling at a $4.60-a-barrel discount to Brent in northwest Europe in late March. Now, refiners are buying the grade at a $1.55 premium, the highest in almost 10 years. Saudi Arabia’s Arab Light crude will sell at a premium of 30 cents a barrel in the region in July, up from a discount of $10.25 in April. Balanced Market The steep OPEC+ cuts mean that even a weakened global economy is probably consuming roughly as much crude as it’s producing right now. That’s a massive turnround from the March-to-May period, when traders put about a billion barrels of unwanted oil into tanks, underground caverns and even ocean-going tankers. If OPEC+ manages to make every country stick to its output quotas and demand keeps rising, the world could soon start consuming more oil than it produces. “There have been encouraging signs of recovery in demand and a rebalancing of global oil markets,” Saudi Energy Minister Prince Abdulaziz bin Salman told a gathering of some OPEC+ ministers last week. “The world economy has embarked on the long journey of easing the lockdowns, but there will inevitably be setbacks and reversals.” The shrinking of bloated stockpiles can often be a catalyst for rising prices, but it could be a slow process. Additional demand could just as easily be met
Explained: Why India is trying to boost its oil refining capacity
India is set to double its refining capacity for crude oil to 450-500 million tonnes per annum by 2030. Why this boost? How will it be achieved? India is set to double its refining capacity for crude oil to 450-500 million tonnes per annum by 2030 said Union Minister for Petroleum and Natural Gas Dharmendra Pradhan on Tuesday. The minister said the construction of a new refinery in Ratnagiri, Maharashtra with a refining capacity of 60 million tonnes per annum is set to start soon. Why is this boost in capacity needed? India’s current refining capacity of 249.9 million tonnes per annum exceeds domestic consumption of petroleum products which was 213.7 million tonnes in the previous fiscal. However, India’s consumption of petroleum products is likely to rise to 335 million tonnes per annum by 2030 and to 472 million tonnes by 2040 according to government estimates. India needs to boost refining capacity to meet growing demand. Pradhan said the expansion in refining capacity will come from both brownfield and greenfield projects. The new refinery project in Ratnagiri is one of the key projects in the planned expansion and has received investment from Saudi Arabia and the UAE’s national oil companies — Saudi Aramco and ADNOC respectively — which together own 50 per cent of the project while the remaining 50 per cent is owned by Indian PSUs, Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. Other key projects include a joint venture between HPCL and the Rajasthan government for a new refinery in Barmer Rajasthan with a refining capacity of 9 million tonnes per annum as well as the major expansion projects in existing refineries in koyali, Paradip and Panipat. What are some of the roadblocks in achieving this? Experts said many of the projects by the state run oil refiners have been severely delayed in the past because of issues in acquiring the required land as well as in obtaining environmental clearances. IOCL’s Paradip refinery was initially expected to begin operations in 2012 but was only able to start operations in 2015 because it faced land acquisition and environmental clearance issues.
China’s new marine fuel contract to attract strong industry, investor interest
China’s marine fuel futures contract that debuts on Monday on the Shanghai International Energy Exchange (INE) is likely to attract strong interest, despite weakened ship fuel demand amid the coronavirus pandemic, industry participants said. The new low-sulphur fuel oil (LSFO) contract features marine fuel meeting stricter international emissions rules and is the latest commodity futures product – and second oil contract after Shanghai crude – open to foreign investment. With few competitors, the contract stands a fair chance to grow into an Asian benchmark for shipping fuel, said traders and brokers, especially as about 20 Chinese refineries are freshly equipped to produce the low-sulphur fuel. The contract could also further Beijing’s ambition to build a bunkering hub in eastern China’s Zhoushan port to challenge Singapore for the multi-billion dollar shipping fuel market. “The listing is hugely attractive for physical enterprises, institutional investors and retail investors,” said Xu Lei, a manager at Xiandai Resource Co, an eastern China trading company planning to trade the contract. Senior managers at state refiners and global trading firms told Reuters they are also keen to trade the contract and will monitor the market from Monday. The exchange will pick about a dozen financial investors as market makers to boost initial liquidity, said INE officials. “We hope to provide the market a better tool to hedge risks as the global shipping industry transforms from high to low-sulphur fuel and satisfy the need for an Asian marine fuel benchmark,” said one INE executive. The INE sources declined to be named because they are not authorized to speak to the media. China removed a consumption tax on fuel oil this year and issued its first-ever supply quotas for 10 million tonnes of the new 0.5% sulphur marine fuel, earlier relying on imports from Singapore for its bonded bunkering market of about 12 million tonnes a year. Compared to Shanghai crude, the LSFO contract has a more diversified investor base that includes traders and bunker operators, on top of the mostly state refiners and financial investors that dominate the crude contract. China also has a high-sulphur fuel oil contract for domestic trade, listed on the Shanghai Futures Exchange. It has recorded healthy volumes the past two years and will continue to trade, INE officials said, although its physical market has shrunk with the change of shipping fuel emissions rules. RETAIL INVESTORS, BUNKER SUPPLIERS With a lower threshold for opening an account at 100,000 yuan ($14,100) versus 500,000 yuan for crude oil, the LSFO contract could draw more retail investors. “With the tax waiver, domestic refinery production has become the main force that will give us pricing advantage and trading volumes,” said Yang Jiaming, an analyst at CITIC Futures, adding that the contract’s volumes could top Singapore’s over-the-counter LSFO swaps. China has 14 licensed bonded bunker suppliers, four of whom have said they will trade the LSFO contract. “We’ll be closely monitoring the contract and will jump in once arbitrage opportunities between Singapore and North Asia emerge,” said a Beijing-based executive with a global trader. The contract faces challenges such as limited warehouse space, an issue that squeezed deliveries against the INE crude contract in April. INE also has stricter product specifications – such as for viscosity and density – than those prevailing in Singapore trade, and this may hamper arbitrage deliveries, traders said. INE did not immediately respond to requests for comment about these market concerns.
India to resume spot LPG imports in Sep after backlog clears
India is expected to resume spot imports of LPG in September after clearing the current inventory backlog, as rising LPG production after state-owned refiners ramp up operating rates, and languishing demand from the commercial sector during the lockdown added on to domestic supply, market sources said in the week of June 15. The LPG market is very long in India. We don’t need additional imports now, we’re all covered,” a source at a state-owned refinery said. “We’re probably resuming [spot] imports in September, we’ll see how the situation evolves, see how the lockdown is affecting demand,” the source added. Indian state-owned refiners Indian Oil Corp., Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd had sought an additional 776,000 mt of spot LPG for delivery between April and June at end-March and early April after India went under a nationwide lockdown on March 25, as demand for the cooking fuel surged, and to meet an increase in demand from the country’s distribution of free LPG cylinders to 80 million households for April to June. However, India had cancelled multiple LPG cargoes for May and June arrival with suppliers in the Middle East after buying too much, and over-estimating the demand spike. During the lockdown, India’s LPG consumption in May posted an 8.7% increase month on month to a four-month high of 2.317 million mt. This also represented a 12.8% increase year on year. India had extended its lockdown for two-and-a-half months until early June, and recently entered into a new phase termed Unlock 1.0 on June 8. Most economic activities have resumed and public spaces reopened. “Domestic demand [right now] is normal,” the source said. “Previously refinery output was restricted. Now refineries have increased operations, so LPG production is higher. As of now, we have no spot requirement,” the refinery source said, adding that spot buying will resume when demand improves. Indian state owned refiners IOC and BPCL have increased refinery run rates after the lockdown measures eased as demand for gasoline, diesel and jet fuel picked up. IOC had raised crude throughput to 80% levels at its nine refineries, Platts reported previously. During the lockdown, the refiner had cut its overall run rates by 25%-30%. BPCL had scaled up the average run rate at its four refineries to 75% as of June 2, and plans to operate its 15.5 million mt/year Kochi refinery at 90% by the end of June, according to an earlier Platts report. “It seems Indian imports is not easy to return as many vessels are waiting offshore at Haldia for over 10 days,” a North Asian trader said. Commercial Demand Falls While residential LPG demand surged during the lockdown, commercial LPG demand dropped significantly, according to a report by S&P Global Platts Analytics. There could be some diversion of subsidized domestic LPG cylinders into commercial use, based on a December 2019 audit report by the Comptroller and Auditor General of India (CAG) cited by the Platts Analytics report. During the lockdown, the commercial enterprises using the subsidized domestic gas were not in operation, thereby affecting demand. The lockdown had also affected the livelihood of the Pradhan Mantri Ujjwala Yojana, or PMUY, beneficiaries, who are entitled to free LPG connections and cylinders. Lack of economic opportunities have forced many people to move back to their home towns and villages. A lack of funds also increases the likelihood of households switching back to freely available biomass and woodchips for cooking needs. Although lockdown restrictions have eased, a fear of a second wave of COVID-19 cases have kept people mostly at home. “Due to weaker economic outlook and changing consumer behavior, revival of the business activities of commercial enterprises is going to be slow. Subsequently, diversion of domestic LPG cylinders for commercial usage would be quite low in the coming months,” according to Platts Analytics. “Indian LPG demand is expected to post a slower demand growth of 1.5% to 3.5% for 2020, compared with a 6.5% demand growth last year, Manish Sejwal, NGL analyst at Platts Analytics said. CFR North Asia propane price slumped to a one-month low of $304.50/mt on June 12, as weak demand weighed on the market, but recovered to $329.50/mt on June 17. The price was last lower on May 13 at $293.50/mt.