Big Oil Shrugs at $50 Crude
Exxon is planning to boost its oil production regardless of where international oil prices are heading. This comes from a senior company executive who spoke to Semafor this week. It also likely reflects the sentiment across the supermajor segment of the energy industry. After all, that’s what the consolidation drive was all about. Exxon announced its plan to take over one of the biggest operators in the shale patch, Pioneer Natural Resources, in late 2023. The value of the deal was calculated at $59.5 billion. At the time, Exxon said the deal would result in combined resources of an impressive 16 billion barrels of oil equivalent in the Permian—and that it had every intention to exploit these resources. From 1.3 million barrels of oil equivalent daily in 2023, the supermajor saw its Permian output in 2030 reaching 2 million barrels daily. Prices were not mentioned as a factor in production decisions at all. Now, per that executive who spoke to Semafor, the 2030 production target has been raised to 2.3 million barrels of oil equivalent daily. “We believe our operating costs are the lowest in the industry, which means we get more out of each barrel we produce,” Bart Cahir, senior vice president for upstream in the unconventional segment, told the publication. “That gives us tremendous resilience when you get into softer parts of the commodity cycle.” Exxon is not alone in this resilience bubble. ConocoPhillips is also there with its $22.5-billion acquisition of Marathon Oil last year. Chevron is also there with its pending takeover of Exxon’s partner in Guyana Hess Corp—unless Exxon wins the arbitration dispute on its right of first refusal for Hess’s Guyana assets—and a slew of smaller though not less significant deals that reshaped the face of the oil industry. Resilience has always been one of the goals of a consolidation push. Up until this year, the main driver of this desire to boost resilience was climate policy. Now, it’s Trump and his plans to pursue U.S. energy dominance, which inevitably means higher production, which in turn, inevitably means lower prices. U.S. Energy Secretary Chris Wright recently said that the shale industry in the country could keep pumping more oil even if the price of crude fell to $50 per barrel. “New supply is going to drive prices down. Companies are going to innovate, drive their prices down and consumers and suppliers will bounce back and forth,” Wright told the Financial Times. Not everyone agrees, however, and that includes another senior Exxon executive. In November, the president of upstream at the supermajor, Liam Mallon, said at an industry event that “We’re not going to see anybody in ‘drill, baby, drill’ mode.” “A radical change (in production) is unlikely because the vast majority, if not everybody, is focused on the economics of what they’re doing,” Mallon said, speaking at the Energy Intelligence Forum in London, and added that the fiscal discipline demonstrated by industry players in recent years was the new normal. Also, “Operators had most likely planned for prices to be over $70 this year, so at $50, rigs would likely drop and activity slow. And when the rigs drop in the Permian you lose the associated gas that the LNG industry is counting on at the end of the year,” Enverus managing director Andrew Gillick told the FT earlier this month. The suggestion that the industry’s resilience has limits has been supported by both the former boss of Pioneer Natural Resources and energy industry authority Daniel Yergin. Scott Sheffield said recently in an interview with Bloomberg that the U.S. shale industry would have to “hunker down” if prices dip even lower and wait out that dip. “You may have to lay off some people. You’ve got to focus on your best prospects. We’ll see what happens over the next two or three years,” Sheffield said, predicting prices of between $50 and $60 per barrel. Daniel Yergin, for his part, says simply that “at $50 a barrel, the economics of shale don’t work”, even though the breakeven price for the shale patch has fallen considerably, from $70 per barrel back in 2010 to just $45 per barrel this year, according to S&P Commodity Insights. Yet it bears noting that the breakeven price is not flat across the shale patch—and that some in the industry argue the lowest-price resources are close to depletion. Indeed, this depletion was quite probably one of the reasons for the merger and acquisition surge in the last couple of years, along with the record profits made amid the energy crunch in Europe. With top acreage running out, the only way to boost exposure to such top acreage was to buy it from another sector player or take over the sector player itself. This is exactly what Exxon and Chevron, and Conoco, and a dozen smaller companies have done, to improve their resilience to lower oil prices.
ONGC to import ethane to make up for changed Qatar LNG composition
Oil and Natural Gas Corporation (ONGC) plans to import ethane starting in mid-2028 to compensate for the altered composition of liquefied natural gas (LNG) sourced from Qatar, according to a tender floated by the state-owned firm. India imports 7.5 million tonnes per annum of LNG from Qatar. Under the deal, QatarEnergy supplies 5 million tonnes a year of LNG that contains methane (used to produce electricity, make fertiliser, converted into CNG or used as cooking fuel) as well as ethane and propane — feedstock to make LPG and petrochemicals — on a firm basis and the rest on best endeavour basis. This contract is coming to an end in 2028 and the revised contract signed last year envisages QatarEnergy supplying ’lean’ gas (one that is stripped of ethane and propane). ONGC spent about Rs 15 billion in setting up a C2 (ethane) and C3 (propane) extraction plant at Dahej in Gujarat. The C2/C3 so extracted was used as a feedstock in its petrochemical subsidiary, ONGC Petro additions Ltd (OPaL). With the changed composition of LNG, the company is now looking at importing ethane. ”ONGC Petro additions Ltd (OPaL), a subsidiary of ONGC, is having a mega grassroot petrochemical complex and having the largest standalone dual feed cracker in Southeast Asia. Plant is having a dual feed cracker i.e. a mix of Naphtha and C2 (Ethane), C3 (Propane) & C4 (Butane) as feedstock,” the tender document said.
Gujarat Gas Pipeline Commissioned: Chhara LNG Terminal to Grid
A natural gas pipeline, connecting the newly set up 5 million tonnes per annum LNG import terminal at Chhara in the Gir-Somnath district with the gas grid, has been commissioned, Gujarat State Petronet Ltd has said. The pipeline having capacity to ship 18 million standard cubic metres per day was developed by Gujarat State Petronet Limited (GSPL) at a cost of Rs 6.50 billion. The pipeline passes from the outskirts of the eco-sensitive zone of the Gir National Park & Wildlife Sanctuary, home to Asiatic lions. The pipeline was commissioned on March 20, GSPL said in a statement. A unit of Hindustan Petroleum Corporation Ltd (HPCL) has set up a facility to import liquefied natural gas (natural gas super chilled into liquid form for ease of transportation in ships) at Chhara. The liquefied natural gas (LNG) imported at the terminal is again turned into its gaseous state and moved to customers like power plants and fertilizer units through pipelines. The Chhara terminal is operated by HPCL LNG Limited, a subsidiary of state-run HPCL. “The work for engineering, procurement and construction of the 36-inch dia pipeline from HPCL LNG terminal at Chhara in Gir-Somnath district up to Lothpur in Amreli district of Gujarat, including despatch terminal at Chhara LNG terminal, valve stations and receiving terminal at Lothpur, was entrusted to the Mumbai-based construction company, Ace Pipeline Contracts, in September 2023. To cut down on the construction schedule, construction techniques such as automatic welding for welding of the 36-inch dia pipeline were deployed on the project,” the statement said. This project enhances the availability of natural gas in the country for use as an energy source in line with the Government of India’s target to raise the share of natural gas in the energy mix to 15 per cent by 2030 from about 6.2 per cent now.
Analysts forecast 2025 growth in India’s LPG imports to be slightly lower compared to previous year
The latest LPG Forecaster published by maritime research consultancy Drewry highlighted the 24 per cent surge in India’s 2024 LPG imports, propelled by strong residential consumption, which was in turn fuelled by the general elections, low domestic production and diversion of domestic LPG to the petchem sector. However, India’s import growth is likely to slow down in 2025 as residential demand eases, with the policy shifting towards natural gas and biofuels as LPG penetration nears saturation. Meanwhile, with almost all of India’s LPG supply coming from the Middle East, the US-China tariff war could encourage China to source more from the Middle East, forcing India to look elsewhere and thereby altering some changes in trading patterns. However, varying butane content in cargoes from the Middle East versus the US could make sourcing from the latter difficult. Residential and industrial sectors ignite surge in domestic LPG demand India’s LPG consumption surged in 2024 due to a combination of low global prices, the general elections and increase in rural LPG consumption. The country added 7.5 million low-income households under the Pradhan Mantri Ujjwala Yojna (PMUY) Phase 2 subsidy scheme, covering 103 million households since the scheme was launched in 2016. Stable LPG cylinder prices throughout 2024 further incentivised residential consumption while industrial consumption received a boost from, in particular, the ceramics industry in Gujarat’s Morbi region, with ceramic producers shifting to propane due to its favourable price compared to PNG on an energy basis. The Indian LPG market navigates seasonal ups and lows with demand peaking in the winter, remaining steady in the summer and declining in the monsoon. Additionally, elections, festivals and global fuel prices sway the LPG demand in the country.
No Windfall Tax on Oil Cos After New Law: Puri
Oil and gas companies will not face any new taxes like the windfall profits tax after the coming into effect of a new law that promises stability of fiscal regime, Petroleum Minister Hardeep Singh Puri said. Parliament has passed the Oilfields (Regulation and Development) Bill, 2024 that provides policy stability to investors, decriminalises provisions and promotes ease of doing business. “After this bill, it will be difficult to levy (new taxes like) windfall tax because somebody will sue us (for failing to keep the promise of fiscal stability),” he said at a reception he hosted to celebrate the passage of the bill. Investors looking to invest in finding and producing oil and gas want fiscal stability, and new taxes that seek to take away gains made when prices are high, without compensating for low or no margins when rates are low, are often a deterrent. India imposed a windfall profit tax on July 1, 2022 joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied. The tax rates were reviewed every fortnight based on average oil prices in the previous two weeks. The levy was scrapped in December last year after 30 months. Puri said global oil majors have been exploring investing in India. Brazil’s Petrobras is in discussion with state-owned Oil India Ltd for exploring the Andaman basins, while Oil and Natural Gas Corporation (ONGC) is engaged with majors like ExxonMobil and Equinor for collaboration in deepwater exploration. The new legislation “creates conditions for all of them (international oil companies) to come and look at India,” he said. The Bill is part of the government’s reforms agenda to make it easier to find and produce crude oil (which is refined into fuels like petrol and diesel) and natural gas (which is used to generate power, make fertilizer or turn into cooking gas and CNG). It decriminalised some of the provisions of the original 1948 law by introducing penalties in place of imprisonment of up to six months. The bill introduces ‘petroleum lease’ and expands the definition of mineral oils to include crude oil, natural gas, petroleum, condensate, coal bed methane, oil shale, shale gas, shale oil, tight gas, tight oil and gas hydrate. This is with a view to raising domestic output and cutting reliance on imports. India currently imports more than 85 per cent of its crude oil needs and about half of its natural gas requirement. “We have 42 billion tonnes of oil and oil equivalent reserves and a sedimentary basin spanning 3.5 million square kilometers,” Puri said, adding most of it is untapped. The Statement of Objects and Reasons in the Bill states that the original Act of 1948 provided for a very different global energy context and required to be amended to meet the needs and aspirations of the country for energy access, energy security and energy affordability. “Further, there is an urgent and pressing need to increase domestic production of oil and gas to meet the rising demand for energy and reduce import dependence of the country. “In order to unlock valuable mineral oil resources, it is necessary to attract investment in the sector to infuse necessary capital and technology for expediting petroleum operations in the country by creating an investor friendly environment that promotes ease of doing business, prospects for exploration, development and production of all types of hydrocarbons, ensures stability, promotes adequate opportunities for risk mitigation, addresses energy transition issues including next-generation cleaner fuels and provides for a robust enforcement mechanism for ensuring compliance of the provisions of the said Act,” it said.
India’s LNG imports from the US at record 7.25 BCM in 2024
India’s imports of liquefied natural gas (LNG) from the US surged to 256.05 billion cubic feet, or roughly 7.25 billion cubic meters (BCM), during 2024 calendar year (CY) — the highest on record According to the US Energy Information Administration (EIA), India’s LNG imports from the US rose by more than 55 per cent year-on-year (y-o-y) during CY 2024. Compared to 2022, imports more than doubled. More than 15 BCM per year of new sales and purchase agreements were signed in 2024, as per the International Energy Agency (IEA). The previous high was registered in 2021 when India imported 5.56 BCM of LNG from the North American country, which overtook the UAE as India’s second largest LNG supplier in 2023 CY, after Qatar. In the same year, the US also became the world’s largest LNG exporter, accounting for 21 per cent of the market, followed by Australia and Qatar. A top government official said that oil and gas volumes from the US will rise “for sure”. However, the scope is higher for LNG considering that India generally imports light sweet crude oil from the US (WTI), which yields more petrol. Logistics and crude costs are the key as Middle East crude freight costs are around $1.50 per barrel, roughly one-third of the US costs.
American Oil Is Underhedged and Heavily Exposed
Hedging is a popular trading strategy frequently used by oil and gas producers, airlines and other heavy consumers of energy commodities to protect themselves against market fluctuations. During times of falling crude prices, oil producers normally use a short hedge to lock in oil prices if they believe prices are likely to go even lower in the future. With oil and gas prices hitting multi-year highs after Russia invaded Ukraine, producers that typically lock up prices preferred to hedge only lightly, or not at all, to avoid leaving money on the table if crude continued to soar. But oil and gas prices have retreated significantly since peaking mid-2022, leaving producers with minimal hedging exposed to highly volatile energy markets. A survey by Standard Chartered of 40 independent companies (not including the major oil companies) has revealed they have little protection, with a 2025 oil hedge ratio of just 21% for their combined 5.03 million barrels per day (mb/d) of output and a 2026 hedge ratio of 4%. The volume-weighted average 2025 WTI swap is at $71.75 per barrel (bbl), while the average two-way collar has a floor of $64.20/bbl and a ceiling of $78.94/bbl. In contrast, the industry entered 2020 with an oil hedge ratio of 51.7%, which provided significant support when prices collapsed during the pandemic. StanChart, however, says there is more protection for natural gas output, with hedge ratios of 40% for 2025 and 21% for 2026. Two-way collars make up 28% of the oil hedge book, three-way collars 6% and plain put options 16%. According to the commodity experts, the optionality contained in these hedges can lead to significant gamma effects, i.e., when falling prices cause banks to sell to cover their exposure to producer puts. For instance, when the 2025 WTI strip reached its YTD-low on 10 March, about 250,000 barrels per day of 2025 options were in-the-money; however, the past week’s price rise has reduced that volume to just 34 kb/d. Thankfully for U.S. producers, prices have so far been unable to stick below $70/bbl Brent despite significant gamma effects and heavy speculative shorting. Many traders consider the market as oversold and geopolitical risk as underpriced, with StanChart predicting further support coming from a widening view that an under-hedged U.S. shale industry will not be able to maintain output at lower prices. Oil Prices Holding Up StanChart notes that oil prices have held up surprisingly well over the past week despite the presence of numerous headwinds that could have pushed Brent prices more decisively below $70/bbl. Indeed, front-month Brent has exceeded $70/bbl at some point on each of the past eight trading days. Speculative positioning, however, remains skewed to the short side of the market, particularly for gasoline and crude oil, with StanChart’s money-manager positioning indices for the two commodities falling to -100.0 and -38.1, respectively. Trader sentiment remains negative largely due to concerns over the potential demand effects of U.S. tariff policies and the potential supply effects of a U.S. switch to policies that are more accommodative of Russian targets. StanChart says several catalysts have prevented a more severe oil price crash. First off, the market appears oversold in technical terms, with the move lower that has happened over the past two months lacking steam and driven purely by its own past momentum. Second, geopolitical risk appears significantly underpriced. Whereas traders might disagree on the scale of upside price risk, few believe the market is pricing the right-side tail of the distribution correctly. Third, some of the negative sentiment at the recent London IE Week is dispersing, with traders concluding that the bearishness that dominated the week was overdone. Fourth, many traders are paying closer attention to fundamental balances, and noting the stronger-than-expected outcomes in Q4 and Q1 as well as the continuing downward pressure on inventories. Finally, traders are coming to terms with the reality of a U.S. Shale Patch that will struggle to ramp up output. Trump says he’ll push shale producers to ramp up output, even if it means operators “drill themselves out of business.” However, commodity analysts at Standard Chartered have predicted that the dramatic slowdown in U.S. oil production growth that we witnessed in 2024 will continue over the next two years. According to the experts, last year witnessed a sharp slowdown in non-OPEC+ supply growth from 2.46 mb/d in 2023 to 0.79 mb/d in 2024, primarily caused by a reduction in U.S. total liquids growth from 1.605 mb/d in 2023 to 734 kb/d in 2024. StanChart expects this trend to continue, with U.S. liquids growth expected to clock in at just 367 kb/d in 2025 before slowing down further to 151 kb/d in 2026.
Oil Prices Jump as Israel Pounds Gaza Again After Ceasefire Deal Falls Apart
Israel has carried out “extensive strikes” on Gaza, killing at least 220, according to sources from both Israel and Gaza cited by the BBC. The strikes came as a ceasefire that began in mid-January failed with the warring parties unable to agree on the terms to extend it. The reignition of the war between Israel and the Palestinian state affects oil prices as there is always a risk of regional escalation in the conflict, notably featuring Iran. This was the case today as well, with Brent crude inching up to $71.29 per barrel and West Texas Intermediate rising to $67.78 per barrel at the time of writing. “Israel will, from now on, act against Hamas with increasing military strength,” a statement by Benjamin Netanyahu’s office said. “This follows Hamas’s repeated refusal to release our hostages, as well as its rejection of all of the proposals it has received from US Presidential Envoy Steve Witkoff and from the mediators,” the statement also said. Hamas, for its part, has called on mediators to intervene and salvage the ceasefire, although it responded to Israel’s strike with accusations of treachery and overturning the ceasefire, the BBC also reported. The Israel-Palestine war was not the geopolitical factor pushing oil prices higher. U.S. strikes on Yemen earlier in the week also acted as a booster for the benchmarks, highlighting the fragile situation in the world’s biggest oil-producing region. In addition to geopolitics, news from China also served to prop up oil prices, as Beijing released its latest round of measures aimed at stimulating consumer demand through higher salaries and childcare subsidies. The news was followed by data showing refining throughput in the country had increased over the first two months of the year, and figures suggesting rebounding consumer spending, which are normally taken as a bullish sign for crude oil demand.
Reliance exported Rs 6,850 cr worth of fuel from Russian oil to US: Report
Billionaire Mukesh Ambani’s Reliance Industries Ltd is estimated to have earned 724 million euros (about Rs 6,850 crore) from exporting fuel made from Russian crude oil to the US in one year, an European think tank said in a report. “From January 2024 to the end of January 2025, the US imported EUR 2.8 billion of refined oil from six refineries in India and Turkey that process Russian crude. An estimated EUR 1.3 billion of this was refined from Russian crude,” the Centre for Research on Energy and Clean Air (CREA) said in a report. US imports of fuels such as petrol and diesel from Jamnagar in Gujarat, where Reliance’s twin oil refineries are located, were EUR 2 billion. Of this, “EUR 724 million (is) estimated to be refined from Russian crude,” it said. Western and US sanctions on Russia, that followed its invasion of Ukraine in February 2022, do not prohibit or sanction buying/using Russian crude oil and exporting fuels such as diesel derived from it. Gujarat’s Vadinar, where Russia’s Rosneft-based Nayara Energy has a 20 million tonne a year refinery, exported EUR 184 million worth of fuel to the US between January 2024 and January 2025. Of this, EUR 124 million is estimated to be refined from Russian crude, CREA said. New Mangalore, where Mangalore Refinery and Petrochemicals Ltd (MRPL) has a unit, exported EUR 42 million worth of fuel to the US, of which EUR 22 million is estimated to be refined from Russian crude, it said. Turkey’s three refineries exported a total of EUR 616 million worth of fuel to the US, of which EUR 545 million is estimated to have come from refining Russian crude. “Russia has earned an estimated USD 750 million in tax from these imports (from India and Turkey) to the US,” CREA said. “The imports consist of gasoline (petrol) valued at EUR 294 million, which ends up in American cars. By our rough estimate, US imports of gasoline made from Russian crude could fill up almost every car in Florida.” As one third of the Russian federal budget is comprised of revenue from fossil fuel exports, sanctions are the key to ending the invasion, while simultaneously also gaining the upper hand in negotiations towards an equitable and acceptable peace for Ukraine, it added. While there are no restriction or sanctions on buying/using Russian crude oil and exporting fuels such as diesel derived from it, the Group of Seven (G7) rich nations, the European Union and Australia – called the price cap coalition countries – first set a crude price cap of USD 60 per barrel starting December 5, 2022 and later on products like diesel to keep market supplied while limiting Moscow’s revenue. This was aimed at punishing Russia for its February 2022 invasion of Ukraine by depriving it of oil revenues while averting a surge in prices that could occur if Russian oil stopped flowing to global markets. But both Europe and the US imported fuel produced from refining Russian crude oil in third world countries such as India.
China Stops Buying U.S. LNG
China has not received a single cargo of U.S. liquefied natural gas in 40 days and there are currently no LNG tankers en route to the country, Bloomberg has reported, citing data it compiled from ship-tracking information providers and energy analytics provider Kpler. The purchase freeze was the result of the tariff exchange that President Donald Trump started as soon as he took office, by slapping an additional 10% tariff on all Chinese imports. In response, China imposed 15% tariffs on U.S. LNG imports and a lower tariff of crude oil imports. Following the tariffs, Chinese LNG buyers with long-term supply contracts with U.S. producers have started reselling the cargos to Europe, Bloomberg reported, citing sources from the trading world. What’s more, Chinese traders have grown cold towards new long-term commitments for future supply from the United States, instead seeking long-term deals with gas producers in the Middle East and the Asia Pacific. The publication mentioned one new deal, between China Resources Gas International and Woodside Energy, which has a term of 15 years and is the first long-term deal between a Chinese company and an Australian company to be signed in years. The moment is rather opportune for Europe, which is nearing the end of its leak gas demand season as spring comes. Yet demand is going to remain elevated for a while as it restocks its depleted gas storage. Indeed, Kpler predicted European gas demand will tick higher in the coming weeks because it is coming out of winter with lower levels of gas in storage. Kpler also revised South Korea’s 2025 LNG demand higher—but it revised Chinese LNG demand for this year down, based on weaker LNG imports in February, part of the reason for which is quite likely the tariff exchange with the United States.