Why OPEC+ is Supporting a Potentially Disastrous Rise in Oil Production
Oil prices have fallen fast since the 3 March announcement from OPEC+ that it will go ahead with a planned rise in its collective oil production. The prospect of increased supply from the group has added to the bearish tone created by rising supply from other key producers and from uncertain demand projections from the world’s biggest importer of oil, China. Lower oil and gas prices is precisely what Donald Trump wants to see in his second term as U.S. president, but with budget breakeven oil prices much higher than even current levels, many may wonder why OPEC+ members are supporting such a potentially financially disastrous production rise. So economically vital is it to most OPEC+ members that oil prices are kept at the higher end of recent historical levels that the organisation has not increased production since 2022. In fact, at that point it had begun a series of collective oil production cuts to support oil prices, totalling around 5.85 million barrels per day (bpd), or around 5.7% of global supply. As recently as December, the cartel extended its previous round of 2.2 million bpd in output reductions to the end of this quarter. Industry estimates are that the first phase of the removal of these production cuts will total about 138,000 bpd in April, with much more to come. “Part of this move [OPEC+ oil production increases] results from repeated overproduction from some of its members, most recently from Kazakhstan [following the Tengiz expansion project], Iraq, and Russia, although Moscow has been doing a lot of it as dark inventory [unofficial output] to sidestep sanctions,” a senior source in the European Union’s (E.U.) energy security complex exclusively told OilPrice.com last week. “Another part comes from the group wanting to protect its market share, given the major shift in the supply-demand balance that’s unfolding,” he added. “And the final part of it is the fact that OPEC+ doesn’t think it can win an oil price war against the U.S. with Trump in his second presidency, given how badly it did in the last two [oil price wars],” he concluded. Indeed, over the course of the 2014-2016 Oil Price War, de facto OPEC leader Saudi Arabia spend over 34% of its precious US$737 billion foreign exchange reserves and swung from a budget surplus to a then-record high deficit of US$98 billion, as analysed in full in my latest book on the new global oil market order. So bad was Saudi Arabia’s economic and political situation back towards the end of the Second Oil Price War in 2016 (the first being the 1973-1974 Oil Crisis) that the country’s deputy economic minister, Mohamed Al Tuwaijri, stated in an unprecedentedly unequivocal way for a senior Saudi in October 2016 that: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” Although the 2014-2016 Oil Price War had been launched by Saudi Arabia with the intention of destroying or significantly disabling the U.S.’s then-nascent shale oil industry, it only succeeded in destroying the finances of OPEC’s members and undermining the reputation of the group – and Saudi Arabia — in the global oil market. Aside from the damage to its own economy, Saudi Arabia had cost the OPEC member states collectively at least US$450 billion in revenues during the 2014-2016 Oil Price War, according to International Energy Agency (IEA) estimates. So badly had OPEC and its effective leader Saudi Arabia been hit by their own actions that Donald Trump was able to exploit this weakness to maintain a tight oil price range during his first term as president through the occasional incentive but many more threats. The lower part of the ‘Trum Oil Price Range’ is US$40-45 per barrel of the Brent benchmark, which is the price at which the bulk of U.S. shale oil producers can breakeven and make a good profit on top. The upper part of it is US$75-80 per barrel, which ties into historical data showing that a gasoline price of under US$2 per gallon has been most advantageous for U.S. economic growth. This US$2 per gallon level has historically equated to a West Texas Intermediate (WTI) oil price of around US$70 per barrel. And as WTI has also historically traded at a discount of between US$5-10 per barrel to the Brent oil benchmark, this US$70 per barrel of WTI price equates to around US$75-80 per barrel of Brent. Judging from Trump’s comments on the campaign trail and in his ‘Agenda47’ blueprint for a second term, his view that oil prices should continue to be heavily influenced by the U.S. in such a way has not changed. He will also be aware of the dramatic political consequences for U.S. presidents of oil prices rising beyond the top of the Range, as also fully detailed in my latest book on the new global oil market order. Specifically, since 1896 the sitting U.S. president has won re-election 11 times out of 11 if the economy was not in recession within two years of an upcoming election. However, sitting U.S. presidents who went into a re-election campaign with the economy in recession won only one time out of seven. Adding to their troubles in this regard, the Saudis know that Trump has much greater power in this term than he did in his first, with Republican majorities in the Senate and the House of Representatives, and his nominees dominating the Supreme Court. They also know his attitude to OPEC and the Russia-enhanced OPEC+ groups, which was marked early in his first term. More specifically, when Saudi Arabia was still trying desperately to repair the appalling damage its 2014-2016 Oil Price War had done to its own finances and to those of its OPEC brothers, it embarked on coordinated production cuts (with Russia as the new-found member of the expanded ‘OPEC+’ cartel) to push the oil price higher. Trump’s reaction was quick and unequivocal: “OPEC and
Bangladesh Govt prepares model PSC for a fresh bidding round
The government has moved to launch an onshore bidding round, 28 years after the previous one, to expedite hydrocarbon exploration in onshore areas with a view to meeting the country’s mounting natural gas demand in industries, power plants and other establishments. State-run Petrobangla has already prepared a draft of the Model Production Sharing Contract (MPSC) making the terms attractive to potential international oil companies (IOCs), a senior Petrobangla official told The Financial Express Sunday. The gas purchase price is linked with the dated Brent on a three-month rolling average basis. The MPSC terms of the previous 1997 onshore bidding round were linked to high sulfur fuel oil (HSFO) with a price floor and a ceiling. Like the MPSC for offshore blocks, the interim government has taken the initiative to sweeten the model PSC for onshore blocks in line with the recommendations from Scotland’s Wood Mackenzie. “We are working to fix the new formula so that the price could be linked to around 8.0 per cent of the dated Brent crude with a capping in the Brent crude price,” said the senior Petrobangla official. Based on the current Brent price assumption, gas price is anticipated to be in the range of around US$5.50 per million British Thermal unit (MMBtu). This would bring gas prices more in line with the costs of supplying gas from liquefied natural gas (LNG) imports which Bangladesh is projected to increasingly rely on, should the country fail to make a turnaround in its domestic gas production. If fixed under this market-based pricing formula, the new gas price for onshore blocks will be around double the highest current price offered under the existing model PSCs for onshore gas blocks. US’s Chevron is getting around US$2.76 per MMBTu against its gas sales to state-run Petrobangla, while Singapore’s KrisEnergy gets around US$2.31 per MMBTu under the current gas pricing formula linked to HSFO. Petrobangla also purchases natural gas from three of its subsidiary state-owned companies. It purchases gas from state-run Sylhet Gas Fields Ltd (SGFL) and Bangladesh Gas Fields Ltd (BGFCL) at Tk 28 per Mcf (1 thousand cubic feet) and from state-run Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) at Tk 112 per Mcf. The price of LNG imported from long-term contract suppliers — Qatar Energy and OQ Trading International — was US$10.66 per MMBTu and US$ 10.09 per MMBTu respectively during the first seven months of the current fiscal year (FY) 2024-25 until January 2025. Petrobangla is also working on narrowing down differences of exploration benefits to attract the IOCs to take part in the next onshore bidding round. Petrobangla had floated the last bidding round for 24 offshore blocks last year under the Model PSC 2023 with no response from the IOCs. Under the Model PSC 2023, gas was priced at 10 per cent to dated Brent on a three-month rolling average basis. Based on the current Brent price assumption, the gas price would be in the range of around US$7.08 per MMBtu.
Indian Oil Marketing Companies Launch New Biodiesel Tender for FY 2025-26
India’s state-owned Oil Marketing Companies (OMCs) have initiated a fresh tendering process for biodiesel procurement, seeking approximately 200 million liters for the first quarter of the upcoming financial year starting April 2025. The latest tender was announced last week by Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL). The move follows the previous fiscal year’s ambitious target of 860 million liters, signaling the government’s continued commitment to advancing its bio diesel programme “Ethanol has benefited from a more focused policy push, regulated supply chains, and effective pricing mechanisms,” explained Dr. Rajeev Kumar, an energy policy expert at the Center for Policy Research. “Biodiesel, meanwhile, has struggled with feedstock security and economic viability issues that haven’t been addressed with the same urgency.
GAIL issues swap tender for six LNG cargoes, sources say
GAIL (India) Ltd has issued a swap tender offering six liquefied natural gas (LNG) cargoes for loading in the United States in exchange for six cargoes to be delivered to India GAIL has 20-year deals to buy 5.8 million metric tons a year of U.S. LNG, split between Dominion Energy’s D.N Cove Point plant and Cheniere Energy’s LNG.AS Sabine Pass site in Louisiana.
Asia’s green jet fuel ambitions exceed demand, heralding exports
Asia’s ability to supply sustainable aviation fuel will outpace regional demand this year and next as more production comes online, increasing exports and potentially lowering prices for the fuel, oil executives and analysts said. Planned SAF production could take a hit if regional demand remains tepid and prices fall below production costs, industry sources say, though Asia’s increased capacity is good news for airlines that have been complaining SAF is too expensive and hard to source. At least five SAF projects in Asia, outside of China, have started up or are earmarked to start production this year, targeting exports regionally and to Europe. Unlike in Europe, where flights departing EU and UK airports must now use 2 per cent SAF in their tanks, Asia’s mandated demand remains low with compulsory use of the renewable fuel in some nations to start only later this decade.
Oil Prices Continue Downward Spiral Amid Market Chaos
Oil markets have kicked off the new week on the back foot with the oil price selloff deepening amid a raft of bearish catalysts. Brent crude for May delivery fell 1.38% to trade at $69.39 per barrel at 1.44 pm ET on Monday, while WTI crude for April delivery declined 1.37% to change hands at $66.12 per barrel. The oil price decline comes as a reversal after crude oil futures rose sharply on Friday but still finished with another week of losses thanks to OPEC’s decision to go ahead with production increases starting in April, uncertainty over U.S. tariffs, and a bearish build in U.S. crude stocks. Last week, a statement posted on OPEC’s website revealed that Saudi Arabia, Russia, the United Arab Emirates, Iraq, Kuwait, Kazakhstan, Oman and Algeria will start unwinding a 2.2 million barrel per day cut from April. The cartel’s decision to add about 138,000 bpd in April appears intended to appease U.S. President Donald Trump, who has repeatedly called on OPEC “to reduce the price of oil.” “There is a bit of a concern in the market that the OPEC+ decision is the start of a series of more monthly supply additions, but the statement from OPEC+ reiterates an approach in bringing back barrels only if the market can absorb them,” UBS analyst Giovanni Staunovo said. Friday’s gains were triggered by remarks by Russian Deputy Prime Minister Alexander Novak that OPEC+ could reverse the production increase planned to begin next month: If there is an imbalance in the market, “we can always play in the other direction,” Novak said, according to Reuters. Previously, we noted that the OPEC press release stressed that the return of oil “may be paused or reversed subject to market conditions’’. On a further bullish note, the increase in oil supply due to OPEC unwinding could even be lower due to a potential offsetting effect of an acceleration in the payback of past overproduction. Commodity analysts at Standard Chartered have reported that current market balances imply that the unwind is unlikely to produce any significant surplus, with a mild surplus expected in Q4-2025 and Q4-2026. Meanwhile, robust demand growth and a continued slowdown in U.S. oil liquids supply will create room for the cuts to be unwound. U.S. oil supply growth slowed significantly in 2024, with revised data showing U.S. crude oil output averaged 13.208 mb/d, good for a mere increase of 274 kb/d y/y following the 942 kb/d increase seen in 2023. StanChart has predicted that U.S. crude oil output will slow further to 231 kb/d in 2025 and just 66 kb/d in 2026. Iranian Oil Returns To Markets Meanwhile, there are growing signs that oil under sanctions is returning to the markets. China’s crude imports during the first two months of this year were down about 5% from a year earlier, thanks to U.S. sanctions on Iran. However, Iranian oil continues being delivered to Chinese ports aboard smaller tankers. “Sanctioned flows have continued largely unfazed as the initial disruption has failed to continue for a meaningful duration,” RBC Capital Markets analysts including Brian Leisen and Helima Croft wrote this week. “January’s disruption did in fact cause a physical impact and a change in crude buying behavior, but as we’ve seen time and again since 2023, the shadow supply chain outperformed.” Trump’s first sanctions against Iran targeted 3 vessels carrying Iranian crude to China. The sanctions affected one very-large crude carrier (VLCC) and two Aframaxes that the Treasury Department said helped move Iranian oil to China. They also targeted several entities and individuals across different countries involved in the trade, on behalf of Tehran’s Armed Forces General Staff and its sanctioned front company, Sepehr Energy Jahan Nama Pars. The Trump administration imposed further sanctions on more than 30 people and vessels for selling and transporting Iranian petroleum-related products as part of the country’s”shadow fleet”. The latest sanctions target tanker operators and managers in India and China; oil brokers in the United Arab Emirates (UAE) and Hong Kong and the head of Iran’s National Iranian Oil Company. Trafigura Group’s head of oil trading Ben Luckock has named U.S. foreign policy towards Iran as the biggest upside risk to crude prices in an otherwise well supplied market.“The two big unknowns are – how is the US going to deal with it’s trade issue with China and then how is the US going to deal with Iran and I think the Iranian one is the one that we need to watch out for,” Luckock said in an interview on Bloomberg TV. “You may find that pressure on Iran backs it into a corner and then we have to be careful.”
Government To Enforce Delhi High Court Order In Gas Dispute With Reliance Industries, Says Oil Minister Puri
Petroleum and Natural Gas Minister Hardeep Singh Puri on Mar. 7 said that his ministry will pursue its demand for $2.81 billion from Reliance Industries Ltd. and its partners till the end, as the court decision on the gas migration row clearly establishes the government’s rights. RIL had earlier received a Rs 245.22 billion ($2.81 billion) demand from the Ministry of Petroleum and Natural Gas. Citing cases in the past that the ministry has won, Puri said that this is an absolutely clear court verdict. “We have already filed for $2.8 billion, and we will enforce it right till the end,” he said. The demand was after the Delhi High Court reversed the judgement that dismissed the appeal challenging an arbitral award to the company. This figure represents a significant increase from the previous $1.55 billion demand, showing additional calculations related to the gas migration issue. If the company is liable to pay this amount, it would represent approximately 31% of the company’s profitability over the past 12 months.
Why has India promised to buy more U.S. Oil?
The story so far: India committed to procure more oil and natural gas from the U.S. when Prime Minister Narendra Modi met U.S. President Donald Trump in February in Washington amid tariff threats. Foreign Secretary Vikram Misri said India’s energy purchases from the U.S. could increase from last year’s $15 billion to $25 billion in the near future. A Reuters report showed that the U.S. exported about 3,57,000 barrels per day (bpd) of crude to India in February, compared with exports of about 2,21,000 bpd last year. What has India agreed on? India is the world’s third-largest oil importer and consumer. For a country which relies on imports for more than 85% of its crude oil requirements, any step to secure hydrocarbon supplies is crucial. The country has promised to enhance oil and gas purchase from the U.S., which will bolster energy ties, and also help, to an extent, in achieving the ambitious doubling of bilateral trade to $500 billion over the next five years. At present, the bilateral trade is in India’s favour. The statistics of the Office of the United States Trade Representative show that the goods trade deficit with India was $45.7 billion in 2024, which is a 5.4% increase from 2023. Executive Director (Energy Transition and Cleantech Consulting) at S&P Global Commodity Insights Gauri Jauhar said that procuring more oil and gas from the U.S. will add to the diversity of major, long-term sources of supply. What about LNG requirements and supply? The aim is to establish the U.S. as a leading supplier of crude oil and petroleum products and liquefied natural gas (LNG) to India. It has been decided to ramp up trade in the hydrocarbon sector, including ethane and petroleum products, with an eye on supply diversification and energy security. The two sides agreed to enhance investments, particularly in oil and gas infrastructure, and facilitate greater cooperation between energy companies. Strengthening cooperation in civil nuclear energy and U.S. support for India to be made a full member of the International Energy Agency (IEA) were also mentioned. What are India’s needs on oil and gas? India imported a total of 234.26 million tonnes of crude oil in 2023-24. Import dependence touched 87.8% against 87.4% in the previous financial year. Domestic production corresponds to less than 13% of the requirement, with domestic crude oil production remaining almost unchanged at 29.36 million tonnes last fiscal (2023-24). In volume terms, the imports were almost similar, but the import bill in 2023-24 declined year-on-year to $133.37 billion on the back of lower international rates. In 2022-23, the oil import bill was $157.53 billion. Additionally, India spent $22.93 billion on the import of 48.69 million tonnes of petroleum products like LPG, fuel oil and petcoke. It also exported 62.59 million tonnes of products for $47.72 billion. India also imports LNG. In 2023-24, the country imported 31.80 billion cubic metres (bcm) for $13.405 billion. In the previous fiscal, gas imports were 26.30 bcm for $17.11 billion, the Petroleum and Natural Gas Ministry said in a report, citing the price shock of 2022-23 in the wake of Russia’s invasion of Ukraine. India is keen on increasing the share of clean fuel in its energy basket. Emphasising on the strategic importance of energy ties with the U.S., especially for LNG, petroleum and natural gas, Minister Hardeep Singh Puri said India wants to increase its natural gas consumption to 15% from the existing about 6%.
India’s Gas price index rises 25% YoY in Feb 2025
India’s Gas Index of India (GIXI) for February 2025 stood at Rs 1,112 per MMBtu ($12.8 per MMBtu), marking a 25 percent year-on-year (YoY) increase. The surge was driven primarily by heightened gas demand from Europe, particularly from gas-based power plants. This increase aligns with the upward trend observed in global gas benchmark prices. European and East Asian spot international gas benchmark prices reflected significant gains, with the Title Transfer Facility (TTF) price reaching $15.4 per MMBtu, up by 90 percent YoY and 6 percent month-on-month (MoM). Similarly, the West India Marker (WIM) price surged by 65 percent YoY and 5 percent MoM to $16 per MMBtu (ex-Dahej). Regionally, the GIXI-West remained at par with the All-India GIXI, whereas the GIXI-East was 10 percent lower at Rs 1,000 per MMBtu ($11.5 per MMBtu) due to transmission cost differentials. Meanwhile, GIXI-Dahej for February 2025 was recorded at Rs 1,111 per MMBtu ($12.8 per MMBtu), reflecting a 10 percent MoM decline. GIXI-Dahej was at an 18 percent discount ($2 per MMBtu) compared to the WIM-ex-Dahej settled price for February.
India Bought 112 Billion Euro Worth Of Russian Oil Since Ukraine War: Report
The world’s third largest oil consuming and importing nation, spent 102.5 billion euro (about Rs 1500 billion) on buying crude oil from Russia since the start of the Ukraine war, a European think tank said on Thursday. The Centre for Research on Energy and Clean Air (CREA) released a report on payments to Russia for fossil fuels since February 24, 2022. According to our estimates, since the beginning of the war, Russia earned EUR 835 billion in revenue from fossil fuel exports,” it said. China was the biggest buyer of Russian fossil fuel at EUR 235 billion (made up of EUR 170 billion for oil, EUR 34.3 billion for coal and EUR 30.5 billion for gas). India, according to CREA, bought fossil fuel worth EUR 205.84 billion from Russia from the beginning of the war until March 2, 2025. This comprised EUR 112.5 billion (USD 121.59 billion) for purchase of crude oil, which is refined into fuels like petrol and diesel at refineries, and EUR 13.25 billion for coal. India, which is more than 85 per cent dependent on imports to meet its crude oil needs, spent USD 232.7 billion on crude imports in 2022-23 (April 2022 to March 2023) and USD 234.3 billion in 2023-24. In the first 10 months of the current fiscal, it spent USD 195.2 billion. India, which has traditionally sourced its oil from the Middle East, began importing a large volume of oil from Russia soon after the invasion of Ukraine in February 2022. This is primarily because Russian oil was available at a significant discount to other international benchmarks due to Western sanctions and some European countries shunning purchases. This led to India’s imports of Russian oil seeing a dramatic rise, growing from less than 1 per cent of its total crude oil imports to a staggering 40 per cent in a short period. Some of the refineries in India turned Russian crude oil into fuels like petrol and diesel which were exported to Europe and other G7 countries, according to CREA.