Six EU Members Want Lower Price Cap for Russian Oil
Six European Union members have called on the Commission to lower the price cap set on Russian oil prices by the G7 as part of a sanction series aiming to cripple Russia’s economy in response to its 2022 incursion into Ukraine. “Measures that target revenues from the export of oil are crucial since they reduce Russia’s single most important income source,” Sweden, Denmark, Finland, and the three Baltic states said in a letter, as quoted by Reuters. “We believe now is the time to further increase the impact of our sanctions by lowering the G7 oil price cap,” they added. The G7 price cap for Russian oil was set at $60 per barrel back in 2023, aiming to reduce Russia’s revenues from exporting its crude while avoiding a market shock that would lead to a price surge. The enforcement of the cap was to be in the hands of insurers and shippers carrying Russian oil. If sellers wanted to use Western insurance and tankers, they had to commit to not asking a higher price for the oil than $60 per barrel. The result of that was that Russia took to using its own tankers and its own insurers as well as coverage providers from Asia and the Middle East. An oil price shock was indeed avoided, at the cost of Russian oil continuing to flow quite freely, only in a different direction—to the East. Now, it seems that the Baltics and the Nordics have gotten inspiration from the outgoing Biden administration, which just slapped more sanctions on Russian oil ahead of Trump’s inauguration, and are pressing the European Commission for additional action as well. Russia has repeatedly stated it would not comply with any price caps. The effect on oil prices from the latest Biden sanctions is already clear: the benchmarks are up and could go higher still as supply tightens globally.
2025 Brings Fundamentals Back to the Fore in Oil Markets
Oil trading in 2024 was marked by the near complete dominance of algorithmic trading. While not a new trend, algo trading arguably reached its peak last year, with technical analysis largely displacing any factual fundamentals considerations. Instead of making traders money, however, algo trading has lost them money. Bloomberg reported earlier this month that 2024 was a loss-making year for algo traders—and it was the second loss-making year in a row for them. Throughout the year, driven by algorithms, oil traders bet on a demand slump in China and oversupply thanks to OPEC’s spare capacity and growth in production outside of OPEC, notably in the United States. Throughout the year, the algorithms—or rather, their users—pointedly ignored facts such as OPEC’s unwillingness to use that spare capacity or the trend in OECD crude oil inventories, which declined considerably during the year. Throughout the year, algo traders had an outsized impact on oil prices. And they still lost money. “Humans did have more success in 2024 than algos, which is different than the last couple of years,” CIBC Private Wealth Group senior energy trader Rebecca Babin told Bloomberg. It could probably be argued that 2024 saw the point of saturation with algo trading on the oil market, which sapped the very price volatility that algo traders thrived on in previous year. In 2024, oil prices traded in the narrowest range since 2019, per Bloomberg. As a result of these developments, algorithmic traders have reduced the weight of oil in their portfolios by as much as half, from 4% in July last year to just 2% today, according to CIBC’s Babin. This means fundamentals are back—and it’s already showing. Oil prices have been trending higher since the start of the year as supply returns to the spotlight ahead of Donald Trump’s inauguration as U.S. president. Trump is expected to tighten sanctions against Iran, crimping Middle Eastern crude oil supply, and these expectations have now trumped the perception of weak Chinese oil demand that dominated oil bets in 2024. Additional U.S. sanctions on Russian oil recently announced by the Biden administration also pushed oil higher earlier this month, again despite previous perceptions there was plenty of oil in the world that kept the benchmarks in a tight range. “The new measures are likely to give the Trump administration additional leverage in future negotiations with Russia, as it decides whether, when, and under what terms to lift Biden-imposed sanctions,” JP Morgan analysts said in a recent note. Whenever these negotiations take place and whatever their outcome, in the meantime oil prices will be higher—with the Biden admin out of office, fuel availability at home is no longer its concern. There is also the issue of energy transition and related oil demand predictions. Algo trading appears to have incorporated a lot of the assumptions made by organizations such as the International Energy Agency. The IEA has, in recent years, turned from an impartial energy provider into a staunch transition supporter, which has led some to question the reliability of its forecast data, for instance, on EV sales. This data has motivated oil trading decisions, and it has resulted in losses, inaccurately predicting oil demand destruction where in fact demand has continued to grow, including in China, the world’s biggest EV market. EV sales, meanwhile, have begun to decline in stark opposition to predictions they would keep surging. Another reason for the losses experienced by algorithmic traders and their clients is the volume of algo trading, it seems. On several occasions last year, algo trading amplified oil price changes prompted by certain events, such as OPEC+ decisions to extend their voluntary production cuts. In June, an OPEC+ update to that effect caused a massive selloff in oil because it was perceived as a bearish signal for demand. Algo trading made the selloff even more massive. “CTAs are just hammering away the market with massive selling,” one analyst from TP ICAP Group told Bloomberg at the time. Besides hammering away on the market, trend followers also overbet on a continued oil rout as well, eventually losing money as prices recovered—because fundamentals began getting some attention. This year could deliver another lesson for oil traders who consider it more convenient and reliable to base their decisions on software. Forecasts about U.S. oil production growth are being revised in a hurry as reports about the maturation of the shale patch are multiplying. Forecasts about Chinese oil demand are changing, too, with the government in Beijing signaling it had more stimulus packages up its sleeve. Finally, no one seemed to expect the parting sanction slap on Russia by the outgoing U.S. administration. After two years of over-reliance on software algorithms, 2025 could be the year fundamentals-based trading reestablishes itself. What impact this would have on prices remains to be seen.
Stricter US sanctions threaten Russia’s oil trade with India and China: Report
New US sanctions on Russian oil producers and ships are expected to disrupt Russia’s oil trade with India and China, two of its largest customers, according to a report by news agency Reuters. This development may lead to higher oil prices and increased freight costs for both countries as they look to source oil from alternative markets. The US Treasury announced tougher sanctions on Friday, targeting major Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 ships involved in transporting Russian oil. These measures aim to cut into the revenues Russia uses to fund its war in Ukraine.
Europe threatens to trigger a global scramble for natural gas supplies
The world is bracing for a fight for natural gas supplies this year, prolonging the pain of higher bills for consumers and factories in energy-hungry Europe and putting poorer emerging countries from Asia to South America at risk of getting priced out of the market. For the first time since the energy crisis was turbocharged by Russia’s war in Ukraine, Europe risks failing to meet its storage targets for next winter, setting the stage for one last scramble for supplies before new liquefied natural gas capacity starts to ease the situation next year. While Europe has enough gas reserves to get through this winter and prices have eased since the start of the year, inventories are being eroded by cold weather, which swept across the continent this weekend. Supply options have been squeezed since the start of this year, when Russian pipeline deliveries through Ukraine ceased following end of a transport agreement. “There will certainly be an energy gap in Europe this year,” said Francisco Blanch, commodity strategist at Bank of America Corp. “That means that all the incremental LNG that’s coming online this year around the world will go into making up for that shortfall in Russian gas.” To cover its projected demand, Europe will need to import as much as an extra 10 million tons per year of LNG — about 10 per cent more than in 2024, according to Saul Kavonic, an energy analyst at MST Marquee in Sydney. New export projects in North America could help ease market tightness, but that hinges on how quickly the facilities can ramp up production. With fewer options to restock for next winter, Europe will need LNG shipments, pulling some away from Asia, home to the world’s biggest consumers. Depending on how demand shapes up, the competition would drive prices higher than countries like India, Bangladesh and Egypt can afford and weigh on Germany’s economic recovery.
HPCL arm successfully commissioned LNG Regasification terminal in Gujarat
Hindustan Petroleum Corporation (HPCL) has announced the successful commissioning of a 5 MMTPA capacity LNG Regasification terminal at Chhara, Gujarat, established by its wholly owned subsidiary, HPCL LNG. The company stated that the ship, Maran Gas Coronis, carrying LNG cargo, berthed on 6 January 2025, and the discharge of the cargo into the onshore LNG tanks was successfully completed on 12 January 2025. The terminal, located at Chhara Port in Gir-Somnath District, Gujarat, has been developed with an investment of approximately Rs 47.50 billion. It features facilities for LNG receipt through ocean tankers, marine unloading, storage, LNG road tanker loading, regasification and the supply of regasified LNG to the gas grid. HPCL LNG will operate the terminal under a tolling model, offering services to third-party users through long-term capacity booking contracts and/or master regasification agreements for spot cargoes. The company has already brought in its first cargo, and the terminal is set to begin commercial operations soon. HPCL is engaged in the business of refining crude oil and marketing petroleum products. It operates through two segments: downstream and exploration and production of hydrocarbons. The companys standalone net profit tumbled 87.67% to Rs 6.3118 billion in Q2 FY25 as against Rs 51.1816 billion posted in Q2 FY24. Net sales (excluding excise duty) grew by 4.29% year on year (YoY) to Rs 994.1316 billion in the September 2024 quarter.
With no dearth of crude, India can survive the transition to green energy, says Hardeep Singh Puri
Union Minister for Petroleum and Natural Gas Hardeep Singh Puri on Saturday, said the transition from fossil fuel to green energy was possible only when one survives the present scenario. While India is making steady steps towards green energy, fossil fuel, particularly crude oil, was available in the international market for survival now, he said. Mr. Puri was speaking at the ‘Energy for Survival-Security and Climate’ debate at the Mangaluru Lit Fest here. Stating that India’s dependence on fossil fuel was growing with about 85% dependence on imports, the Minister noted the situation would continue till the country explores crude on its own. Dependence on gas was about 50%, he said. At the same time, there was no shortage of crude oil, he argued, and said crude also comes from non-OPEC (the Organisation of Petroleum Exporting Countries). The Western hemisphere has abundant crude with Brazil putting out about 300 million barrels per day and even the U.S. producing about 13 million barrels. There were other countries, including Russia, Guyana, Suriname, etc., producing crude. Speaking on sustainability, Mr. Puri said India would blend biofuel with petrol by 20% from 2025-26 itself instead of the earlier target of 2030. While the country has demonstrated its ability to produce solar energy, it was also confident of achieving the 5 million tonnes of green hydrogen target. Compressed Biogas Plants and Compressed Natural Gas plants would be increased to achieve sustainability, he said. Mr. Puri said with about 67 million people, of 1.4 billion population in the country fill fuel at retail outlets everyday. India’s consumption of crude was set to increase to 7 million barrels per day from the present 5 million. Yet, a quarter of the global growth would come from India in about 20 years. “We have to plan for tomorrow and remain insulated against possible upheavals and disruption,” he said.
US Imposes Sweeping Sanctions on Russia’s Oil and Gas
U.S. President Joe Biden’s administration imposed its broadest package of sanctions so far targeting Russia’s oil and gas revenues on Friday, in an effort to give Kyiv and Donald Trump’s incoming team leverage to reach a deal for peace in Ukraine. The move is meant to cut Russia’s revenues for continuing the war in Ukraine that has killed more than 12,300 civilians and reduced cities to rubble since Moscow invaded in February, 2022. Ukrainian President Volodymyr Zelenskiy said in a post on X that the measures announced on Friday will “deliver a significant blow” to Moscow. “The less revenue Russia earns from oil … the sooner peace will be restored,” Zelenskiy added. Daleep Singh, a top White House economic and national security adviser, said in a statement that the measures were the “most significant sanctions yet on Russia’s energy sector, by far the largest source of revenue for (President Vladimir) Putin’s war”. The U.S. Treasury imposed sanctions on Gazprom Neft and Surgutneftegas, which explore for, produce and sell oil as well as 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum. Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil. The Treasury also rescinded a provision that had exempted the intermediation of energy payments from sanctions on Russian banks. The sanctions should cost Russia billions of dollars per month if sufficiently enforced, another U.S. official told reporters in a call. “There is not a step in the production and distribution chain that’s untouched and that gives us greater confidence that evasion is going to be even more costly for Russia,” the official said. Gazprom Neft said the sanctions were unjustified and illegitimate and it will continue to operate.
Government partially restores gas supply to IGL, Adani-Total
The government has increased cheaper gas supply to city gas retailers IGL, Adani-Total, and Mahanagar Gas, restoring a major part of the allocation that was cut in 2024, according to regulatory filings by the companies. The government, in October and November last year, had cut supplies of the so-called APM Gas (low-priced natural gas coming from old fields such as Mumbai High and Bassein fields in the Bay of Bengal) to city gas retailers by as much as 40 per cent in view of limited output. This led to city gas retailers hiking CNG prices by Rs 2-3 per kg and planning more increases as they replaced lost volumes with higher-priced input fuel. The price hike made CNG less attractive when compared to alternate fuels like diesel.
Iraq, UAE gain as India’s Russian oil imports slip to 12-month low in Dec amid Moscow’s high domestic demand
India’s crude oil imports from West Asia—specifically Iraq and the United Arab Emirates (UAE)—surged in December with Indian refiners looking to replace the shortfall in supplies from their largest source market Russia, which cut exports to meet heightened oil demand from its domestic refineries, shows an analysis of oil tanker data. Saudi Arabia, however, was unable to capitalise on the opportunity due to its barrels being priced higher than Iraqi and Emirati oil. ding to industry watchers, domestic oil demand in Russia jumps towards the end of the year as the country’s refineries come out of the autumn refinery maintenance season and start clocking high capacity utilisation levels. The seasonally high demand for crude in Russia is expected to continue in January and a couple of subsequent months, which is likely to cap Russian oil exports and push India towards other key suppliers to bridge the supply gap. In December, India’s imports of Russian crude dropped nearly 17 per cent sequentially to 1.48 million barrels per day (bpd), the lowest monthly level in 2024, per vessel tracking data from commodity market analytics form Kpler. Russia’s market share in India’s import basket in December contracted to 31.5 per cent from 38 per cent in November. India’s total oil imports in December were at 4.71 million bpd, up 0.5 per cent month-on-month. “The lack of Russian medium sour (crude) grades has been a boon for Iraq as India needed to find grades that would be similar in quality to Urals (Russia’s flagship crude grade) and could be tapped into relatively quickly. As a consequence, Iraqi imports hit their highest since March,” said Viktor Katona, head of crude analysis at Kpler.
ONGC engages BP to boost production in largest oil field
India’s top explorer Oil And Natural Gas Corp on Wednesday said energy major BP will act as technical service provider to help boost oil and gas output from the country’s largest producing field, off India’s west coast. BP has promised an increase of up to 60% in production of oil and gas output from the Mumbai High field, discovered in 1974, ONGC said in a stock exchange filing. The field reached a peak production level of 471,000 barrels per day of oil in March 1985, and its output had declined to about 134,000 bpd in April 2024, according to the tender document floated last year. India, the world’s third-biggest oil importer and consumer, wants to quickly raise its oil and gas output, which has been stagnant for years. In June, the government said that ONGC was seeking a technical tie-up with a global oil major to boost production and BP’s board had met India’s Oil Minister Hardeep Singh Puri in September 2024.