Oil Demand Stays Strong Despite EV Surge
In the new hit TV show “Landman”, the lead character, Tommy Norris, delivers a five-minute speech that summarizes just how critical for modern civilization crude oil is. Everything, up to and including wind turbines, depends on oil. This year, with record EV sales in China and the continued build out of wind and solar in Europe, has proven just how pertinent that speech is to the current state of the energy transition-or the absence of it. About a month ago, the World Bank predicted in a blog post that crude oil demand would hit 103 million barrels daily in 2024. What the World Bank noted was that this number represented slowing demand. What the World Bank did not mention was that the number also represented another all-time high for oil demand. In its latest monthly oil market report, the International Energy Agency, another doomsayer for oil demand, said demand was about to actually pick up in 2025, rising from this year’s estimated 840,000 barrels daily to 1.1 million barrels daily. The IEA attributed the pick-up to the increase in demand for petrochemical products that would offset lost demand from the transport sector. Yet even demand from the transport sector is not shrinking anywhere near the rate that was predicted. China has cemented its place as the world’s number-one market for electric vehicles. These constitute increasingly large portions of total car sales. July 2024 was the first month ever in which so-called new energy vehicle sales exceeded ICE car sales. Since July, China has consistently marked months of EV sales, holding more than 50% of new car sales
India’s oil import bill drops despite rising import volumes
India’s oil import bill has seen a reduction year-on-year for the months of September, October, and November, despite an increase in import volumes, according to data from the petroleum Ministry. This marks a shift from earlier in the fiscal year when the value of oil imports had been higher compared to the same period in the previous year. During the September-November period, India’s oil imports decreased by 9 percent in value terms, totaling USD31.2 billion. However, import volumes increased by 4.4 percent to 57.2 million tonnes, as reported by the Petroleum Planning & Analysis Cell. The value decline was most significant in November, where it fell by 13 percent, followed by a 10.9 percent drop in October and a 2.8 percent decrease in September, when compared to the same months of the previous fiscal year. Despite the fall in import costs, volumes continued to rise, with November seeing a 2.7 percent increase, October a 4.3 percent increase, and September a 6.3 percent rise. This trend reflects India’s growing demand for oil, driven by softer global crude prices.
Qatar agrees to supply LNG to Gail India in five-year deal
Qatar will supply liquefied natural gas to Gail India Ltd. from next year under a new five-year pact, according to people with knowledge of the matter. India’s state-owned company will receive one LNG shipment a month from April 2025 until March 2030, said the people, who asked not to be identified because the information is not public. The deal was concluded as part of a tender that closed earlier this month. Qatar is already India’s largest LNG exporter, providing roughly half of the South Asian nation’s total purchases last year. Gail India and QatarEnergy didn’t immediately respond to a request for comment.
Natural gas consumption rises 12%, LNG imports jump 18% in H1 FY25
India’s domestic natural gas production recorded a modest growth of 1.6% during April-September 2024, increasing to 18,160 MMSCM from 17,879 MMSCM in the corresponding period of 2023, according to a report by the Petroleum Planning & Analysis Cell (PPAC). The marginal rise was attributed to an 8.6% production increase in PSC/JV fields and a 3.9% boost in Oil India Limited’s (OIL) nomination fields. However, production from ONGC nomination fields witnessed a decline of 3.5%. LNG imports see double-digit growth Liquefied Natural Gas (LNG) imports surged by 18.03% to 18,915 MMSCM during April-September 2024 from 15,416 MMSCM in the same period last year. In value terms, the imports rose by 17.37%, amounting to $7,613 million compared to $6,486 million in the previous year. LNG terminal utilization varied widely, with Dahej terminal operating at 103.9% capacity, while Kochi terminal utilization was at 21.8%. The city gas distribution (CGD) sector also expanded its footprint, reporting 7,259 CNG stations and over 13.7 million PNG connections across 297 geographical areas (GAs) as of October 1, 2024. CGD sector sales increased by 8% to 41.63 MMSCMD during April-September 2024, driven by a 9% rise in CNG sales and an 8% increase in industrial sector sales. However, domestic and commercial sales dipped by 2%.
Massive LNG Expansion Expected Worldwide Despite Green Transition
Since 2022, several countries worldwide have announced plans to expand their natural gas production capacity over the next decade, with multiple new large-scale projects coming online over the last three years. This was largely driven by the 2022 Russian invasion of Ukraine and subsequent sanctions on Russian energy, which led to a global shortage of natural gas. As countries across Europe and North America hurriedly sought out alternative supplies of the fuel, several governments decided to back new gas expansion plans to ensure the future of their energy security, with many viewing natural gas as a necessary mid-term transition fuel. A recent report by the climate group Reclaim Finance states that $200 billion in funding has been earmarked by large banks for new gas terminals, in addition to $252 billion from around 400 other investors. While most major banks have committed to a shift toward “net-zero” banking, many continue to define natural gas as a transition fuel, allowing for funding exceptions. The wave of new gas projects comes in the wake of the Russian invasion of Ukraine and the widespread energy shortages that followed. Many countries have shifted their reliance on Russia for gas supplies to alternative producers, such as Norway and the U.S., over the last almost three years. “Oil and gas companies are betting their future on LNG projects, but every single one of their planned projects puts the future of the Paris Agreement in danger,” Reclaim Finance campaigner Justine Duclos-Gonda said in a statement this month. “Banks and investors claim to be supporting oil and gas companies in the transition, but instead they are investing billions of dollars in future climate bombs.” The report found that eight liquefied natural gas (LNG) export terminal projects and 99 import terminal projects were completed between 2022 and 2024, increasing the global export capacity by 7 percent and the import capacity by 19 percent. In addition, LNG developers have a project pipeline of 156 new LNG terminals worldwide to be completed by the end of the decade, consisting of 63 export terminals and 93 import terminals. This has raised concerns among climate experts over the potential emissions increase in relation to new gas projects. The report stated that methane leaks from these terminals could produce as much as 10 gigatonnes of greenhouse gas emissions by 2030, which is nearly equivalent to the annual emissions of all operational coal plants globally. In October, the International Energy Agency’s (IEA) World Energy Outlook 2024 warned that there could be a severe oversupply of gas by the end of the decade if all planned projects go ahead. This will likely lead to a sharp drop in gas prices. The IEA predicts that the price of gas imported into the EU could fall from a record average high of over $70 per million British thermal units (MBtu) in 2022 to just $6.50 by 2030. The U.S. has taken the lead in LNG production, overtaking Qatar and Australia to become the world’s largest LNG exporter in 2023, according to the U.S. Energy and Information Administration (EIA). U.S. LNG exports averaged 11.9 billion cubic feet per day (Bcf/d), a 12 percent increase on 2022 levels. Australia and Qatar each exported between 10.1 Bcf/d and 10.5 Bcf/d annually between 2020 and 2023. Russia and Malaysia were the fourth- and fifth-highest LNG exporters globally over the last five years. There are no signs of slowing for the U.S., which has an extremely large LNG project pipeline for the next decade. Three new LNG export projects, currently under construction, are expected to come online by the end of 2025. Earlier this year, the EIA forecast that U.S. natural gas exports would grow by 6 percent in 2024 compared to 2023, to 13.6 billion Bcf/d. Net exports are set to increase even further in 2025, by an additional 20 percent, to 16.4 Bcf/d. This is not just a U.S. phenomenon, with North American LNG exports on track to more than double by 2028, as the U.S., Canada, and Mexico all expand their export capacities. By July, 42 LNG projects across Europe were planned to start in 2025. The current European project pipeline is expected to increase the continent’s LNG capacity by 121 million metric tonnes a year by 2030. However, a decrease in European demand means that utilization rates at many operating terminals have fallen below 50 percent. Energy experts are growing increasingly concerned over the potential overinvestment and underutilization of the market. The race to develop new LNG terminals in the wake of the Russian invasion of Ukraine and subsequent global gas shortages may be short-sighted, if demand predictions from the IEA are to be believed. The rapid expansion of the global LNG market could lead to a huge oversupply, thereby driving down gas prices dramatically over the next decade. However, this does not appear to be deterring many of the developers building these new projects, who expect demand to remain high as gas is used globally as a ‘transition fuel’.
LPG demand to decline 7% by 2030 on growing piped natural gas adoption
India’s liquefied petroleum gas (LPG) demand will decline by 7% by 2030 after having risen 82% in a decade as a planned massive adoption of piped natural gas will eat into its growth, according to a joint study by the Petroleum and Natural Gas Regulatory Board (PNGRB) and Deloitte. Household consumption makes up about 90% of the total LPG consumption in the country. About 99% of households have access to clean fuel—domestic LPG connections have doubled in a decade to 320 million — but many poor families consume an abysmally low amount of fuel. Their consumption is expected to expand in the future and can fuel demand for LPG. However, this growth will likely be more than offset by a rapid expansion of piped natural gas (PNG). “As city gas distribution sector grows, it will be the key factor that will erode LPG demand,” the study said. “Demand erosion will be prominent in the domestic segment as PNG—domestic and commercial—is cheaper than LPG.”
India’s import of Russian oil drops in Nov to lowest level since June 2022
India’s import of Russian crude oil dropped in November to its lowest level since June 2022 but the Kremlin continues to be the biggest source of oil for India, according to a monthly tracker report of a European think tank. India became the second biggest buyer of Russian crude oil since Moscow invaded Ukraine in February 2022, with purchases rising from less than one per cent of the total oil imported to almost 40 per cent of the country’s total oil purchases. The rise was primarily because the Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow. “India’s imports of Russian crude oil dropped by a massive 55 per cent in November – the lowest figure since June 2022,” the Centre for Research on Energy and Clean Air (CREA) said its latest report. Russia remained India’s top oil supplier, followed by Iraq and Saudi Arabia. “China has bought 47 per cent of Russia’s crude exports, followed by India (37 per cent), the EU (6 per cent), and Turkey (6 per cent),” CREA said without giving absolute numbers. In November, there was a 17 per cent month-on-month increase in the discount on Russia’s Urals grade crude oil to an average of $6.01 per barrel compared to Brent crude oil. The discount on the ESPO grade narrowed by a massive 15 per cent and was traded at an average discount of $3.88 per barrel while that on the Sokol blend narrowed by 2 per cent to $6.65 per barrel, it said.
Putin Halts Arctic Gas Production as Sanctions Take Effect
Russia has been compelled to halt operations at a section of the world’s largest liquefied natural gas (LNG) facility near the Arctic city of Murmansk due to diminished demand caused by Western sanctions. The Belokamenka yard, which was completed last year and was planned to employ 15,000 workers, is now abandoned, as most contractors have vacated the site. This shutdown represents a significant setback for Russian President Vladimir Putin. Last year, Putin visited the facility alongside Leonid Mikhelson, the CEO of Novatek—the second-largest gas company in Russia responsible for constructing the plant. In the previous year, Novatek produced 79 billion cubic meters of gas, approximately matching the United Kingdom’s entire annual consumption. During their visit, both Putin and Mikhelson touted Belokamenka as a leading global industrial site. However, just a few months later, the US Treasury imposed sanctions on the Arctic LNG 2 project, with the European Union following suit with similar measures. The imposition of sanctions has led to a shortage of available ships. Novatek required a fleet of ice-breaking LNG carriers for their project to proceed, but only a few shipyards were willing to risk violating sanctions. In September, construction firm Vellestroy reportedly pulled out of Belokamenka, and contractors Renkons Arktik have now also departed. Currently, approximately 500 individuals remain on the site, primarily security personnel. A significant setback to Putin’s ambitions in the Arctic occurred in September when India declared it would no longer purchase LNG from Arctic LNG 2.
Do you have a better deal?: India’s Jaishankar responds on getting ‘cheap oil’ from Russia
Indian Foreign Minister S Jaishankar gave a stern reply on Saturday (Dec. 9) to the criticism of New Delhi buying oil from Russia amid the country’s ongoing war with Ukraine. Foreign Minister Jaishankar was taking part in the 22nd edition of the Doha Forum panel on “Conflict Resolution in a New Era” in Doha. “Pleased to participate @DohaForumpanel today on the topic “Conflict Resolution in a New Era” in Doha today along with PM & FM@MBA_Al Thani_of Qatar and FM @EspenBarthEide of Norway. As the conflicts around us increase, the need of the hour is more diplomacy, not less,” Jaishankar said in a post on X. ‘Do you have a better deal?’ On being asked about India getting “cheap oil” from Russia, Jaishankar said, “I get oil, yes. It is not necessarily cheap. Do you have a better deal?” Last month, Indian Petroleum and Natural Gas Minister Hardeep Singh Puri said that Russia had become the largest supplier of crude oil to India, accounting for over 35 per cent of the country’s imports. In September, Puri said that New Delhi was prepared to keep buying oil from Russian companies that were allowed to make such sales since prices were cheap. Western sanctions on Russia over its war with Ukraine have capped the price Russia can charge for its crude oil, and India is prepared to buy oil and gas at the lowest possible prices from anyone, Puri told the news agency Reuters. Jaishankar on Russia-Ukraine war Meanwhile, at the Doha Forum panel, Foreign Minister Jaishankar reiterated India’s stance that the Russia-Ukraine war could only be resolved through dialogue and diplomacy and not on the battlefield. “We’ve always held to the view that this war is not going to be solved on the battlefield. At the end of the day, people are going to return to some kind of negotiating table, the sooner the better. Our effort has been to facilitate that to the extent possible. That has not been the most popular thing, at least in some parts of the world,” Jaishankar said
Surprise Crude Oil Build Pressures Prices
Crude oil inventories in the United rose by 499,000 barrels for the week ending November 29, according to The American Petroleum Institute (API). Analysts had expected a draw of 1.30 million barrels. For the week prior, the API reported a 1.232-million barrel build in crude inventories. So far this year, crude oil inventories have fallen by roughly 3.4 million barrels since the beginning of the year, according to API data. On Tuesday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) rose by 0.7 million barrels as of December 6. SPR inventories are now at 392.5 million barrels, a figure that is about 46 million above its multi-decade low last summer, yet still 242 million down from when President Biden took office. At 3:11 pm ET, Brent crude was trading down $0.08 (-0.11%) on the day at $72.06—down roughly $1.60 per barrel compared to last Tuesday. The U.S. benchmark WTI was trading up on the day by $0.08 (+0.12%) at $68.45—up about $1.50 per barrel from last Tuesday. Gasoline inventories rose this week by 2.852 million barrels on top of last week’s 4.623-million-barrel increase. As of last week, gasoline inventories are 4% below the five-year average for this time of year, according to the latest EIA data. Distillate inventories rose by 2.452 million barrels, after last week’s 1.014-million-barrel increase. Distillate inventories were about 5% below the five-year average as of the week ending November 29, the latest EIA data shows. Cushing inventories—the benchmark crude stored and traded at the key delivery point for U.S. futures contracts in Cushing, Oklahoma—fell by 1.517 million barrels, according to API data, after rising by 112,000 barrels in the previous week.