BPCL CMD inaugurates BPCL’s 1st LNG Fueling Station
Bharat Petroleum Corporation Limited, CMD G Krishnakumar, inaugurated BPCL’s 1st LNG Fueling Station at Ghar Outlet BP-Avinashi, located on National Highway 544 (formerly NH 47) in Chengapalli, connecting Salem in Tamil Nadu to Kochi in Kerala. As India’s trucking market expands from 4 million trucks in 2022 to an estimated 17 million trucks by 2050, liquefied natural gas (LNG) emerges as a promising alternative fuel.
U.S. Looks to Ensure Long-Term Demand for Its LNG in Europe
The United States is looking to keep its LNG flowing to Europe in the long term when the EU will have standards for methane emissions for all imported fossil fuels. The EU’s methane regulation will require imports of oil and gas, including LNG, to have equally strong or more stringent requirements of thresholds for these emissions than the European Union, starting in 2030. These requirements, yet to be deliberated and announced in detail, would mean that U.S. LNG developers and exporters would need to clean up their operations to ensure their product would be EU-emission compliant by the end of the decade. U.S. Seeks Methane Regulation Alignment Days before the U.S. presidential election, the Biden Administration sought to begin discussions with the EU to ensure that LNG supply compliant with U.S. methane rules would automatically be considered compliant with the EU regulation. The Department of Energy (DOE) and the Environmental Protection Agency (EPA) co-signed a letter addressed to European Commission Director-General for Energy Juul Jorgensen, requesting a determination of “equivalency” for U.S. exports of LNG to Europe. The letter was signed by DOE Assistant Secretary for Fossil Energy and Carbon Management, Brad Crabtree, and the Environmental Protection Agency’s (EPA) Assistant Administrator for the Office of Air & Radiation, Joseph Goffman. “We understand that this process will take time. However, we would like to begin discussions as soon as possible, to ensure the continued reliable and stable supply of natural gas from the United States to Europe,” they wrote in the letter dated October 28. Related: US LNG Exports Poised to Hit 9-Month High “We are confident that the United States’ extensive domestic regulatory regime to monitor, measure, and reduce greenhouse gas emissions (especially methane) from the oil and gas sector is consistent with the goals of the EU’s regulations,” they noted. With an alignment of methane emission standards, the U.S. is looking to keep its now largest LNG export market well into the next decade. It is also seeking to have methane regulation on U.S. LNG regardless of what President-elect Donald Trump would do with U.S. environmental protection requirements over the next four years—most likely repeal most of them. U.S. LNG Exports to Europe The United States, the world’s top LNG exporter last year ahead of Qatar and Australia, continued to export two-thirds of its LNG volumes to Europe, including Turkey, in 2023, according to data from the U.S. Energy Information Administration (EIA). Similar to 2022, Europe and Turkey remained the primary destination for U.S. LNG exports in 2023, accounting for 66% of U.S. exports. Asia, the top destination of America’s LNG before the Russian invasion of Ukraine in early 2022, now trails Europe with about a quarter of U.S. LNG going there. Moreover, the U.S. remained the largest LNG supplier to the EU and the UK in 2023, accounting for nearly half, 48%, of total LNG imports. Qatar and Russia remained the second- and third-largest LNG suppliers to Europe last year, with market shares of 14% and 13%, respectively. As the EU seeks to ditch Russian gas, it could consider replacing imports of Russian LNG with U.S. LNG, European Commission President Ursula von der Leyen suggested last week. “We still get a lot of LNG from Russia and why not replace it by American LNG, which is cheaper for us and brings down our energy prices,” von der Leyen told reporters. LNG Supply with the Methane Regulation The EU methane regulation has yet to determine how and when methane rules in a country outside the bloc would be considered “equivalent or stronger” to the methane emissions legislation in the European Union. In view of this regulation, a lot is at stake for both the United States and Europe in terms of LNG supply in the medium and long term. Europe needs U.S. LNG as it severs ties with Russian gas, while the EU, the UK, and Turkey combined is the top export market of U.S. LNG producers and developers. U.S. trade groups, including the American Petroleum Institute (API) and the U.S. Chamber of Commerce, have expressed concerns that the EU regulation could undermine the EU’s energy security by depriving the bloc from U.S. LNG supply if it is found to be more polluting than the EU requirements. President-elect Trump will likely target for immediate repeal or rollback the methane emissions fees finalized by the Biden Administration, while also lifting the current pause on new LNG project permitting. However, regardless of any U.S. rollbacks on methane fees and emissions requirements, and a possible boost to LNG export developments under Trump, America’s exporters will be closely watched for emissions reporting and emission profiles over the next few years. The EU hasn’t decided how exactly these methane regulations would actually work. It may have to juggle between its energy security and climate goals in finalizing the methane requirements for fossil fuel imports.
EIA: India leads global oil consumption growth in 2024, 2025
India has emerged as the top contributor to expected global oil consumption growth, accounting for 25% of the increase for 2024 and 2025, according to the US Energy Information Agency (EIA)’s latest Short-Term Energy Outlook (STEO). EIA expects global liquid fuel consumption to rise by 1.0 million b/d in 2024 and 1.2 million b/d in 2025. This growth is below the pre-pandemic 10-year average of 1.5 million b/d of annual growth, as well as below the oil demand growth seen in the 2021-23 pandemic recovery. “We expect consumption of liquid fuels in India to increase by 300,000 b/d in both 2024 and 2025, driven by rising demand for transportation fuels. We forecast China’s petroleum and liquid fuels consumption will grow by less than 100,000 b/d in 2024 before recovering to almost 300,000 b/d 2025,” EIA said. “We have revised China’s 2024 consumption downward several times over the past year. In China, rapidly expanding electric vehicle ownership, rising use of liquefied natural gas for trucking goods, and decelerating economic growth have limited consumption growth for transportation fuels.” Meantime, EIA forecasts more distillate fuel consumption in the US next year after 2 years of declines, largely because US manufacturing activity is expected to increase. Oil prices The Brent crude oil spot price averaged $76/bbl in October, up $2/bbl from the average in September. Crude oil prices increased in October in part because of market concerns that an Israeli response to Iran’s missile attack would reduce Iran’s ability to produce or market oil. However, Brent fell to $71/bbl on Oct. 29 after Israel’s military response did not target Iran’s oil infrastructure. Despite the drop in oil prices in late October, EIA expects that geopolitical risks and OPEC+ cuts are likely to raise oil prices, with Brent crude averaging $78/bbl in first-quarter 2025. As production grows, inventories will build in second-quarter 2025, reducing prices to $74/bbl in second-half 2025. “By second-quarter 2025, we expect OPEC+ production increases and supply growth from countries outside of OPEC+ will outweigh global oil demand growth and cause oil to be put into inventory. We expect that global oil inventories will increase by an average of 400,000 b/d in second-quarter 2025, before inventories rise by an average of 600,000 b/d in second-half 2025. We forecast that inventory builds will put downward pressure on crude oil prices, with Brent falling to an average of $74/bbl in second-half 2025. In our forecast, the Brent price averages $76/bbl for the full year of 2025,” EIA said. However, EIA sees at least two main sources of oil price uncertainty: the future course of the ongoing Middle East conflict and OPEC+ members’ willingness to adhere to voluntary production cuts.
India’s oil import strategy may not witness dramatic shift in Trump era
India is unlikely to trim its purchases of Russian crude under a new Donald Trump government, though it might explore more term import contracts and collaboration on storage with the US, analysts and trade sources told S&P Global Commodity Insights. The South Asian country, which imports as much as 85% of its needs, has pledged to continue buying oil from the cheapest available sources to meet its growing demand, and Russian oil falls in that category due to attractive discounts, they added. “India has been taking a stand to buy cheaper crude wherever available, and I don’t foresee the US offering their typical crude priced lower than Russian oil. Hence a drastic shift is less likely,” said Abhishek Ranjan, South Asia oil research lead at S&P Global Commodity Insights. The average discount of Russian Urals to Dated Brent was $12.129/b in August, $12.30/b in September and $12.189/b in October, fluctuating within a narrow range, according to Platts, part of S&P Global Commodity Insights. “Keeping the oil import bill low is a big priority for the Indian government, and buying Russian oil at discounted rates helps in achieving that objective. I don’t think India will change that stance, unless of course, the market scenario changes,” said Priyanka Kishore, director and principal economist at Asia Decoded, a Singapore-based research consultancy. Declining US share In the January-September period, India’s imports of Russian crude averaged 1.7 million b/d, making the non-OPEC producer the country’s biggest supplier. The US was the fifth-largest supplier, accounting for 215,000 b/d in the same nine-month period, according to data from S&P Global Commodities at Sea. “Judging by recent statements from government officials, including the petroleum and foreign ministers of India, it appears that India will not shy away from continuing purchasing Russian-grade crude in the foreseeable future,” said Rajat Kapoor, managing director for oil and gas at Synergy Consulting. The US crude share in India rose to as high as 15% in the first quarter of 2021. The majority of US crude exports to India consisted of light grades, predominantly WTI, with nearly 50% previously discharged for Reliance Industries until 2021. However, since the start of the Russia-Ukraine conflict, purchases from the US have fallen behind, as Russian crude now accounts for over 40% of India’s imports, according to data from CAS. Commodity Insights expects the US share of India’s total crude imports to maintain a range of 5%-6% in the near term, as US crude has solidified its presence in Europe. “The recent availability of cheap Russian crude has shifted the dynamics away from the US grades. Notably, the Reliance refinery, along with many other Indian refineries, possesses a high complexity index, allowing a relatively easy transition between these crude grades. As a result, the shift from US grades to Russian grades was relatively easy,” Ranjan added. “However, India may revert back to increasing its imports from the US, should sanctions on Russian crude tighten or the price dynamics favor US crudes, although this appears less likely in our base case,” he added. Search for new markets Some Indian refining sources said US crude production will likely continue to grow under a Trump administration. “Right now, US crude is finding homes easily in Europe. With the Indian oil demand growth outlook showing a lot of promise, the US will surely step up efforts to grab a bigger market share. But a lot would depend on prices,” said one refining source. India has mainly been buying US oil on a spot basis, but as US production rises, both sides could increasingly explore the possibility of term contracts, multiple refining sources said. Industry sources said the global oil flow map could change if Trump acts on his election promise to step up efforts to stop the Russia-Ukraine conflict, and Russian oil again starts flowing to Europe. “India has consistently adopted a neutral stance from the perspective of global and commodity trade in the ongoing Russia-Ukraine conflict,” said Tushar Tarun Bansal, senior director at consulting firm Alvarez and Marsal. “Trump is widely expected to push for an agreement to limit or end the conflict. This potentially could lead to greater Russian oil flows into global markets, although the exact contours, pathways and eventual outcome are far from clear at this stage. This could potentially be bearish for oil going forward in Q1 and Q2 next year,” Bansal added. Commodity Insights expects Platts Dated Brent to average $81/b in 2024 but the market remains volatile at present. Despite ongoing tensions in the Middle East and other uncertainties, Commodity Insights sees an easing of Platts Dated Brent to the lower $70s/b in 2025, owing to expected production increases from both OPEC+ and non-OPEC+, coupled with a subdued global oil demand growth.
CBDT Grants Tax Exemption to Petroleum and Natural Gas Regulatory Board Effective from AY 2024-25
On November 12, 2024, the Central Board of Direct Taxes (CBDT) issued a notification granting tax-exempt status to the Petroleum and Natural Gas Regulatory Board (PNGRB) under section 10(46A)(b) of the Income-tax Act, 1961. This exemption is set to be effective from the assessment year 2024-25, allowing the regulatory board relief from income tax, provided it continues to fulfill its statutory functions as outlined in the Petroleum and Natural Gas Regulatory Board Act, 2006. The PNGRB, which holds a vital role in the regulation of India’s petroleum and natural gas sector, will benefit from this exemption by reallocating resources toward enhancing its regulatory infrastructure and oversight capabilities. The notification (No. 118/2024) specifies that PNGRB’s tax-exempt status will remain valid as long as it maintains its constituted role and objectives under the 2006 Act. This move underscores the government’s commitment to bolstering the regulatory framework for energy resources, aligning with the broader economic goals of sustainable and secure energy management. By supporting regulatory bodies with tax exemptions, the government aims to enhance sectoral stability, ensuring that resources are directed towards regulatory functions rather than tax liabilities. For industry stakeholders, this announcement reaffirms the government’s proactive measures to strengthen the energy regulatory landscape. Analysts view this tax exemption as a positive step, promoting regulatory robustness and contributing to India’s energy security goals.
OPEC+ Faces Double Trouble: China Demand Weakness and Trump’s Policies
The OPEC+ group has struggled to manage oil supply and prices this year. First, there was overproduction from several members, undermining the cuts from the other producers in the pact. Then came the summer and the first actual consumption data for the first and second quarters of the year, showing that China’s oil demand growth is nowhere near OPEC’s expectations. Toward the end of the year, just as the cartel and its allies announced they would postpone the start of the easing of the production cuts to January 2025, they now have the wildest card on the market of all—President-elect Donald Trump. China’s weak oil demand has already thrown OPEC+ off track in its supply-management policies and continues to defy OPEC forecasts with underwhelming crude consumption and imports. The group now has to contend with some policies President-elect Trump has promised to introduce, including easier permitting for fossil fuel projects, import tariffs, and a more rigid stance toward Iran. China Weakness China has already undermined the OPEC+ alliance’s policy. The group is cutting production, but demand has been weaker than expected amid slower Chinese economic growth, the property crisis undermining construction activities and diesel consumption, and the surge in electric vehicle (EV) sales and registrations of LNG-fueled trucks. OPEC has been wrong-footed by the surge in electric mobility in China, the International Energy Agency (IEA) said in its World Energy Outlook 2024 report last month. In October, OPEC cut its 2024 global oil demand forecast in the third consecutive monthly report, citing actual consumption data so far this year and expectations of slightly lower demand in some regions, including China. In each report since August, OPEC has signaled that its estimates of Chinese oil demand growth were too optimistic when it published the first outlook for 2024 in July 2023. Despite the optimistic long-term view, OPEC’s short-term demand outlook on China has been revised down, again. Weaker-than-expected oil consumption in China and rising electric vehicle sales will continue to weigh on the world’s oil demand growth going forward, according to the IEA’s Executive Director, Fatih Birol. “This year, global oil demand is very weak, much weaker than previous years, and we expect this will continue because of one word — China,” Birol told Bloomberg in an interview last month. China’s official crude oil import data hasn’t been encouraging for OPEC, either. Although imports are not all the crude China consumes, the import trends in the world’s top crude importer have weighed on oil prices. The latest Chinese data showed another month of lower crude oil imports compared to the same month of 2023. In October, China imported 10.53 million bpd of crude oil, per data from the General Administration of Customs. This was the sixth consecutive month in which crude cargo arrivals have lagged behind the imports in the same months of 2023. And imports were 9% lower compared to October 2023 and 2% below the import level of 11.07 million bpd in September 2024. Trump Uncertainties Apart from China, OPEC+ will now have to navigate uncertainties and risks to oil demand and supply with the incoming American president. President-elect Trump is expected to step up sanctions on Iran, an OPEC member exempted from the production cuts, which earlier this year saw its exports hitting a six-year high. Lower Iranian supply could be bullish for oil prices if demand holds. But other policies Trump has floated, such as 10% tariffs on all U.S. imports and a 60% tariff on imports from China, could undermine global economic growth, leading to lower global oil demand overall. OPEC+ can ill-afford weak global oil demand growth if it wants to return 2.2 million bpd of supply to the market next year. Tariffs could slow U.S. and global economic growth, reducing oil demand by as much as 500,000 bpd in 2025 – one-third of Wood Mackenzie’s current projection for global oil demand growth next year. “This has the potential to soften oil prices by US$5 to US$7/bbl from current levels, assuming no other risks such as an escalation in Israel-Iran hostilities,” Simon Flowers, chairman and chief analyst at WoodMac wrote last week.
Biofuel Blending Could Save India ₹910 billion On Imports: Union Minister Hardeep Singh Puri
Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, has stated that biofuel blending could save India 910 billion rupees on import expenses, with these savings benefiting the agricultural sector. Inaugurating the 27th Energy Technology Summit in Bengaluru, he noted that India ranks second globally in biofuel blending and is on track to achieve a 20 per cent biofuel blending target by next year, ahead of schedule. The Minister emphasised that as Indian refineries transition to green energy, the country is advancing toward its green hydrogen goals. He highlighted that India’s energy demand is expected to grow 2.5 times by 2047, with a current crude oil refining capacity of 400-450 million metric tons annually-about one-third of the global average. Achieving the 2070 net-zero emission target, he added, will require doubling efforts in energy security, sustainability, and technological innovation. The three-day Energy Technology Meet, organised by the Centre for High Technology and Indian Oil Corporation Limited, has drawn 1,200 participants, with 60 papers to be presented and 23 exhibitors showcasing the latest technologies. The Minister also awarded the Petroleum and Natural Gas Ministry’s 2023-24 best energy-efficient technology awards.
Trump Factor: Decoding the potential impact on crude prices and India’s oil economy
Energy markets are attempting to understand the implications of Donald Trump’s presidency on oil and gas prices. Analysts predict that his actions could significantly influence global crude oil prices, with an 80% likelihood of a decline. However, there are a few factors that could drive prices higher. Moreover, experts believe that although most of Trump’s policies are likely to have a bearish impact on prices, there is significant upside potential in his focus on ‘increased drilling’ and trade policies. Trade-related uncertainties and tensions continue to pose challenges for crude oil prices, particularly affecting energy prices in the US. There may be counterproductive effects on US exports resulting from the tariffs imposed on imports. “US oil production means a well drilling cost requirement of $64/ bbl. Hence the degree of “Drilling” would be muted. Going forward, in a couple of years these costs could scale up to $67 and $70 range as per the forward prices,” said NS Ramaswamy, Head CRM & Commodities of Ventura Securities. On the other side, Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services pointed out that since Trump is pro-fossil fuel, his regime is likely to give tax incentives for capital investment in the exploration and production of fossil fuels. This policy will keep crude prices soft, he opined. “Since US is the largest producer of crude in the world now, OPEC is not as powerful as it used to be. This trend will accelerate with the potential to bring crude prices further down, going forward,” said Vijayakumar. What does softening of crude prices mean to India? Overall, declining crude prices can lead to various advantages for India, such as reduced import expenditure, decreased inflation, improved profit margins for industries, and enhanced performance in Indian stock markets. “Softening crude price will be a macro positive for India which will help us to keep the current account deficit and fiscal deficit down, thereby imparting macro stability to the economy. An added positive is that this will lower inflation thereby enabling the MPC to cut rates early in 2025. Industries such as paints, tyres, adhesives and aviation, which use crude derivatives as inputs, will gain from the potential decline in crude prices,” said Dr. V K Vijayakumar. However, in this case (Trump presidency), according to a few experts, India finds itself in a dilemma; if the trading range stays between $65 and $70, it may persist with imports from Russia. Continuing these imports could have repercussions on fiscal policy. With Trump likely to maintain a strong relationship with India, this could contribute to inflationary pressures. In any case, the status of our currency remains uncertain.
WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment
West Texas Intermediate broke below $70 per barrel on Monday as Hurricane Rafael weakened to a storm that is unlikely to cause any damage to U.S. oil production in the Gulf of Mexico. Separately, oil benchmarks got depressed by trader pessimism about Chinese oil demand after the country’s ruling party announced its latest stimulus package, which underwhelmed, according to Reuters. At the time of writing, Brent crude was trading at $73.30 per barrel while WTI had dropped to $69.69 per barrel. “The market will now shift focus to the Politburo meeting and Central Economic Work Conference in December, where we expect more pro-consumption countercyclical measures to be announced,” ANZ analysts wrote about China. Beijing on Friday announced additional stimulus measures that focused on the real estate sector and consumer demand for goods. Apparently, this was not good enough for oil analysts. “The crude market has hit a fair value and feels incredibly comfortable at the $70 level,” Chris Weston, head of research at Pepperstone Group, told Bloomberg. “Granted, we have US election risk that could impact growth expectations, but we’re not expecting that battle to bite and impact this week.” China, of course, remains in the focus of traders’ attention as the second-biggest consumer of the commodity and top importer. Just last week, Vitol’s head of research noted that this focus will remain in place as China continues to drive growth in oil demand thanks to petrochemicals. These, Giovanni Serio said, will replace transport as the main source of demand growth in the coming years. “The growth just next year is entirely capable of satisfying the total demand globally for plastics,” Serio said at the FT Asia Commodities conference, as quoted by Reuters. “There is no doubt that this is going to be the driving force of oil demand in China and globally because it is less of a decarbonisation story in that space,” he added.
Russia explores plan to merge Rosneft with Gazprom subsidiary and Lukoil, WSJ reports
Russia is working on a plan to merge state-backed Rosneft Oil, opens new tab with Gazprom Neft, opens new tab and Lukoil, opens new tab, creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify., opens new tab with Gazprom Neft, opens new taband Lukoil, opens new tab creating the world’s second-biggest crude oil producer, the Wall Street Journal reported on Friday. Talks between executives and government officials took place over the past few months, and a deal may or may not happen, the newspaper said, citing people familiar with the matter whom it did not identify. A combination of Rosneft, Gazprom, opens new tab subsidiary Gazprom Neft and Lukoil, would be second to Saudi Arabia’s Aramco, opens new tab and could pump almost three times U.S. oil producer Exxon’s, opens new taboutput, the report added. There are some obstacles, including opposition from some Rosneft and Lukoil executives and the problem of collecting funds to pay Lukoil shareholders, the report said. Lukoil, Rosneft, Gazprom and the Kremlin did not immediately respond to Reuters requests for comment, while Gazprom Neft could not immediately be reached.