Oil Prices Start the Week in Decline on Bearish Economic Data From China
Crude oil prices were falling at the start of the week following the latest economic news from China which was interpreted as bearish for oil demand. That latest news was inflation data for September, which showed consumer prices had only gone up modestly, by 0.4%, falling short of economist expectations of 0.6% as shared with Reuters. The September consumer price figure was also the slowest price rise in three months, Reuters noted in its report. Lower consumer prices are normally bullish for oil prices because the lower the prices, the stronger the consumption but in this case the dominant interpretation appears to be focusing on weaker prices as reflection of weaker demand that will only weaken further as inflation slows. “China faces persistent deflationary pressure due to weak domestic demand. The change of fiscal policy stance as indicated by the press conference yesterday (Saturday) would help to deal with such problems,” the chief economist of Hong Kong-based Pinpoint Asset Management told Reuters. On Saturday, the Chinese government announced it would be injecting further stimulus into the economy, which should have been positive for oil prices. However, Beijing did not elaborate on the size of the stimulus package, which would be in the form of “significantly increased” debt buying from local governments and subsidies to low-income households. Apparently, the only thing traders wanted to hear from that update was exactly how much the Chinese government would spend on these additional stimulus measures. As a result, oil traders forgot about the Middle East temporarily and focused on the world’s largest oil importer yet again, betting that whatever stimulus it offers, it would not be enough to prop up global stock and commodity markets. That’s despite reports from Friday that the U.S. will expand its sanctions against Iran, targeting its so-called ghost fleet of oil tankers. “These measures will help further deny Iran financial resources used to support its missile programs and provide support for terrorist groups that threaten the United States, its allies, and partners,” National Security Adviser Jake Sullivan said, as quoted by Reuters.
Indian company among dozen sanctioned by US for illicitly carrying Iranian oil
An Indian shipping firm is among the dozen-odd companies sanctioned by the US for allegedly carrying Iranian oil for sale to buyers in Asia days after slapping restrictions targetting Iran’s energy trade for its October 1 attack on Israel. Gabbaro Ship Services, the India-based company, was involved in the transport of Iranian petroleum as the technical manager of crude oil tanker Hornet and knowingly engaged in a significant transaction for the transport of petroleum from Iran as part of a ‘Ghost Fleet’, the State Department alleged. The latest American sanctions against several companies across the world comes in response to Iran’s October 1 ballistic missile attack against Israel. “This attack targeted Israel’s most populated city, Tel Aviv, and could have killed hundreds if not thousands of innocent people,” US National Security Advisor Jake Sullivan said. Following that attack, the US had made it clear that Iran would face severe consequences, he said, and added, the Departments of the Treasury and State on Friday announced the “new and significant measures to more effectively target Iran’s energy trade.” “The new designations today also include measures against the ‘Ghost Fleet’ that carries Iran’s illicit oil to buyers around the world. These measures will help further deny Iran financial resources used to support its missile programmes and provide support for terrorist groups that threaten the United States, its allies, and partners,” Sullivan said. The Treasury claimed Iran’s oil exports are enabled by a network of illicit shipping facilitators in multiple jurisdictions which, “through obfuscation and deception,” load and transport Iranian oil for sale to buyers in Asia. Prominent among them include United Arab Emirates-based Max Maritime Solutions FZE (Max Maritime), which used vessels under its management to conduct multiple ship-to-ship transfers of Iranian oil with vessels affiliated with the US-designated National Iranian Tanker Company (NITC), it alleged. The NITC moves Iranian oil for National Iranian Oil Company (NIOC) to transport it to refineries in the China. Among the companies sanctions by the State Department are Suriname-based Strong Roots Provider NV, Glazing Future Management NV, Engen Management NV; India-based Gabbaro Ship Services Pvt Ltd; Malaysia-based Alya Marine Sendirian Berhad, and Hong Kong-based Celia Armas Ltd. Secretary of the Treasury Janet L Yellen said, “Today’s sanctions target Iranian efforts to channel revenues from its energy industry to finance deadly and disruptive activity with dangerous consequences for the region and the world. Yellen described deadly and disruptive activity as those including development of Iran’s nuclear programme, the proliferation of ballistic missiles and unmanned aerial vehicles, and support to regional terrorist proxies. “We will not hesitate to take further action to hold Iran accountable,” she said.
Surprise Crude Inventory Spike Slams Oil Prices
Crude oil inventories in the United States rose by a shocking 10.9 million barrels for the week ending October 4, according to The American Petroleum Institute (API). Analysts had expected a build of 1.95 million barrels. For the week prior, the API reported a 1.5-million-barrel decrease in crude inventories. So far this year, crude oil inventories have slumped by just 5 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 0.3 million barrels as of October 4. SPR inventories are now at 382.9 million barrels, a figure that reflects an increase of more than 35 million from its multi-decade low last summer, yet 252 million from when President Biden took office. At the current rate of replenishment, it will take more than five years to return to January 2020 levels. Oil prices shrugged off what is now becoming rather for the markets—threats of a possible supply shock in the wake of continued conflict in the Middle East. WTI and Brent fell sharply ahead of the API data release as traders took handsome profits from the recent oil rally and their kept their eyes on soft demand from China. At 3:39 pm ET, Brent crude was trading down $3.46 (-4.28%) on the day at $77.47—a nearly $4 per barrel gain from this time last week. The U.S. benchmark WTI was also trading sharply down on the day by $3.29 (-4.26%) at $73.85—a $3.70 per barrel gain from this time last Tuesday. Gasoline inventories fell this week by 557,000 barrels, compared to last week’s 900,000-barrel increase. As of last week, gasoline inventories are 1% below the five-year average for this time of year, according to the latest EIA data. Distillate inventories fell by 2.59 million barrels, on top of last week’s 2.7-million-barrel decrease. Distillates were already about 8% below the five-year average as of the week ending September 27, 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, rose by 1.359 million barrels, according to API data, on top of the 700,000-barrel build of the previous week. Inventories at Cushing are now under 24 million barrels.
India clears 1 million sq km for oil exploration in ‘no-go’area: Hardeep Singh Puri
India has cleared 1 million square kilometers of its 3.5 million square kilometers of sedimentary basin for oil and gas exploration, a significant portion that was previously classified as a “no-go” area, said Petroleum Minister Hardeep Singh Puri announced at the FT Live Energy Transition Summit. Of the bids received in the Open Acreage Licensing Policy(OALP) Round 9, 38% are in this newly cleared “no-go” zone. The 10th bidding round is also in the pipeline. Puri stressed India’s efforts to attract global investors, saying, “We are making it easier. You don’t even need to invest initially. If you come to assist in seismic surveys, we’ll compensate you.” This marks a significant shift toward a more flexible, investor-friendly approach. Addressing oil prices, Puri reaffirmed India’s call for stability amidst global tensions. “We have enough oil in the world, but global disruptions raise freight and insurance costs,” he said, expressing optimism that both state and non-state actors would act responsibly to avoid escalations. On 8th October, Brent crude futures dropped by $1.31, or 1.6%, settling at $79.62 per barrel after hitting a monthly high amid fears of increased Middle East tensions. India’s energy demand continues to soar, with Puri noting that India’s consumption is three times the global average and that it is projected to account for 25% of the increase in global energy demand over the next two decades. India is set to consume over 6 million barrels of crude oil daily in the foreseeable future, highlighting its critical role in the global energy landscape.
Fuel demand drops to two-year low in September
Fuel consumption in September fell by 1.6% year-on-year to 17.92 million metric tons, its lowest in two years, oil ministry data showed on Monday (October 7, 2024), as above-normal monsoon rains continued to weigh on diesel demand. WHY IT IS IMPORTANT: India is the third-largest consumer and importer of oil. The data is a proxy for the country’s oil demand. KEY QUOTE Above-normal monsoon rains likely weighed on agricultural demand, hence weakness in demand for diesel, said analyst Giovanni Staunovo of UBS. BY THE NUMBERS On a monthly basis, fuel demand was down 2.7% from 18.41 million tons in August, data from the Petroleum Planning and Analysis Cell’s (PPAC) website showed. Demand last month was at its lowest since September 2022. Sales of gasoline, or petrol, rose 3% from a year earlier to 3.15 million tons. Diesel consumption was down by 1.8% year-on-year to 6.37 million tons in September, also its lowest in years. Cooking gas or liquefied petroleum gas (LPG) sales increased 1.6% to 2.59 million tons on an annual basis, while naphtha sales rose 0.6% to 1.03 million tons. CONTEXT India is likely to receive above average rainfall in October after unusually high volumes for the past three months, a senior weather department official said last week, which could damage summer-sown crops ready for harvesting. An above-normal monsoon season decreases diesel demand as increased rainfall reduces the need for diesel-powered irrigation and farm machinery use.
India dominates global natural gas contracts in 2024, cornering 30% of market share
Globally, around 50 billion cubic meters (BCM) per year of natural gas contracts were inked with upcoming, or post-Final Investment Decision (FID), projects from January to August 2024, of which India cornered the highest share of 30 per cent. FID is the final stage in a project, where it is determined whether to proceed with it or close it down. Post-FID refers to projects that have been given the go-ahead and are in various stages of implementation. According to the International Energy Agency’s (IEA) global gas security review and Q4 2024 gas market report, the volume of contracts signed by India with post-FID projects is around 15 BCM annually during January-August in the current calendar year. “The volume of contracts signed with post-FID projects in the first eight months of 2024 was 50 BCM per year, representing a 65 per cent increase compared with the same period in 2023. Buyers in Asian countries accounted for 56 per cent of the volumes contracted, with India signing the highest proportion (30 per cent) by country,” the IEA said. On the export side, the Middle East accounted for the highest share of contract volumes signed in the first eight months of 2024 (56 per cent or 28 BCM per year), a similar trend to 2023. By country, Qatar showed the highest share (42 per cent or 21 BCM per year), it added. “On the import side, Asia accounted for the highest share of contract volumes signed in the first eight months in 2024 (56 per cent or 28 BCM per year). India accounted for a high proportion (30 per cent or 15 BCM per year), representing the largest share by country. China accounted for 1 BCM per year, decreasing by around 90 per cent compared with the same period in 2023,” the report added. For instance, last month, state-run Indian Oil Corporation (IoCL) signed a 15-year agreement with the Abu Dhabi National Oil Company (ADNOC) to supply 1 million tonnes per annum (MTPA) of liquefied natural gas (LNG), the third such contract signed in just over a year. IoCL and state-run GAIL previously signed long-term agreements for 1.2 MTPA and 0.5 MTPA, respectively, with ADNOC. The IEA report noted that India’s strong demand growth was supported by a 5 per cent increase in domestic production and a 25 per cent surge in liquefied natural gas (LNG) inflows. India’s LNG imports approached 3.5 BCM per month between May and July 2024, a level not seen since the 2020 LNG price collapse. This LNG surge was driven by increased gas-fired power generation amid high temperatures and delays in domestic gas production, supported by relatively low spot prices in H1. India’s total gas demand in 2024 is expected to increase by nearly 9 per cent Y-o-Y, driven by the country’s growing energy needs and rapid economic expansion, supported by an 18 per cent overall rise in LNG imports. Similarly healthy growth of 8 per cent Y-o-Y is projected for 2025, with most of the growth coming from the industrial sector and, to a lesser extent, a continued rise in power sector gas burn. The possible inclusion of natural gas in India’s goods and services tax (GST) regime could lower prices for industry and consumers, presenting further upside for 2025 consumption growth. A decision on GST is expected by the end of March 2025.
Oil Prices Tumble 4% as Demand Fears Override Middle East Risk
Oil prices slumped by more than 4% early on Tuesday as traders have yet to see an actual supply disruption in the Middle East while focusing on China’s underwhelming demand again. Both benchmarks, WTI Crude and Brent Crude, were down by about 3% as of 9:30 a.m. EDT on Tuesday. The U.S. benchmark fell below $75 per barrel, and the Brent price was down to the $78 a barrel handle, after breaking above $80 on Monday in an 11% total gain in oil prices since Iran fired missiles on Israel a week ago. The war premium has started to evaporate, especially after the recent rally and the return of business in China after the Golden Week holiday. As China returned from the holiday, the authorities said they were confident that growth in the world’s second-largest economy would hit their forecasts this year. The officials, however, refrained from unveiling additional measures to prop up the economy and oil demand, which disappointed traders and speculators. “China’s National Development and Reforms Commission (NDRC) failed to announce any new supportive measures. Without policy support, an economic slowdown could keep China’s oil demand subdued in the short to medium term,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Tuesday. The return of Libya’s oil production and exports after more than a month of hiatus due to the political stalemate has also weighed on the prices. “Oil can keep ascending only for so long purely based on perceptions and not actual supply disruption,” oil brokerage PMV said in a Tuesday note. “The geopolitical risk premium has an obscure and unforeseeable expiry date. When that point arrives and is not replaced by genuine and supportive fundamental factors, in the case of the Middle East conflict by a palpable supply shortage, the move higher will not be sustainable.”
U.S. Natural Gas Consumption Soars
Natural gas-fired power generation in the United States has soared to a record high so far this year, driving up global gas demand. U.S. power producers generated a total of 55.6 million megawatt hours (MWh) from gas-fired power plants between January and September, according to data from LSEG quoted by Reuters’s columnist Gavin Maguire. This is up by 5% compared to the same period of last year. It’s also the highest power generation from natural gas since at least 2021. Moreover, the share of natural gas in the U.S. power generation has also jumped to record highs this year. Since June, gas has accounted for a record-high 46% of the nation’s power generation, according to LSEG data. The rising share of natural gas is undermining the Biden Administration’s goal of a ‘clean power’ grid by 2035. In recent years, power demand in the United States, the single largest portion of which is delivered by gas-fired power plants, has soared and is expected to continue to surge with rising electrification and more electricity necessary to power and cool data centers. U.S. power-generating companies are announcing plans for the highest volume of new natural gas-fired capacity in years as the AI boom is driving demand for electricity. During the first half of 2024, electricity-generating firms unveiled plans for the new gas-powered capacity equal to all capacity announced in 2020, according to data from Sierra Club cited by Bloomberg last month. Natural gas-fired electricity generation in the United States has jumped year-to-date compared to the same period last year, as total power demand rose with warmer temperatures and demand from data centers. After more than a decade of flatlining power consumption in America, the AI boom and the chip and other tech manufacturing are leading to higher U.S. electricity demand. For years, natural gas has accounted for the largest share of U.S. power generation, at around 40% of all electricity-generating sources.
GAIL India issues LNG tender for November delivery, sources say
GAIL (India) GAIL.NS, the country’s biggest natural gas distributor, issued a tender seeking a cargo of liquefied natural gas for delivery in November, two industry sources said on Monday. It is seeking the cargo on a delivered-ex-ship (DES) basis for Nov. 6-15 delivery to the Dahej terminal. The tender closes on Oct. 7.
GAIL partners with AM Green for sustainable energy solutions
GAIL (INDIA) informed that it has signed memorandum of understanding (MoU) with AM Green B.V. (AMG) to explore projects aimed at advancing sustainable energy solutions in India. The partnership will focus on the loterm supply of carbon dioxide (CO2) for eMethanol production and the exploration of hybrid renewable energy projects across India. According to the terms of the MoU, both companies will conduct studies for the loterm supply of around 350 KTA of CO2 generated by GAILs gas processing plants to produce eMethanol, an environmentally friendly fuel that can reduce carbon emissions and promote a circular economy. Under the agreement, GAIL will also have the option to invest equity in the proposed eMethanol project. Additionally, both parties plan to explore the establishment of solar and wind hybrid renewable projects totaling up to 2.5 GW across India. These hybrid projects, in conjunction with Greenkos upcoming Pump Storage Projects, are expected to provide round-the-clock power to end users, including the proposed eMethanol project. Rajeev Singhal, Director (business development), GAIL said The signing of this MOU with AM Green underscores our commitment to pioneering sustainable energy solutions. By facilitating the supply of CO2 for eMethanol production, we are taking a proactive approach to reduce carbon emissions and support alternative fuel development.