Diesel dilemma: Demand drop in India and China puts pressure on crude oil prices
Chinese and Indian diesel markets — which account for the bulk of Asian demand — are showing signs of a slowdown, potentially leading to more weakness in crude oil prices. In China, the biggest oil importer, demand for the fuel is contracting, while in India, consumption growth has collapsed. Against that backdrop, the profits for refiners across the region from turning Dubai crude into diesel have fallen by more than 40% since the start of the year, Bloomberg Fair Value data show. Diesel’s fortunes matter because the workhorse industrial fuel is a pillar of the traditional global energy market, powering trucks, mining, construction and agriculture. It accounts for the single largest share of products made from crude worldwide, according to data from the International Energy Agency. Weaker conditions for diesel impact oil, with global benchmark Brent hitting the lowest since late 2023 this week amid concern about a global glut. The weakness for diesel in Asia echoes trends in Europe, where futures hit the lowest level since mid-2023 this week. In recent days, a key metric for measuring the profitability of making the fuel in that region fell to its weakest in more than 15 months, creating a headwind for refiners. In China — where economic growth is slowing, a property crisis is grinding on, and concerns are mounting that the government won’t meet GDP targets — apparent consumption of diesel has fallen by more than 10% so far this year, putting it on course for the first full, on-year decline in three, according to Bloomberg calculations based on official figures. Part of the reason for the drop-off in China is cyclical — cooling growth eats into demand as activity slows — but there’s also a structural element from the spread of alternatives. More trucks are turning to natural gas, while for autos, the percentage of new natural-gas and electric commercial cars increased to 5.2% and 11.7% in 2024, up from 2.9% and 0.7% in 2020.
Russia Ships LNG Straight to Storage as Sanctions Bite
Russia has started shipping LNG from its flagship Arctic LNG 2 project—but not to customers. The shipments have been made from the Arctic project to floating storage units either in Russia or in European waters, as potential customers are unwilling to buy LNG from the facility, which has seen tightened Western sanctions in the past months, the Financial Times reported on Thursday, citing data from ship-tracking providers. Located in the Gydan Peninsula in the Arctic, Arctic LNG 2 was considered key to Russia’s efforts to boost its global LNG market share from 8% to 20% by 2030-2035. But the project has come under intensifying sanctions from the United States, which have put off any buyers that were previously considering buying cargoes from Arctic LNG 2. The project has already seen months of delays after the initial U.S. sanctions in November 2023 upended the company’s plans for production start-up and export timelines. Russia, however, has started to amass a dark fleet of tankers to ship its LNG in vessel ownership transfers similar to the moves that Moscow began after the invasion of Ukraine to create a shadow fleet to export oil and products in the face of Western sanctions. Some tankers have recently departed from the sanctioned terminal in northern Russia, signaling Moscow’s continued efforts to circumvent Western restrictions. Last month, the U.S. State Department intensified efforts to derail Russia’s Arctic LNG 2 exports by targeting companies involved in the development of the project and vessels found to have loaded LNG from the facility. The U.S. State Department in August said it had “taken new steps to sanction entities supporting the development of Russia’s Arctic LNG 2 and other future energy projects.” The Department designated multiple companies related to the Arctic LNG 2 project to further disrupt the project’s ability to produce and export LNG, as well as the project’s ability to procure critical LNG carriers. These designations include entities involved in the illicit loading of LNG from Arctic LNG 2 in early August. Three vessels – Pioneer, Asya Energy, and Everest Energy – are LNG carriers targeted by the new sanctions, as well as their registered owners Zara Shiphoding and Ocean Speedstar Solutions.
Govt Plans New Assessment Of Oil, Gas Reserves
The mines and petroleum department is set to initiate a new study aimed at assessing the potential for oil and gas deposits in Rajasthan. This move is expected to further expand oil and gas exploration and extraction sector under the discovered small fields (DSF) scheme. The study will encourage companies in the sector to adopt the latest global technologies in petroleum and gas exploration and extraction, with the goal of identifying and exploiting more areas within the state. In a review meeting on Tuesday, mines and petroleum department’s secretary, Anandi, emphasised the importance of leveraging data from the central govt’s national data repository (NDR). “By obtaining NDR data, new areas for exploiting the available oil and gas reserves will be identified, creating more opportunities for growth, investment, revenue and employment in the petroleum and gas sector,” the secretary said. An official present in the meeting said there are plans to prepare a roadmap to meet the demand and supply of natural gas as an alternative energy source for cement plants in Jaisalmer. “The aim is to ensure affordable green energy for the cement sector while promoting the production and utilisation of natural gas within the state,” he added. Currently, Rajasthan holds 13 petroleum mining leases and 14 petroleum exploration leases. It ranks second in the country for crude oil and natural gas land production.
Govt reduces natural gas price for September from $8.51 to $7.85/mmBtu
The ministry of petroleum and natural gas (MoPNG) said that the price of domestic natural gas has been reduced to $7.85 per million metric British thermal units (mmBtu) for September 2024, down from $8.51 in the previous month. However, the price of the gas from the nominated gas fields of ONGC and Oil India has been kept unchanged at the price cap of $6.50 per mmBtu. “The price of domestic natural gas for the 1st September 2024 to 30th September 2024 is notified as $7.85/mmBtu on gross calorific value (GCV) basis,” said the notification dated 31 July. The price of domestic natural gas has been linked to the India crude oil basket since April and is changed every month. The pricing decision is part of India’s ongoing effort to manage its natural gas sector effectively and balance the needs of producers and consumers. The new price follows the guidelines set forth by the MoPNG’s notification in April 2023, which established the framework for monthly price updates.
India, Brunei to expand space cooperation, discuss long-term LNG supplies
India and Brunei on Wednesday expanded their long-standing cooperation in space to satellite development and discussed the potential for long-term LNG supplies, with Prime Minister Narendra Modi describing the Southeast Asian state as an important partner in New Delhi’s vision for the Indo-Pacific. Modi, the first Indian premier to make a bilateral visit to Brunei, and Sultan Hassanal Bolkiah, agreed to elevate four-decade-old diplomatic ties to an enhanced partnership and discussed collaboration in emerging areas such as fintech and cyber-security. In an apparent nod to China’s activities across the region, a joint statement issued after talks between the two leaders said India and Brunei are committed to maintaining peace, stability, maritime safety and security, and respecting freedom of navigation and overflight and unimpeded lawful commerce in line with international law.
GAIL issues swap tender for 3 LNG cargoes, sources say
GAIL (India) Ltd GAIL.NS has issued a swap tender offering three liquefied natural gas (LNG) cargoes for loading in the United States in exchange for three cargoes for delivery to India, two industry sources said on Wednesday. India’s largest gas distributor is offering three cargoes for loading on a delivered ex-ship (DES) basis from Sabine Pass on Sept. 4-5, and from Cove Point on Oct. 29-31 and Nov. 28-30. In exchange, it is seeking three cargoes on a DES basis to the Dabhol terminal on Sept. 24-30, Nov. 10-15 and Dec. 1-6. The tender closes on Sept. 4.
India’s top oil explorer may set up refinery in Uttar Pradesh
India’s Oil and Natural Gas Corp. is considering setting up a multibillion dollar refinery and petrochemical project in the nation’s most populous state to bolster its business as fuel demand expands. The New Delhi-based company — India’s largest crude explorer — is looking at a 9-million-ton-a-year project in Uttar Pradesh that could cost more than 700 billion rupees ($8.3 billion), according to the four people familiar with the matter, who declined to be identified as the talks are not public. ONGC has held talks with Bharat Petroleum Corp, Ltd. to set up the unit in the city of Prayagraj as the state-owned refiner holds a parcel of land there, they said. India’s is one of the world’s fastest-growing major economies, with surging crude and petrochemicals consumption, even as renewable-energy capacity gets built out. As it’s common in the country for big-ticket infrastructure and commercial projects to face delays given the slow process of land acquisition, the potential access to BPCL’s holdings may prove to be an advantage. BPCL itself has been considering setting up a refining and petrochemical unit, either in the coastal state of Andhra Pradesh or Uttar Pradesh, two of the people said. The company, which has hired a US-based consultant for a sitting study, favors Andhra Pradesh as the state has promised incentives, they said.
WTI Breaks Below $70 as Concerns Over Oil Demand Persist
Crude oil prices extended a decline that began earlier this week today as pessimism about demand, especially from China, deepened while expectations arose that Libya could resume its oil exports. West Texas Intermediate had dipped below $70 per barrel earlier today, with Brent crude sliding below $74 per barrel, after Libya’s rival governments reached a deal to appoint a governor to Libya’s central bank, which would resolve the dispute that prompted the shutdown of oil fields and export terminals last month. The shutdowns had decimated the country’s output of some 1.2 million barrels daily. That outage sparked some oil optimism and reports that OPEC could go ahead with its partial rollback of production cuts agreed last year, on apparent expectations that the Libyan shutdown will extend in time. Now that this is not the case and oil has fallen to the lowest since last December, chances are the cartel will keep its cuts in place lest it risks an even bigger price slump. “Easing political tension in Libya potentially seeing some supplies return and economic weakness in the world’s largest oil consumers, U.S. and China, serve as a confluence of headwinds for oil prices,” IG analyst Yeap Jun Rong told Reuters.
Russian oil Shipping costs to India easing
Freight rates to ship Russia’s Urals crude to India have fallen further and remain at their lowest since Western countries introduced a price cap late in 2022, boosting the economics of Moscow’s oil exports, industry sources told Reuters on Monday. Prices for Urals in India have also strengthened, keeping estimates on a FOB basis in Russian ports almost $10 above the price cap limit, Reuters calculations shows. The Group of Seven countries (G7), including the United States, and the EU have imposed a price cap on Russian seaborne shipments of crude oil since December 2022 as part of sanctions on Moscow. Buyers are only able to use Western services such as shipping and insurance when Russian crude trades below $60 per barrel. According to the sources, the cost of transport to India for loading mid-September from Russia’s Baltic ports of Primorsk and Ust-Luga by tankers which can hold 100,000 metric tons has dropped to approximately $4.25-$4.50 million from $4.7-$4.9 million in July-August. The cost from the Black Sea port of Novorossiisk to India for Suezmax tankers, which can hold 140,000 tons, fell to around $3.8 million for a one-way trip from $4.3-$4.5 million over the same period, the sources added.
India’s Petroleum Exports To Europe Up 2,53,788% Since 2018
India’s petroleum exports to various European markets have seen an extraordinary increase of 2,53,788 per cent in volume between 2018-2019 and 2023-2024. This surge was driven by logistics challenges during the COVID-19 pandemic and the geopolitical impact of Russia’s invasion of Ukraine in early 2022, which boosted demand for Indian petroleum in Europe. In terms of value, India’s exports to these countries grew by 250 per cent. According to trade data from the Ministry of Commerce and Industry, around 15 to 17 European nations consistently rank among the top 100 countries to which India exports petroleum products each year. The Netherlands leads the list of European countries importing petroleum from India. In 2018-2019, the Netherlands imported 9,740.51 metric tons (MT) of petroleum products, a figure that surged to 24.73 million metric tons by 2023-2024. In terms of value, imports from India grew from $5.9 billion (Rs 489.7 billion) in 2018-2019 to $20.5 billion (Rs 1,703.5 billion) in 2023-2024.