Earnings for Big Oil backpedal as natural gas prices tumble
U.S. and European oil companies reported weaker first quarter results on Friday due to a sharp drop in natural gas prices compared with a year ago. Results at oil and gas firms are still retreating from record levels in 2022 that were boosted by a surge in demand after the COVID-19 pandemic and then when prices spiked after Russia invaded Ukraine. In the U.S., Exxon Mobil missed Wall Street earnings targets on fuel derivatives and Chevronbeat tempered expectations with better-than-expected U.S. oil production. French oil major TotalEnergies also slightly beat analysts forecasts as good refining margins partially offset a steep drop in profits from natural gas. “European gas prices declined by 35%, reflecting a mild winter and high storage levels,” said TotalEnergies Chief Financial Officer Jean-Pierre Sbraire. Exxon’s profit fell 28%, Chevron decreased 16% and TotalEnergies was down 22% year-on-year, with the two U.S. oil majors also taking a toll from weaker profits from gasoline and fuels. Henry Hub futures, the benchmark for U.S. gas, has been trading below USD1.70 per million British thermal unit (mmBtu), and earlier this year dropped to a 3-1/2-year low on warm weather and oversupply
Norway’s Oil Demand Hasn’t Crashed Despite Record EV Market Share
The fact that a record 90% share of all new car sales in Norway are electric has failed to make any impact on the country’s oil demand, indicating that hopes of rising EV uptake making an immediate dent in global oil demand are unrealistic. Last year, 82.4% of all new passenger cars sold in Norway were fully electric, up from 79.3% in 2022, according to the Norwegian Public Roads Administration and the Norwegian Road Federation (OFV). This share has jumped to over 90% this year, but the impact on Norway’s oil demand “has been negligible,” bank UBS said in a note this week carried by Investing.com. Norway has risen to become an EV powerhouse, also thanks to “generous financial incentives,” which have been partly funded by the Government Pension Fund Global, the world’s largest sovereign wealth fund that has amassed its wealth from sales of oil and gas, UBS noted. Norwegians, like other consumers, are concerned about vehicle range, and many opt for hybrids or gasoline-fueled vehicles to travel longer distances, according to the bank. “Another possibility is that electric vehicles are used for short distances, but Norwegians still rely on fossil fuels to cover longer distances,” UBS said in the note. Moreover, even if road transportation fuel demand has declined, demand for LPG and ethane, used for heating and cooking and in petrochemicals, has been very strong, the bank added. Road fuel demand in Norway has remained relatively stable even with soaring EV adoption, raising questions about whether EVs really have a material impact on diesel and gasoline sales, Rystad Energy said last year. The lack of a noticeable dent in oil demand in a country where EVs are 90% of all new car sales is a cautionary tale for those predicting an immediate drop in oil demand due to rising EV sales, according to UBS. The bank still sees years of rising global oil demand. “We continue to believe it will increase over the coming years, then plateau and begin a gradual decline at some stage during the next decade.”
India Will Show World A New Path On Biofuels Through The Global Biofuels Alliance (GBA): Petroleum And Natural Gas Minister Hardeep Singh Puri
Petroleum and Natural Gas Minister Hardeep Singh Puri has said that India will show the world a new path on biofuels through the Global Biofuels Alliance (GBA). The alliance was launched by Prime Minister Narendra Modi on the sidelines of the G20 Summit. GBA is an India-led initiative to develop an alliance of governments, international organizations and industry to facilitate adoption of biofuels. Mr Puri said, 19 countries and 12 international organisations have already agreed to join the alliance. The Minister observed that Global Biofuels Alliance has given a historic momentum for world’s quest for cleaner and greener energy. It will transform country’s farmers from ‘Annadatas to Urjadatas’ as an additional source of income. Mr Puri added that India will save about 450 billion rupees in oil imports and 63 Metric Tonnes of oil annually.
Oil Prices Are Set for a Weekly Gain as Yellen Sees Inflation Falling
Crude oil prices may end this week in the green as the U.S. Treasury suggested the weak first-quarter GDP data may be revisable and as supply concerns persisted. If the benchmarks do indeed end the week with gains, it would be the first positive week in three. “The U.S. economy continues to perform very, very well,” Janet Yellen told Reuters yesterday commenting on the latest economic reports out. Those showed a GDP growth rate of just 1.6% for the first quarter and an accelerated inflation rate of 3.7% in personal consumption expenditures. Expectations had been rather different, with GDP seen at 2.4% by analysts polled by Reuters. The quarterly change in the rate of personal consumption expenditures inflation was also surprising. “The fundamentals here are in line with inflation continuing back down to normal levels,” the Treasury Secretary said, which served to quickly quench any concern oil traders may have had about the state of the economy of the world’s biggest oil consumer. Meanwhile, Israel said it was going to bomb Rafah again, which seems to have reignited concern about the security of oil supply in the Middle East as Tel Aviv’s Western allies urged the country not to step up the attacks for fear of escalation with Iran. A third factor that has helped oil prices this week was the state of U.S. inventories, which booked a decline for last week. The Energy Information Administration said on Wednesday that crude oil inventories had shed as much as 6.4 million barrels in the week to April 19—an amount apparently seen as sizeable enough to motivate a more bullish sentiment on the oil market. As a result of all this, Brent crude is back above $89 climbing towards $90 per barrel and West Texas Intermediate is closing in on $84 per barrel again.
GAIL plans to expand LNG trading business to global markets
India’s top gas marketer GAIL aims to become a global liquefied natural gas (LNG) trader as the expanding market fuels new business opportunities. “We plan to ramp up our LNG trading business. We began with sourcing LNG cargoes for ourselves and have expanded to sourcing cargoes for some other Indian companies. Now we plan to serve non-Indian customers as well, with an aim to become a global LNG trader,” GAIL chairman and managing director Sandeep Kumar Gupta told ET. “The global trade can significantly boost our topline and provide visibility to our Singapore subsidiary,” said Gupta who has set the ambition to turn GAIL into a “company of global standing”. The Singapore subsidiary is engaged in sourcing spot LNG. GAIL plans to double its LNG trading volume by 2030, Gupta said, without specifying the current size of its business. “We have expertise in gas. We have been procuring from so many geographies. We have sold several US cargoes to multiple customers,” said Gupta. GAIL has a long-term contract to purchase LNG from the US and sells part of those supplies to international customers, instead of bringing it to India based on arbitrage opportunities. But with a focus on trading now, GAIL would actively seek out buyers and sellers of spot LNG in the global marketplace. GAIL has long-term contracts for the annual purchase of 14 million tonnes of LNG from various suppliers across the globe, about three-fourths of India’s total long-term buys of about 19 million tonnes. The country’s LNG import from the spot market is small-just about 10%-but growing. GAIL plans to confine itself to the spot market for its global LNG trade for now, Gupta said. Many established global traders also offer long- and medium-term contracts to buyers and suppliers. The spot market for LNG has hugely expanded over the last decade with booming supplies, especially from the US and Australia, and diverse customers, mainly from emerging markets. The creation of trading infrastructure has also aided the growth of the spot market, which offers flexibility to buyers and suppliers.
Standard Chartered: Global Oil Demand Will Pick Up Strongly In May And June
Oil prices have held steady week on week despite a significant inventory build in U.S. crude two weeks ago, which was countered by a draw in U.S. crude stockpiles for the week ending April 19th. Next to this, traders have become less concerned about a potential supply disruption in the Middle East. The crude inventory build at the middle of the month triggered fears that oil demand could be weakening; however, Standard Chartered estimates that global inventories will increase by only 74,000 barrels per day in the month of April, a much smaller build compared with 2.2 million barrels per day (mb/d) build in April 2023 and the 1.4 mb/d build in April 2022. StanChart notes that the markets could be more sensitive to this change in trajectory following the strong counter-seasonal inventory draws during the first quarter of 2024. Even better for the bulls, StanChart has forecast that global oil demand will pick up strongly in May and June, exceeding 103 mb/d for the first time in May (at 103.15 mb/d), increasing further in June to 103.82 mb/d. The commodity experts have predicted global inventory draws of 1.53 mb/d in May and 1.69 mb/d in June, tightening physical spreads significantly. StanChart also says that OPEC is unlikely to increase output in the near-term thanks to the stall in the oil price rally despite having room for at least 1 mb/d of extra OPEC output in Q3 without increasing inventories. With the next key ministerial meeting just six weeks away, concerns about demand and the macroeconomic environment are likely to dominate the meeting. StanChart says we are likely to record a 1.6 mb/d Q3 draw in stocks if there is no increase in OPEC output, compounding the price effect of a H1-2024 draw of 1.1 mb/d. U.S. Sanctions on Iranian Oil Recently, the Biden administration passed new sanctions on Iran’s oil sector as part of the $95-billion foreign aid package to Ukraine, Israel and Taiwan. In a move aimed at reducing Iran’s oil trade with China, the broadened sanctions now target Chinese banks that conduct transactions involving Iranian crude and products. The sanctions now include foreign refineries, vessels, and ports that knowingly process, transfer, or ship crude oil in violation of existing sanctions. The new sanctions could prove significant in disrupting market fundamentals considering that Iran currently produces about 3 million b/d and is expected to increase output by a further 280,000 b/d this year. StanChart has predicted that whereas the upcoming U.S. presidential election may influence the timing of the next swing down in Iranian exports, Iran’s oil flows are bound to take a hit regardless of who ascends into the Oval Office in 2025. The analysts note that existing U.S. policy instruments were enough to drive Iranian exports down to close to zero in late 2020, before the international context, and the associated implementation policies, changed. StanChart has argued the Biden administration has room to start implementing the sanctions immediately despite the risk of increased fuel prices during an election year. StanChart notes that the record-high on the day of a U.S. presidential election is $3.492/gal in 2012 (when the incumbent won), equating to about $4.80/gal in 2024 money terms after adjusting for consumer inflation. That’s $1.14/gal higher than current prices, with the U.S. national gasoline price average at $3.66 per gallon. StanChart says that whereas recent U.S. international oil policy has clearly been designed with a view to moderating oil price effects, it does not mean that the U.S. has necessarily chosen a policy of minimum pressure on Iranian and Russian oil exports. Meanwhile, the natural gas outlook appears to be getting more bullish. A late cold snap has led to a sharp deceleration in European gas inventory builds, with EU inventories standing at 72.01 billion cubic meters (bcm) on 21 April according to Gas Infrastructure Europe (GIE) data. The w/w build was just 0.427 bcm, significantly slower than the 2.005 bcm build for the week to 14 April. StanChart, however, says the cold snap might not last long, meaning Europe is likely to still be faced with a gas glut in the summer. The U.S. gas outlook is, however, more bullish after National Weather Service (NWS) meteorologists forecast above-average summer heat across the vast majority of the country, setting the stage for increased cooling demand.
Indian Gas Exchange Launches Small-Scale LNG Contracts
The Indian Gas Exchange (IGX) having received approval from the Petroleum and Natural Gas Regulatory Board (PNGRB) launched contracts of Small-Scale Liquefied Natural Gas (ssLNG) on its platform. This move marks a significant step towards addressing the demand of natural gas in areas that are not connected to the national gas grid. The introduction of ssLNG contracts on IGX aims to address the growing gas demand from industries and CGD (City Gas Distribution) companies that do not have access to pipeline networks. Through ssLNG, they can now procure liquefied gas through LNG tankers at competitive rates under daily, fortnightly and monthly contracts. Initially, this contract is launched at Dahej & Hazira LNG Terminals. Later, it will be launched at other terminals namely Dhamra, Mundra, Ennore, Kochi, and on-land ssLNG stations at Vijaipur. Speaking at the occasion, Mr. Anjani Kumar Tiwari, Member, PNGRB said, “Small-scale LNG serves as the cornerstone for our gas-based economy, enabling us to expand our reach beyond traditional pipelines. On supply side, it can bring gas from remote and difficult fields and on demand side, it can help an industry source gas which is not connected to the gas grid. With this vision, we provided approval to IGX for launching ssLNG contracts on their platform. PNGRB endeavors to be a facilitator to support the growth of ssLNG in India by providing a comprehensive regulatory framework. We will also be continuously evaluating the present regulations and making amendments to support the industry in navigating challenges.” Speaking at the occasion, Mr. D.K. Saraf, Ex-Chairman, PNGRB said,” While pipelines stand as the optimal means for gas transportation, the geographical expanse of our nation poses challenges in reaching every corner. Small-scale LNG emerges as a solution, bridging this gap and enabling customers to access the advantages of natural gas, thus facilitating a transition towards cleaner energy sources. I extend my sincere compliments to IGX for collaborating with PNGRB in launching ssLNG in India. Together, we can pave the way for widespread adoption of small scale LNG and create a cleaner, more sustainable energy future for all.” Top of Form Speaking at the occasion, Mr. Rajesh K Mediratta, MD & CEO, Indian Gas Exchange said, “We envision IGX providing marketplaces for competition, flexibility and transparent price discovery. The introduction of ssLNG contracts is to fill the void in ssLNG space. With the demand for road-transported LNG projected to increase substantially over the coming years, our initiative will provide city gas distribution networks, industries & LNG dispensers a competitive gas pricing that will optimize their costs. By facilitating the trading of ssLNG contracts, we are not only enabling the efficient transportation of larger volumes of natural gas via trucks but also widening access to a cleaner fuel across the country.” Natural gas is primarily supplied through pipelines in the country. As a result, industries and commercial establishments without access to the grid primarily rely on trucks for LNG transportation. The demand for road-transported LNG is projected to increase to 5 MMSCMD over the next five years. ssLNG contracts presents a win-win situation for both the buyers as well as sellers. It would serve as a platform for sellers, who can come and trade LNG. Transporting natural gas in liquefied form via trucks will allow larger volumes to be transported, potentially making it economically viable for buyers not connected to pipelines. Further, it will also ensure a transparent and fair procurement process with enhanced payment security.
ONGC plans June drilling for India’s first geothermal project in Ladakh
Oil and Natural Gas Corp (ONGC) is planning to mount a fresh drilling campaign in June for India’s first geothermal project after suffering a setback two years ago. If successful, the project could open a source for emission-free electricity, space heating, and irrigation in the cold and harsh terrains of Ladakh. The company plans to begin drilling the first well in the second or third week of June and complete two geothermal wells of 1,000 meters depth each by September-end, ONGC energy centre director general Ravi, who is overseeing the project at Puga in Ladakh, told ET. If all goes well, a power plant of at least 1 MW capacity will be set up by next year, he added. The geothermal wells help pipe hot water or steam to the surface, which then is used to power a turbine to generate electricity. Water with a temperature of 220 degrees centigrade is expected at Puga. The steam could be first used to produce electricity and then for space heating, aqua farming and herbal spa. ONGC is being advised by consultants from Iceland, a country that depends on geothermal for two-thirds of its primary energy.
India reiterates its partnership with Opec
India has reiterated its long-standing and constructive partnership with the Organisation of Petroleum Exporting Countries (Opec). India is the second largest export destination for the Opec as a whole, reported WAM . The reiteration of “long-standing” partnership came in a 30-minute telephone conversation with the Opec Secretary General, Haitham Al Ghais and India’s Minister of Petroleum and Natural Gas, Hardeep Singh Puri, the Minister’s office said in a statement. Puri emphasised the “importance of balancing market stability and affordability of oil with pragmatism. The discussions, inter-alia, covered recent trends in the global oil markets and their implications for international energy stability,” the statement said. Puri assured Al Ghais that as one of the world’s fastest-growing economies, India is committed to supporting efforts to achieve such balance in global energy markets. The statement pointed out that as per updated final figures for the financial year 2022-23, India imported crude oil, liquefied petroleum gas, liquefied natural gas and petroleum products from Opec countries, amounting to $ 120 billion.
Iran-Israel conflict: Oil, LNG prices may rise if Tehran blocks Strait of Hormuz
Oil and LNG prices are likely to shoot up if Iran is to block Strait of Hormuz, through which countries like India import crude oil from Saudi Arabia, Iraq and UAE, leading to a spike in inflation, analysts said on the Iran-Israel conflict. The Iran and Israel conflict has escalated over the last few days. Iran first launched drone and rocket attacks on Israel, which retaliated by firing a missile. HT launches Crick-it, a one stop destination to catch Cricket, anytime, anywhere. Explore now! Crude oil prices have hovered around USD 90 per barrel since the conflict. In a note, Motilal Oswal Financial Services said while de-escalation efforts will likely control the crisis, oil and LNG prices will spike in case Iran completely or partially blocks the Strait of Hormuz. The Strait of Hormuz is a narrow sea passage between Oman and Iran. It is about 40 km wide at the narrowest point, with 2 km of navigable channels for incoming and outgoing ships. It is the key route through which crude oil is exported by Saudi Arabia (6.3 million barrels per day), the UAE, Kuwait, Qatar, Iraq (3.3 million bpd) and Iran (1.3 million bpd). Oil flow via the Strait was 21 million barrels per day or 21 per cent of global oil consumption in 2022. Also, about 20 per cent of global LNG trade moves through it, including almost all LNG exports from Qatar and the UAE. Unlike oil, for which alternative routes via the Red Sea are available, no alternative routes are available for liquefied natural gas, it said. India, which is more than 85 per cent dependent on overseas suppliers to meet its crude oil needs, imports oil from Saudi, Iraq and UAE as well as liquefied natural gas (LNG) from Qatar through the Strait of Hormuz. In the event of blockade of the Strait, “we anticipate materially higher crude oil prices, refining margins, and spot LNG prices”, it said. While alternative routes do exist, they may only be able to accommodate a fraction (around 7-8 million bpd of crude oil/refined products) of the volume currently passing through the Strait (21 million bpd), and that too at elevated freight costs. “While investors focus on oil, we believe that spot LNG prices will witness even sharper escalation if the Strait of Hormuz is closed due to the absence of alternative routes,” it said. Both Saudi Arabia and the UAE have alternative export routes, which avoid the Strait. Saudi Arabia has the East-West pipeline with a capacity of 7 million bpd, according to the IEA. However, this pipeline opens up into the Red Sea, where traffic flow has already been disrupted due to attacks by Houthi rebels.