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.
Rising Middle East Risk Sparks Fear of $100 Oil
Despite Iran’s attack on Israel over the weekend, oil prices dropped on Monday as an Iranian response to the Israeli hit on the Iranian diplomatic mission in Syria was largely expected and priced in. The well-telegraphed-in-advance Iranian drone attack against Israel may have been peak escalation, for now, analysts and investment banks say. However, uncertainty over a potential Israeli retaliation and whether restraint will prevail continue to keep the oil market on edge. Risk premiums and fear will continue to be priced in Brent Crude for the foreseeable future. Uncertainty and risks have grown in the Middle East – a key oil-producing region, which is also home to the world’s most crucial oil chokepoint, the Strait of Hormuz. About 21 million barrels per day (bpd), or a fifth of the world’s daily consumption, is being transported out of the top Middle Eastern exporters via the Strait of Hormuz. ‘Well Above $100’ In case of further escalation, $100 oil is possible, analysts say, especially if this involves direct threats to oil supply. “What is not priced into the current market, in our view, is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade up to +$100/bbl, depending on the nature of the events,” Citigroup in a note, as carried by Bloomberg. The worst-case scenario for oil supply is Iran attempting to disrupt tanker traffic in the Strait of Hormuz, which could send oil prices spiking to $130 per barrel, according to Lipow Oil Associates. “Any attack on oil production or export facilities in Iran would drive the price of Brent crude oil to $100, and the closure of the Strait of Hormuz would lead to prices in the $120 to $130 range,” Andy Lipow, president of Lipow Oil Associates, told CNBC. An escalation involving the U.S. could send oil surging to $140 per barrel, according to Societe Generale, which has raised its Brent price forecast by $10 a barrel to reflect continued geopolitical risk premium. Escalation Not the Base-Case Scenario While warning that oil prices could spike well above $100 per barrel in case of a major escalation, investment banks do not consider such escalation the base-case scenario. While Israel is weighing its response to the Iranian attack, the G7 has called for restraint and the U.S. has signaled it wouldn’t be part of any Israel offensive against Iran. U.S. President Joe Biden has assured Israeli Prime Minister Benjamin Netanyahu that the U.S. commitment to defend Israel is “ironclad,” but the U.S. would not participate in an offensive against Iran, a senior administration official has told NBC News. As of early Tuesday, Israel was still weighing its options. Iran has signaled that with the drone barrage against Israel it considers the matter closed, the permanent mission of Iran to the United Nations said on Sunday, but added that “should the Israeli regime make another mistake, Iran’s response will be considerably more severe. It is a conflict between Iran and the rogue Israeli regime, from which the U.S. MUST STAY AWAY!” In view of calls on Israel for restraint, the “most likely path from here (to be) de-escalation rather than further escalation,” Richard Bronze, co-founder and analyst at Energy Aspects, told CNN. “While Israel’s allies are pushing for a diplomatic response, it appears for now that Israel is considering a more direct response. If this is the case, it unfortunately means that this uncertainty and tension will linger for quite some time, as markets will then focus on how Iran further retaliates,” ING strategists Warren Patterson and Ewa Manthey wrote in a Tuesday note. “Iranian oil output is most at risk and even a strong diplomatic response from Israel’s allies could hit Iranian oil exports significantly with stricter enforcement of oil sanctions,” say the strategists, who see up to 1 million barrels per day (bpd) of Iranian oil off the market in such case. ‘The Worst Has Passed’ Morningstar sees “more downside risks than upside at the moment,” Stephen Ellis, an energy and utilities strategist for Morningstar, wrote on Monday. “[T]he ample public and private forewarning from Iran amid rising regional tensions means the attack was already reflected in oil prices via a higher geopolitical risk premium.” Most of the recent rise to $91 oil before the Iranian attack has been the result of geopolitical risks rather than supply risks, according to Morningstar, which notes that the OPEC+ group has ample spare capacity of about 5 million bpd – and probably more – part of which it can return to the market if oil prices surge above $100. “We expect more downside risks than upside at the moment, and see a higher potential to touch $75 by the end of 2024 versus a sustained movement beyond $100 a barrel,” Morningstar’s Ellis said. Iran’s retaliation can now prompt profit taking and prices could be easing, but this is not the end of risk premiums, consultancy FGE said in a note on Monday. Despite pressure from allies on Israel to limit a possible response, further escalation is not entirely off the cards, but FGE says that “Our base case is that the worst has passed.” FGE’s base case is now for OPEC+ to decide to unwind some of the production cuts as of July. Even with another up to 1 million bpd from OPEC+ output back on the market, Brent is still expected to average $90-$95 a barrel in the third quarter with the ongoing political risk, the consultancy said.
Asian LNG Prices Soar on Fears of Wider Middle East Conflict
Spot LNG prices in Asia jumped to the highest level since the beginning of January amid concerns that the conflict in the Middle East could further escalate. After lingering at around multi-month lows for nearly the entire winter heating season in the northern hemisphere, spot LNG prices for delivery into north Asia have jumped in recent days amid fears that an Israeli response to the Iranian attack could escalate into a regional conflict that could obstruct LNG cargo flows around the Middle East, most notably via the Strait of Hormuz, where 20% of the world’s LNG trade passes. Analysts see a low probability that the Strait of Hormuz would be blocked. Yet, spot LNG prices for delivery into North Asia surged on Tuesday to above $11 per million British thermal units (MMBtu), traders told Bloomberg. That’s the highest spot LNG price in Asia since early January 2024 and a 40% surge since the end of February. European benchmark natural gas prices also jumped on Tuesday, closing 6.4% higher and recording a fourth consecutive daily increase, amid concerns about global LNG trade flows. Early on Wednesday, the front-month Dutch TTF futures, the benchmark for Europe’s gas trading, advanced by another 1.6% to the highest level so far this year. While a mild winter and full gas storage helped Europe through a second consecutive winter without most of the Russian pipeline gas it had previously received, the potential of a widening conflict that could obstruct LNG flows is keeping the European and Asian gas markets on edge. Europe has become more dependent on LNG imports for its gas supply after losing a large part of the Russian pipeline gas following Moscow’s halt of flows to several EU countries and the sabotage of the Nord Stream pipelines. European prices have also jumped in recent days amid lower pipeline flows from Norway – now Europe’s top gas supplier – due to unplanned outages. “The geopolitical environment will also support European gas prices, particularly given the EU’s larger dependence on LNG since the Russia-Ukraine war,” ING strategists Warren Patterson and Ewa Manthey wrote in a note on Wednesday. “However, fundamentals remain bearish with storage more than 62% full, well above the 5-year average of 43% full for this time of year,” they added.