India’s sluggish oil consumption weighs on global prices

MOSCOW (MRC) -- India’s petroleum consumption increased to a record high in the first seven months of 2023 but growth has slowed markedly as the rebound from the coronavirus pandemic and lockdowns is completed, said Reuters.

The economy is being hit by the same combination of rapid inflation and slowing global trade that has hit other major economies across South and East Asia. Petroleum consumption increased to 135 million metric tons in the first seven months of 2023 from 128 million metric tons in the same period in 2022.

The increase in the first seven months was equivalent to roughly 255,000 barrels per day (bpd), down from growth of 415,000 bpd in 2021/22. Oil consumption growth of roughly 5% to 6% per year is consistent with the same reported growth in manufacturing output.

But it compares with growth of more than 1.0 million bpd in U.S. oil production in the first five months of 2023. It has not been fast enough to absorb the extra crude and tighten the global market at a time when consumption has been depressed in North America, Europe and China.

The relatively sluggish growth in India’s consumption has therefore added to downward pressure on crude petroleum prices so far in 2023.

We remind, Indian refiner Hindustan Petroleum Corp Ltd is meeting up to 23% of its oil needs through discounted Russian grades. Indian refiners, which rarely used to buy Russian oil, have been snapping up discounted barrels after many Western countries shunned purchases from Moscow following its invasion of Ukraine. HPCL's Russian oil intake is limited by the configuration of its refineries, Joshi said, but the company is maximizing the use of these cheaper so-called opportunity crudes, he added, helping "ringfence" it from risks arising from high oil prices.

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MOSCOW (MRC) -- China Petroleum & Chemical Corp, or Sinopec, reported an increased gas output during the first half of this year, a number of oil and gas discoveries and breakthroughs and intensified efforts in high quality exploration, said Chinadaily.

The company's production of oil and gas in the first half of 2023 reached 250 million barrels of oil equivalent, up 3.3 percent year-on-year, with natural gas production of 660.9 billion cubic feet, up 7.6 percent year-on-year, it said in a report released on Sunday.

The company has strengthened integrated operation of natural gas production, supply, storage and sales and improved the profitability of the whole natural gas business chain.

The company also reported higher refinery output and growth in fuel sales during the first six months. Refinery throughput reached 127 million tons, a year-on-year increase of 4.8 percent, while total sales volume of refined oil products reached 117 million tons, a year-on-year increase of 18.5 percent. Ethylene production was 6.875 million tons, up by 0.4 percent year-on-year.

Interim net profit for the first half of the year was 35.11 billion yuan ($4.82 billion), on lower crude prices despite higher refinery output and growth in fuel sales. Turnover and other operating revenues in the first half of 2023 were 1.59 trillion yuan, down 1.1 percent from the year prior.

We remind, Sinopec reported a 10.5% year-on-year increase in first-half 2022 net profit on the back of strong crude, even as its chemical earnings shrunk 94% as demand collapsed amid COVID-19 curbs. Strong crude and COVID-19 outbreaks dampened domestic demand for oil products in April-June 2022, with chemical operations have had to grapple with high cost, high inventory, low utilisation rates and poor margin. Ethylene consumption in the first half barely grew, logging a 0.1% year-on-year increase, while output grew 5.9% to 6.85m tonnes. Sinopec is targeting to produce 7.2m tonnes of ethylene in the second half, which will bring the full-year production to 14.05m tonnes, up 4.9% from 2021.

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MOSCOW (MRC) -- Indian refiner Hindustan Petroleum Corp Ltd is meeting up to 23% of its oil needs through discounted Russian grades, as per Hydrocarbonprocessing, citing chairman Pushp Kumar Joshi at the annual shareholder meeting.

Indian refiners, which rarely used to buy Russian oil, have been snapping up discounted barrels after many Western countries shunned purchases from Moscow following its invasion of Ukraine.

HPCL's Russian oil intake is limited by the configuration of its refineries, Joshi said, but the company is maximizing the use of these cheaper so-called opportunity crudes, he added, helping "ringfence" it from risks arising from high oil prices.

State-controlled HPCL operates a 190,000 barrel per day (bpd) Mumbai refinery in Western Maharashtra state and a 300,000 bpd Vizag refinery in southern state of Andhra Pradesh. It is also building a 180,000 bpd refinery and petrochemical complex in the desert state of Rajasthan.

Joshi said HPCL hopes to soon commission secondary units at the Vizag refinery to boost its distillate yields. The company is planning capital expenditure of 750 billion rupees ($9.08 billion) in the next five years including on refinery upgrades and natural gas and renewable projects.

About a quarter of the planned spend would be used for green initiatives to help HPCL meet its 2040 net zero goal. The company plans to transfer all of its green and emerging businesses into a new subsidiary, Joshi said.

As well as selling conventional fuels such as gasoline, gasoil, jet fuel and cooking gas in India, HPCL is also a key supplier of lubricants, which it currently exports to about 20 countries. It is looking to boost output capacity to expand its exports.

Joshi said in-principle approvals had been granted to explore options including carving out the lubricant business to unlock value, subject to approvals from competent authorities.

We remind, Indian state-owned oil refiner Hindustan Petroleum Corporation Ltd (HPCL) said it posted its biggest quarterly profit in nine years, helped by a fall in crude prices and higher refinery margins. Net profit for the fourth quarter ended March 31 jumped about 80% to 32.23 B rupees (USD394.1 MM) from 17.95 B rupees a year earlier, according to a stock exchange filing. Sale of products grew nearly 8.6% to 1.14 T rupees, with domestic sales rising to 10.92 MMt from 10.26 MMt a year earlier.

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MOSCOW (MRC) -- Rising prices of a popular Russian crude sold to China are poised to peak soon as more independent refiners are likely to switch to cheaper oil from Iran which has ramped up exports to fresh 4-1/2 year highs in August, several trade sources said, said Hydrocarbonprocessing.

OPEC+ supply cuts and strong demand from large Chinese refiners for Russian oil have pushed prices for the ESPO Blend grade exported from the Pacific port of Kozmino to the narrowest discounts since the Ukraine war started.

Trade for the light sweet crude for October arrival commenced this week, with the first deal done at a discount of about $1 a barrel to ICE Brent on a deliver-ex-ship basis (DES) to China, according to two trading sources, up from discounts of about $1.80 a barrel for September deliveries. ESPO cargoes were offered at discounts as narrow as 50 cents a barrel prior to the deal.

"We were expecting ESPO prices to continue surging as seen in the past two months," one of the sources said.
"But now we think the price hike could be capped as some refineries may turn to buy Iranian oil."

China's large private refiners have since earlier this year stepped up ESPO purchases, crowding out smaller refiners, known as teapots, and forced them to look at cheaper alternatives like sanctioned Iranian oil. Iran ramped up crude exports in 2023, with May's outflow hitting a 4-1/2 year high of 1.54 million barrels per day, according to ship tracking data from Kpler.

Exports climbed to around 1.6 million bpd in August, or just below 2 million bpd if condensate is included, according an Iranian source familiar with the matter. The abundant supply has widened discounts for Iranian Light crude to about $13 a barrel to ICE Brent in China on a delivered basis from around $10 a barrel last year, even as prices for rival grades, such as Russia's Urals and ESPO crude, have jumped.

"It's very likely that ESPO buyers split under the pressure from a flood of Iranian crude," another source said. "The big private buyers who can afford the higher prices would gobble more ESPO cargoes, while the smaller-scale teapot refiners go to take cheaper Iranian oil."

Moreover, teapots may have found another method to bring in Iranian oil without using their limited import quotas which may lead to higher imports soon, a third source said. Currently, only teapots are taking Iranian oil as big private refiners and state-owned firms still shun the sanctioned crude despite cheap prices.

China's Iranian oil imports in August are at the highest since December 2022, with Vortexa estimating the volume at about 1.2 million bpd. Kpler's estimate is 1.4 million bpd, including cargoes shipped directly from Iran and from the Eastern Outside Port Limit, a zone off the south east coast of Malaysia where many tankers carrying Iranian oil engage in ship-to-ship transfer.

Iran is cranking up crude output to 3.4 million bpd by the end of September, after the country announced earlier this month that its oil exports had surpassed 1.4 million barrels bpd, primarily to China, the Iranian oil minister said this week.

We remind, the global market is anticipated to have a steady CAGR of 4.2% during the period from 2023 to 2033. The overall market size is predicted to expand from USD59.4 B in 2023 to USD89.6 B by 2033. Previously, the ethylene copolymers market was thriving at a CAGR of 3.5% from 2018 to 2022, resulting in a market size of USD57.4 B in 2022.

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