Oil fell below $49 a barrel on Monday (31 August) after its biggest two-day rally in six years last week, pressured by a supply glut and renewed concern about a hard landing for China's economy.International benchmark Brent crude climbed 10 per cent last week but was still heading for its fourth straight monthly decline and has risen in only two of the past 14 months.At 1052 GMT, Brent was down $1.14 at $48.91 a barrel and US crude, which had rallied 12 percent last week, dropped 81 cents to $44.41."Volatility was high last week, so now we're seeing some retracement - $50 is proving to be a resistance level," said Olivier Jakob, analyst at Petromatrix, referring to Brent. "It is still a market which is very well supplied."Volume is expected to be lower than normal on Monday because of a British public holiday.Chinese equities fell sharply on Monday before recovering much of their losses ahead of a survey expected to point to further economic weakness.China will release its official reading on August factory conditions on Tuesday, and economists polled by Reuters believe activity likely shrank at its fastest pace in three years.Excess supply is weighing on oil. The Organization of the Petroleum Exporting Countries, which used to adjust its own supply to keep crude above $100, decided in 2014 to let prices fall in order to retain market share.OPEC's forecasts point to an oversupply of more than 2 million barrels per day (bpd) on the market because of higher output from members including Saudi Arabia and Iraq, and resilient supply from countries outside the group.Output from OPEC could rise even higher in 2016 if and when sanctions on Iran are lifted.A possible increase in US interest rates is expected to support the dollar, making dollar-priced commodities including oil more expensive for users of other currencies.Investors are looking ahead to US business surveys, factory orders, trade data and Friday's nonfarm payrolls this week after comments by a top Federal Reserve official suggested a September rate rise was more likely than some investors expected."We believe that bearishness is still in play," Phillip Futures said in a report.(Reuters)
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The government has permitted Reliance Industries to sell up to 1.2 lakh tonnes of LPG produced at its plants to private cooking gas marketers.The LPG Control Order mandates that all cooking gas (LPG) produced locally must be supplied to state-run fuel retailing companies as India is deficient in LPG and has to import a part of the requirement.However, under the Parallel Marketing Scheme (PMS), private companies are allowed to import and market LPG to bulk consumers.RIL has been permitted to sell up to 10,000 tonnes per month to parallel LPG marketers, according to an oil ministry order.The approval, valid from April 1 to March 31, 2016, is, however, subject to RIL importing an equivalent quality and delivering to state-owned firm."... RIL shall have to import the equivalent quantity and deliver it to public sector oil marketing companies (OMCs) at a price which makes this transaction cost-neutral or cheaper to OMCs vis-a-vis procurement of same quantity from domestic production by RIL," the order said.This arrangement would be valid till liquefied petroleum gas (LPG) import facility at Kandla Port in Gujarat is re-commissioned or March 31, 2016 or till further orders, whichever is earlier.There are a total of 183 parallel LPG marketers in the country.The government had in February last year asked RIL to stop retailing LPG produced in its Jamnagar, Hazira and Patalganga plants. The company has a vast network that supplies cooking gas to 1 million customers, mostly in rural areas, and 134 auto LPG outlets.RIL, the largest single location LPG producer in the country, had contested the ministry view saying rules do not mandate that all domestic LPG must be sold only to state firms.Also, it was selling domestic LPG in parallel market because state oil marketing firms were not willing to pay market rates.RIL's subsidiary LPG Infrastructure India Ltd (LIIL) is undertaking parallel marketing of LPG and has substantial customers. It told the ministry that the move to prohibit the company from marketing gas would deprive its rural customers of the fuel. Its customers are mostly in rural areas of Gujarat, Maharashtra, Rajasthan and Madhya Pradesh.Following this, the Ministry on August 5, 2014 permitted RIL to sell up to 10,000 tonnes per month of LPG to parallel marketers till March 31, 2015. This has now been further extended till March next year."Since the earlier notification... dated August 6, 2014 was expired on March 31, 2015, this notification is being issued with effect from April 1, 2015 to give continuity to the notification dated the August 6, 2014. No one is adversely affected by giving retrospective effect to this notification," the ministry order said.(PTI)
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Indian finance ministers have always enjoyed the times when crude oil price hovered around less than $50 per barrel in the global market. Lower crude oil prices augur well for an economy that imports 75 per cent of its domestic requirement. However, the same falling price will also ensure that India remains an oil importing nation in the long run as the Indian upstream companies are forced to lower their capital expenditure on exploration business. Cairn India Ltd, a unit of London listed Vedanta resources Plc, has already reduced its capital expenditure for FY16 by about 60 per cent to $500 million from $1.2 billion. While ONGC has claimed that it will spend Rs 36,000 crore as capital expenditure in FY16 as against Rs 32,309 crore spent as capex in FY15, it would be difficult for other Indian companies to do the same as they try to cover their margins. The benchmark Brent crude on 24 August fell below $45 a barrel for the first time since March 2009. The stocks of ONGC, Oil India (OIL) and Cairn India have touched 52-week low this year. Lower crude prices bring a double whammy for companies that operate the Pre-Nelp blocks as they are paying a fixed amount of Rs 4,500 per tonne of oil produced from their fields. According to industry sources, the companies have been lobbying hard with the government to get rid of this cess. Apart from this, ONGC has 165 marginal fields (86 onshore and 79 offshore). These fields become financially unviable for production at the current price of crude oil. The government wanted to put 69 of these blocks for auctions, as it was felt that the private sector would be able to extract crude oil or gas from such blocks, but given the falling realisations for the upstream companies, it is unlikely that the private sector would like to put money into these fields. Some experts also feel that none of the international players would be interested in exploration business in India if the price of crude oil remains below $50 per barrel. The hydrocarbon fields in India are difficult and require higher investments compared to African countries. A silver lining for the upstream sector in such a scenario is the reduction in the price of rigs and other assets required for exploration business. It would be interesting to see, how the Indian companies negotiate their contracts for rigs to safeguard their margins. Deepak Mahurkar, , Leader Oil & Gas PwC says, "While crude oil prices sustaining around $40 in mid and long term is hard to think of, but the producers clearly are getting ready to be fit at $50. Marginal fields' developments around the world have to wait in these circumstances. In general, companies which adeptly take up efficiencies induction will do well. Unbelievable success has been achieved on cost reduction and technology deployment in the US including in the shale play. Service providers as much as operators have understood the sensitivities of costs."
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The government's 10 per cent stake sale in Indian Oil Corp (IOC) will not have any impact on the company's ratings, said Moody's Investors Service and Fitch Ratings. In separate statements issued, the two global agencies said that after the stake sale, the government will continue to hold a majority stake of 58.57 per cent in IOC. The government on Monday (24 August) sold 10 per cent stake in IOC through an offer for sale and raised over Rs 9,300 crore. Moody's Investors Service said IOC's ratings remain supported by its strategic importance to the country, given its position as India's largest refiner and distributor of petroleum products. "The government will retain its majority stake in the company after the stake sale, and as such does not affect our assessment of sovereign support for IOC," Moody's VP and Senior Credit Officer Vikas Halan said. Fitch Ratings said refiner Indian Oil Corporation's ratings is "unaffected" by lower state stake. The other two smaller state-controlled oil refining and marketing companies - BPCL and HPCL - historically have had lower state ownership at 55 per cent and 51 per cent, respectively, it added. "Fitch believes that the state continues to have close operating and strategic linkages with these entities despite the recent reforms in fuel prices and subsidy schemes. "We believe these three companies will continue to be important policy tools that the state will use to meet socio-economic objectives when required," it further said. Moody's added that it would reassess the level of government support incorporated in the company's ratings only if the government's shareholding falls below 51 per cent, or if there are other indicators of a change in the relationship between the government and IOC. "However, we see this as an unlikely scenario, given the strategic importance of IOC as the country's largest downstream oil company with a 31 per cent share of the domestic refining capacity," Halan said.(PTI)
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Oil prices dipped on Wednesday, trading near six-year lows ahead of the latest US energy report after jitters over China's faltering economy spurred heavy losses this week, analysts said. US benchmark West Texas Intermediate for October delivery fell 13 cents to $39.18 in Asian trading, while Brent crude for October eased 13 cents to $43.08 in late-morning trade. Both contracts gained on bargain-hunting on Tuesday, after plummeting to their lowest levels since early 2009 a day earlier as investors fret about falling demand in the face of a world supply glut. "US crude inventories continue to be the weekly constant mover for oil prices in this period of stagnant fundamentals," said Daniel Ang, investment analyst at Phillip Futures in Singapore. "If inventories turn out lower than estimates, we may see prices get more support and vice versa," he added. Ang said China's rate cut prevented oil prices from finding a new low. ANZ said China's rate cuts had calmed commodity markets, but they remained cautious and gains would be limited. "The displacement of high-cost supply from the United States is taking much longer than expected, and it's likely to keep the market substantially oversupplied in the short term," it said. Industry group American Petroleum Institute reportedly said on Tuesday that US crude reserves shrank by 7.3 million barrels in the week to August 21. The numbers signalled healthy demand in the world's top crude consumer ahead of the more closely watched official stockpiles report from the US Energy Information Administration later on Wednesday. Oil prices have come under pressure from concerns that China's slowing economy will curb demand for the commodities that have helped feed its astonishing growth over the past three decades. The devaluation of the yuan two weeks ago fuelled economic fears, sparking a slump in world equities sending commodities, as measured by the Bloomberg Commodity Index of 22 raw materials, to a 16-year-low on Monday. Losses continued in Shanghai shares today, while other Asian markets were mixed, after China's central bank cut its benchmark lending and deposit interest rates in a bid to boost confidence. "Although this did not revive the markets, it did put a stop to the bleeding and markets remain quiet at the start of the day," Ang said. (Agencies)
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Once upon a time, talk of an emergency OPEC meeting would have rippled through oil markets, likely triggering at least a brief rally in prices. The last extraordinary meeting to discuss a price slump, in 2008, resulted in the Organization of the Petroleum Exporting Countries' largest ever production cut, paving the way for prices to double within a year. Nowadays, however, calls for an unscheduled meeting to address spiralling prices are more a sign of growing friction within the group than a leading indicator of policy action. Although OPEC's statutes say support from a simple majority of the 12 members can trigger an extraordinary meeting, none will occur without support from Saudi Arabia, which has yet to give its blessing, OPEC delegates say. With oil falling further, support is growing among non-Gulf members for action and even some Gulf officials are concerned about the latest drop in prices. But the top OPEC producer's policymakers have remained publicly silent. Without the Saudis on board, even some OPEC members who are desperate to shore up prices say an abrupt public gathering is not the way to go and might only make matters worse. "The environment here is not to have any meeting without reaching unity in the position and measures of the majority at least," said an OPEC delegate. "Otherwise, the meeting will be meaningless. And it might be even worse and add pressure to prices if no agreement came out." Oil fell to almost $42 a barrel this week, its lowest since early 2009, pressured by abundant supplies and concern about the economic health of China, the world's second-largest oil consumer. Prices deepened their decline after OPEC's 2014 change in policy to defend market share and discourage competing supply sources from rival producers, rather than cut its own supply. Saudi Arabia and its Gulf allies led the policy shift. Non-Gulf members want OPEC to take action. Algeria has written to OPEC expressing concern about the market, delegates say, and Iran said on Sunday an emergency OPEC meeting may be "effective" in stabilising prices. But two other delegates doubted OPEC will meet before its next scheduled gathering on Dec. 4. "There is no emergency OPEC meeting - nothing," said one. No country has formally requested such a meeting, said another. Unwilling To CutSaudi Oil Minister Ali al-Naimi has made no public comment on prices since June 18, when with Brent above $63 he said he was optimistic about the market in coming months. As prices sank this week, Saudi officials remained silent. OPEC delegates and industry sources say it would be hard for Saudi Arabia to reverse the policy it championed, particularly at a time when Iraq has boosted exports to a record and Iran is hoping to expand supplies if and when sanctions are lifted. Since 2011, OPEC has met just twice a year. It gathered more frequently to deal with previous price collapses and held as many as eight meetings annually in the early 2000s, sometimes convening gatherings with just days' notice. As well as an extraordinary meeting, OPEC can also convene a "consultative meeting" at the request of its president. The last one took place in late 2008, when prices had collapsed due to the financial crisis and OPEC made its record output cut. The difference now, though, is the willingness to curb supply is not there. "No one is ready to decrease production," said the first delegate from one of OPEC's larger producers. A Gulf OPEC delegate said he didn't see Saudi Arabia changing strategy and that Brent may fall to $40 before recovering. Signs of lower exports from OPEC countries would be more likely to boost prices than talk of a meeting. Iraq's oil exports fell by at least 250,000 barrels per day in the first 17 days of August, according to loading data, making it less likely a steady rise in OPEC output will be sustained this month. "Reducing production will have an immediate strong reaction on the market - better than a meeting with no outcome," he said. "Calling an emergency meeting will not help at all." (Reuters)
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India is set to raise about Rs 9,379 crore ($1.4 billion) from a share sale in state-run Indian Oil Corp, the government said on Monday (24 August), but a slump in the stock market raised concerns about future stock offerings. The sale of 242.8 million shares came on a day when India's stock markets slipped nearly 6 per cent, their biggest daily falls since January 2009 as steep falls in Chinese equities sparked widespread unrest in global markets. Disinvestment Secretary Aradhana Johri said markets were getting difficult and the government would have to "look for opportunities" for further asset sales. New Delhi is seeking to raise as much as $11 billion by selling stakes in state-run companies this fiscal year, crucial to narrowing the fiscal deficit to a planned 3.9 per cent of gross domestic product in 2015/16.(Reuters)
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Indian Oil Corp said all units at its 274,000 barrels per day (bpd) Koyali refinery in western Gujarat are running normally except the 44,000 bpd crude distillation unit (CDU), where a minor fire occurred during a planned maintenance shutdown."There has been no fatality; however there are five cases of injuries to employees of Gujarat Refinery," the company said in a statement issued on Sunday.IOC, the country's biggest refiner, had shut the 44,000 bpd crude unit 2-3 days ago for routine maintenance, a company source said, adding the shutdown will last for about 25 days.Koyali refinery has five CDUs.(Reuters)
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