Tag: crude oil

Oil prices surge amid reports of Israel attack on Iran: expert weighs in on outlook

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices rose by $3 per barrel on Friday following unconfirmed reports of explosions in Iran, raising fears of potential disruptions to oil supply from the Middle East. The increase pushed oil prices beyond $90 per barrel, prompting immediate concerns as the region contributes significantly to global oil production. Analysts are closely monitoring the situation to gauge the extent of potential oil supply disruptions in the event of a wider regional conflict.

In a discussion with CNBC-TV18, Fook Hien Yap, a Senior Investment Strategist at Standard Chartered Bank, and Peter McGuire, CEO of XM Australia, explored the implications of the situation on oil prices and speculated on the potential impacts on gold and the dollar index during times of uncertainty.

McGuire explained that when a market, like oil, suddenly rises by 3.5-4% within a few hours, it shows how easily the market can be affected and how quickly prices can go up because of things like political tensions. If there are reports of explosions happening in several countries, it creates a lot of uncertainty about what might happen next, which can push prices even higher.

Talking about gold, he mentioned that it’s currently at its highest price ever, likely around $2430 to $2435 per ounce, which is very impressive. Silver prices have also risen, along with other metals like copper and zinc. Meanwhile, the dollar index is around 106.30.

Also Read | Gold prices steady amid geopolitical tensions: Check city-wise rates today

“There is probably more upside for the dollar index in the short run – that will be a flight to safety in some ways. The currencies will come a bit further crushed to the downside – euro, yen, pound and Australian Dollar and associated currencies. But yes, stronger US dollar, stronger gold, and by the looks of it – stronger oil in the short run,” added McGuire.

Also Read | Oil back above $90 a barrel after Israel attacks Iran

When asked about India, Yap said, “India is watching the oil price because it’s a net importer of oil, but we do see the elections proceeding as expected, there is going to be continuity in a government, growth remains very strong we think that is attractive. So, we do have a buy view now for India large caps. We think it is an attractive opportunity.”

In a separate discussion with CNBC-TV18, Jonathan Schiessl, Deputy CIO of Westminster Asset Management said, “We are in a phase and if oil prices do move higher, inflation is an issue that is certainly coming back to haunt some of the major markets. Therefore, from our perspective, we think oil stocks or oil is probably the best inflation and geopolitical hedge you have at the moment. So, we are quite invested in that part of the market. We do have and have had for some time good positions in gold as well and that has been an interesting area to be more recently.”

Investors have been watching closely to see how Israel responds to the Iranian drone attacks on April 13. The extra risk that comes with these geopolitical events has been decreasing in oil prices this week. This is because people thought that if Israel did retaliate against Iran, it would be controlled by pressure from other countries.

(with input from Reuters)

For the entire discussion, watch the accompanying video

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Oil prices dip as demand concerns outweigh Middle East supply fears

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Crude oil prices eased in early trade on April 17 as worries about global demand due to weak economic momentum in China and fading hopes for US interest rate cuts in the near term outweighed supply fears on heightened tensions in the Middle East.

Brent futures for June delivery slipped 7 cents, or 0.1%, to $89.16 a barrel by 0042 GMT, while US crude futures for May delivery fell 10 cents, or 0.1%, to $85.26 a barrel.

Oil prices have softened so far this week as economic headwinds pressured investor sentiment, curbing gains from geopolitical tensions, with eyes on how Israel might respond to Iran’s attack on Israeli territory over the weekend.

“Demand concerns increased due to expectations that US interest rate cuts are likely to be delayed and weaker-than-expected economic data from China,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

“Since the market had been rising until last week on supply worries amid escalating tensions in the Middle East, the relatively restrained Iranian aggression has not provided the ground for buying up,” he said.

He predicted WTI would trade around $83-$88 without any new developments.

The run of disappointing data showing stronger-than-expected inflation means the Federal Reserve will likely need more time than previously thought to be confident that inflation is on the path to 2%, Fed Chair Jerome Powell said.

In China, the world’s biggest oil importer, the economy grew faster than expected in the first quarter, but several March indicators, including property investment, retail sales and industrial output, showed that demand at home remains frail, weighing on overall momentum.

In the Middle East, a third meeting of Israel’s war cabinet set for Tuesday to decide on a response to Iran’s first-ever direct attack was put off until Wednesday, as Western allies eyed swift new sanctions against Tehran to help dissuade Israel from a major escalation.

Analysts said, however, Iran’s unprecedented missile and drone strike on Israel is unlikely to prompt dramatic sanctions action on Iran’s oil exports from the Biden administration due to worries about boosting oil prices and angering top buyer China.

Meanwhile, US crude oil inventories rose last week more than expected by analysts polled by Reuters, however gasoline and distillates stockpiles fell, according to market sources citing American Petroleum Institute figures on Tuesday.

Official data from the Energy Information Administration, the statistical arm of the US Department of Energy, is due on Wednesday at 10:30 a.m. (1430 GMT).

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Windfall tax on crude up 96% in April with two consecutive tax hikes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government has increased the windfall tax or Special Additional Excise Duty (SAED) on petroleum crude by 41% effective April16. The revised SAED rate is ₹9,600 per tonne from ₹6,800 per tonne, which was earlier on April 4 increased from ₹4900 per tonne. Thus, with two consecutive hikes windfall tax on crude has gone up by 96% in a span of 16 days.

The windfall tax on diesel, petrol and Aviation Turbine Fuel remains nil as that was kept unchanged.

Earlier in the day government officials told CNBC-TV18 that the government will cash in on higher crude oil price through the windfall tax levy, although it doesn’t expect crude prices to touch levels seen after the Russia-Ukraine war broke out in February 2022 when the India crude basket soared to an average $116/bbl in June after staying over $100/bbl in April and May.

Also, with daily fuel price revisions suspended since May 2022, the government hopes there will be little impact on retail inflation.

Also Read: IEA predicts lower global oil demand growth for this year and next

As recently as March 14, the government-owned fuel retailers had reduced petrol and diesel prices by ₹2 per litre when the India crude basket averaged $84.49 for that month. India crude basket was last seen at $90 per barrel in October 2023 while it has averaged $91.20 per barrel as of April 12.

India first imposed windfall tax on July 1, 2022, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and ATF and ₹13 a litre ($26 a barrel) on diesel. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

A windfall tax is levied on domestic crude oil if the rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel. Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

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Iran-Israel tensions: Don’t expect crude oil at levels seen during the Russia-Ukraine war, says govt official

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Crude oil prices remain a key concern for India amid the ongoing tensions between Iran and Israel, said a government official on Monday, April 15. The official added that despite tensions in West Asia, they don’t expect crude oil at levels seen immediately after the Russia-Ukraine war.

The official added that the government will gain through windfall taxes on higher crude and petroleum exports and they see little impact on the inflation situation in the country in the absence of daily fuel price revisions.

The government has increased the windfall tax on crude petroleum by nearly 40% to ₹6,800 per tonne from ₹4,900 per tonne earlier on April 4. A fortnight earlier, it was increased to ₹4,900 per tonne from ₹4,600 per tonne earlier.

A windfall tax is levied on domestic crude oil in case rates of global benchmarks rise above $75 per barrel. India first imposed the windfall tax on July 1, 2022, joining a list of countries that tax the supernormal profits of energy companies. These tax rates are now reviewed every fortnight, based on the average oil price in the last two weeks.

CNBC-TV18 also reported recently that the government-owned oil marketing companies (OMCs) don’t anticipate crude oil prices reaching $100 per barrel (/bbl) in 2024, contrary to projections by some brokerages. One reason cited for this has been the behaviour of crude oil futures, which, according to companies, don’t suggest a significant increase in oil prices to $100/bbl, at least for the time being. Brent crude futures for June–August are trading within a narrow range of $88–$91/bbl.

OMCs also indicated that with two to three months of contracts already in place, they may have headroom to deal with higher crude oil prices for now. However, if crude continues at $90 beyond May–June, it may pose some concerns. Brent crude prices have been hovering around this level since September last year, after the OPEC+ extended production cuts.

India imports around 85% of its crude, and soaring prices drag on the Indian economy. The average price of Indian basket crude oil was estimated to reach more than $97 a barrel in the financial year 2023, sharply higher than the preceding year’s average of over $78.

During his keynote address at the recent India Exchange Summit, Citigroup’s Chief Economist for India, Samiran Chakraborty, also explained the intricate relationship between oil prices and India’s macroeconomic indicators. Chakraborty elucidated that even a modest 10% increase in oil prices could trigger a 15 basis point decline in India’s GDP growth and a 30 basis point surge in inflation.

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The international crude oil price of Indian Basket, as published today by the Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas, was $91.20 per barrel (bbl). The Indian basket of Crude Oil represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of Crude oil processed in Indian refineries in the ratio of 75.62: 24.38. The crude oil prices are the average of daily prices of the respective month, and the average for the current month is till date.

ALSO READ | IEA predicts lower global oil demand growth for this year and next

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian stocks fall in wake of Iran attack on Israel

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares in Asia slipped Monday, tracking a fall in US equities, as markets grappled with ratcheting tensions after Iran’s unprecedented attack on Israel at the weekend.

Equity benchmarks in Japan, South Korea and Australia all declined while Hong Kong stock futures also fell. Contracts for US shares edged higher in Asia after the S&P 500 suffered its worst session since January on Friday amid a flight to safety.

With investors already rattled by sticky inflation and the prospect of higher-for-longer interest rates, the escalation of the Middle East crisis risks injecting fresh volatility into markets. As the conflict widens, many say oil could surpass $100 a barrel and expect a flight to Treasuries, gold and the dollar, along with further stock-market losses.

Most Group-of-10 currencies strengthened against the greenback Monday while Treasures steadied in early Asian trading after yields slipped in the previous session. Gold rose amid driving demand for haven assets, while aluminium jumped more than 6% after US-imposed sanctions on Russian trading.

“The escalated tension over the weekend has unfortunately introduced new bitter uncertainties for the financial world to digest,” said Hebe Chen, an analyst at IG Markets. In Asia “the financial and tech sectors may experience the deepest pain — higher energy prices are likely to darken the shadow on the inflation trajectory, resulting in higher rates for a longer period.”

In Asia, Chinese equities are set for a tough week after a miss in the nation’s trade data Friday. Even if the global risk mood improves and Middle East tensions subside, Chinese stocks may see headwinds of their own to overcome.

Elsewhere, developer China Vanke Co. said it’s making plans to resolve liquidity pressure and short-term operational difficulties as China’s top leaders have grown increasingly alarmed about the country’s protracted real estate crisis and its effect on the sluggish economy.

War Nerves

While Iran said “the matter can be deemed concluded,” traders are now waiting to see if the conflict spirals into a widespread regional war. Still, nerves may be tempered following a report that President Joe Biden told Israeli Prime Minister Benjamin Netanyahu that the US won’t support an Israeli counterattack against Iran.

“For markets this may eventually play out as a fade as Iran and Israel step back from the brink,” said Namik Immelbäck, chief strategist at Skandinaviska Enskilda Banken AB. “But near term this should lead to position reduction from especially trend following quant strategies” which should exacerbate the typical flight to safety, he said.

Bitcoin rallied after it sank almost 9% in the wake of the attacks on Saturday. Stock markets in Saudi Arabia and Qatar posted modest losses under thin trading volumes on Sunday. Israel’s equity benchmark fluctuated between gains and losses at least nine times before closing with a small gain.

Oil shrugged off Iran’s the attacks, with gains held in check by speculation that the conflict would remain contained. Brent crude is already up almost 20% this year and last traded around $90 a barrel.

Traders will soon shift to looming economic data as they refine bets on central bank easing cycles, as well as the International Monetary Fund and World Bank spring meetings in Washington. This week, Chinese growth data and Japan, Eurozone and UK inflation readings are due.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Shanghai International Energy Exchange imposes trade limits in crude oil futures

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shanghai International Energy Exchange says it will impose a maximum position on crude oil futures at 3,200 lots from April 12.

“As from April 12, 2024, (i.e. since the continuous trading session on the evening of April 11, 2024), INE will implement the trading limits on the crude oil futures contracts. The maximum intraday position opening volume of a Non-Futures Firm Member (Non-FF Member), Overseas Special Non-Brokerage Participant (OSNBP), or client in crude oil futures contracts is 3,200 lots for each contract,” it said in a circular.

Separately, the Shanghai Futures Exchange will impose daily position limits for gold futures at 2,800 lots from April 12, according to a statement on the bourse website.

The exchange will also impose a daily copper futures position limit at 2,000 lots.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Don’t see crude oil touching $100 per barrel in 2024 but matter of concern if it ‘sustains’ at $90: OMC sources

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Government-owned oil marketing companies (OMCs) don’t anticipate crude oil prices reaching $100 per barrel (/bbl) in 2024, contrary to projections by some brokerages. One reason cited for this is the behavior of crude oil futures, which, according to companies, don’t suggest a significant increase in oil prices to $100/bbl, at least for the time being. Currently, Brent crude futures for June–August are trading within a narrow range of $88–$91/bbl.

Brokerage firms Goldman Sachs and JP Morgan have suggested that crude prices could reach $100/bbl, with JP Morgan specifically forecasting September 2024 for Brent crude to hit this mark. Meanwhile, Bank of America and Standard Chartered anticipate crude prices to average $94–$95/bbl in Q2 of FY25. Macquarie previously forecasted crude at $90 by June of this year, and Morgan Stanley had predicted $90 by Q3 of the current fiscal year.

OMCs also indicate that with two to three months of contracts already in place, they may have headroom to deal with higher crude oil prices for now. However, if crude continues at $90 beyond May–June, it may pose some concerns. For instance, the daily price revisions by OMCs remain practically suspended since May 2022, making it impossible for companies to pass on price increases. Industry sources also say that while some of the OMCs can deal with crude oil prices in the $85–$90/bbl band, others are comfortable with crude under $85/bbl, with $78 a barrel as a “wishlist.”

The three government-owned OMCs will be announcing their Q4 and FY24 results by May and it is widely expected that despite the ₹2 price cut in petrol and diesel prices in March, companies are likely to post healthy bottom lines, also due to the previous three good quarters.

During April-December FY24, the three OMCs reported bumper profits of ₹69,000 crore, almost half of which was earned by the Indian Oil Corp. (IOC) at ₹34,781 crore. This is in stark contrast to the ₹30,000 crore of losses suffered by OMCs in FY23 as they absorbed the brunt of soaring crude prices.

Meanwhile, the OPEC+ decision to extend the two million barrels a day production cuts until June 2024 has also contributed to the recent spike in crude oil prices. Although the RBI’s April monetary policy has kept the baseline assumption of the crude price for the Indian basket unchanged at $85/bbl for FY25, the central bank’s commentary is hawkish.

The RBI says, “Global crude oil prices have remained highly volatile, with Brent crude falling from a high of US$95 in early October 2023 to below US$75 by mid-December, before rebounding and settling above US$80 in the first quarter of 2024. An escalation in the conflict in West Asia and logistical impediments in key trade routes may cause serious disruptions in the oil market… Amidst intensifying hostilities in the Middle East, deep output cuts by OPEC plus, and incidents of supply outages, international crude prices reached an average close to US$85 per barrel in March. Geopolitical tensions imparted significant uncertainty to the outlook.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil dips 1%, posts weekly loss as markets weigh Chinese demand

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices closed 1% lower on Friday and fell even more for the week as markets remained wary of soft Chinese demand even as producer group OPEC+ extended supply cuts.

Brent crude futures settled down 88 cents, or 1.1%, at $82.08 a barrel. U.S. West Texas Intermediate crude futures (WTI) fell 92 cents, or 1.2%, at $78.01.

Both benchmarks fell in the week, with Brent down 1.8% and WTI 2.5%.

“While supplies have remained on the tighter side given OPEC’s production cuts and Russian sanctions slowing exports, demand from China looks to be lagging and U.S. driving season demand has yet to kick in,” said Dennis Kissler, senior vice president of trading at BOK Financial.

China earlier this week set an economic growth target for 2024 of around 5%, which many analysts say is ambitious without much more stimulus.

China’s imports of crude oil rose in the first two months of the year compared with the same period in 2023, but they were also weaker than the preceding months, data showed on Thursday, continuing a trend of softening purchases by the world’s biggest buyer.

On the supply side, OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.

However, crude production in OPEC+ countries increased by 212,000 barrels per day (bpd) in February over January output, according to Rystad Energy data and research.

Meanwhile in the U.S., energy firms this week cut the number of oil rigs – an indicator of future production – by two to 504 this week, their lowest since Feb. 23, energy services firm Baker Hughes said.

Oil markets have homed in on signals on the timing of possible rate cuts in the U.S. and European Union in the previous two sessions. Lower interest rates could increase oil demand by boosting economic growth.

U.S. job growth rose by 275,000 new nonfarm payrolls in February, according to the Bureau of Labor Statistics, beating expectations of a 200,000 rise according to a Reuters survey.

But the unemployment rate also rose and wage growth decelerated, indicating that the U.S. economy could be slowing which kept on the table an anticipated interest rate cut in June from the Federal Reserve.

The data suggests “a less tight job market, supporting the soft landing narrative and increasing the odds of a June rate cut,” UBS analyst Giovanni Staunovo said.

U.S. Federal Reserve Chair Jerome Powell said on Thursday that the central bank was “not far” from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates.

The European Central Bank (ECB) will likely start lowering interest rates some time between April and June, French central bank head and ECB policymaker Francois Villeroy de Galhau said.

Money managers raised their net long U.S. crude futures and options positions in the week to March 5, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

New sanctions threaten Russian oil sales to India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Fresh US sanctions on Moscow threaten to dent Russian oil sales to India, the biggest buyer of Russian seaborne crude, and complicate efforts by Indian state refiners to secure annual supply deals, three industry sources familiar with the matter said.

Washington on Friday imposed sanctions to mark the second anniversary of Moscow’s invasion of Ukraine and retaliate for the death of opposition leader Alexei Navalny.

The sanctions target Russia’s leading tanker group, Sovcomflot, which Washington accused of being involved in violating the G7’s price cap on Russian oil, as well as 14 crude oil tankers tied to Sovcomflot.

Sources said Indian refiners are concerned the latest sanctions will create ”challenges” in getting vessels for Russian oil and could drive up freight rates. That may narrow the discount for the oil, which is bought from traders and Russian companies on a delivered basis.

In addition, Moscow may have to push even more volumes through traders to shield from further sanctions risk, adding to uncertainties, the industry sources said, declining to be named because of the sensitivity of the matter.

India rarely bought Russian oil before 2022 due to high freight costs, but refiners in the world’s third-largest oil importing nation are now big buyers, benefitting from lower prices, after Europe banned Russian oil imports.

Russia emerged as India’s top oil supplier in 2023. Through term deals and spot market purchases, the South Asian nation imported about 1.66 million barrels per day of Russian oil in 2023 compared to an average 652,000 bpd in 2022.

State refiners Indian Oil Corp, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) are in joint talks with Russian major Rosneft for an annual deal to secure a combined volume of up to 400,000 bpd of Russian oil, mainly Urals, for the fiscal year that starts on April 1, sources said.

Sources said final volumes under the planned term deals depend on payment terms and discounts offered by Russia.

Rosneft has offered a discount of $3-$3.50 per barrel to Dubai prices, two of the sources said, costlier than top refiner Indian Oil’s current deal with Rosneft, which ends on March 31, at a discount of $8-$9 to Dubai quotes on a cost and freight basis.

Refiners consider the proposed discount to be thin, given the uncertainties brought by sanctions, sources said.

Indian state refiners are not seeking supplies of Sokol grade crude under the planned term deal due to payment issues, they added.

The three refiners and Rosneft did not respond to requests for comment.

An Indian government source said India would continue buying Russian oil only if it is sold below the price cap in a non-sanctioned vessels.

The country’s oil ministry did not respond to a request for comment.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil prices headed for weekly gains as Israel rejects ceasefire offer

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices rose in early trade on Friday, on track for weekly gains, with tensions persisting in the Middle East after Israel rejected a ceasefire offer from Hamas.

Brent futures climbed 8 cents, or 0.1%, to $81.71 a barrel by 0119 GMT, while U.S. West Texas Intermediate crude futures rose 17 cents, or 0.2%, to $76.39 a barrel.

Oil prices rose about 3% in the previous session as Israeli forces bombed the southern border city of Rafah on Thursday after Prime Minister Benjamin Netanyahu rejected a proposal to end the war in the Palestinian enclave.

The tensions have kept oil prices elevated, with Brent and WTI both set to gain 5.7% for the week.

U.S. officials made their most pointed criticism so far of Israel’s civilian casualties in Gaza as it turned the focus of its offensive to Rafah.

A Hamas delegation arrived in Cairo on Thursday for ceasefire talks with mediators Egypt and Qatar.

While the conflict has propped up prices, there has been no impact on oil production.

However, with the Ukraine conflict, a combination of drone attacks on Russian refineries and technical outages have led the country to export more crude than it planned in February, which could undermine its pledge to curb sales under an OPEC+ pact.

Under the deal with the Organization of the Petroleum Exporting Countries and allies, called OPEC+, Russia committed to capping crude output at 9.5 million barrels per day (bpd). It is also voluntarily cutting crude exports by 300,000 bpd and fuel exports by 200,000 bpd from the average May-June level.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow