NEW DELHI: After cementing trade ties with China, energy-rich Russia is now looking to strengthen its relationship with India by reviving discussions on a hydrocarbon pipeline, in addition to inviting ONGC Videsh (OVL) to invest in oil and gas projects in the Russian Federation.
India and Russia have decided to form a joint working group to study laying a ‘hydrocarbon’ pipeline connecting the nations. Preliminary discussions were held in New Delhi last week, while a formal announcement is expected during Russian President Vladimir Putin’s visit to India in December, said officials privy to the development.
The two nations are yet to decide on whether they should lay a natural gas or a crude oil pipeline and, hence, decided to work out the feasibility of a ‘hydrocarbon’ pipeline.
Previously, India was considering negotiating with Russia for the extension of a $30-billion gas pipeline that Moscow plans to build to China till the Indian border. If the proposed pipeline from Russia via China’s Xinjiang province materialises, it will be among the world’s most expensive gas pipelines. The joint working group would “examine all feasible options”, an official directly involved in the negotiations told FE.
The Modi government’s intent is to bolster sourcing of oil and gas to meet the country’s rising energy demand. India is a huge importer of energy. In FY14, its net energy imports were 6.3% of the GDP. “Without energy imports, we calculate it would have run a current account surplus of 4.6% of the GDP,” Goldman Sachs said in a recent report.
During the World Petroleum Congress held in Moscow recently, petroleum minister Dharmendra Pradhan is learnt to have discussed the possibility of the pipeline with his Russian counterpart, Alexander Novak. India is looking to set up a pipeline from Russia, either through China or via the same route as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.
During Putin’s visit to New Delhi, sources also say ONGC Videsh may further “fine tune” its talks with Russia’s Rosneft to pick up equity stakes in two blocks in East Siberia in two separate deals.
The exact size of the deals is not known but is believed to have combined worth of around $2 billion.
In one of the deals, OVL, the overseas subsidiary of India’s largest explorer ONGC, is looking at picking up a 10% stake in the Vankor fields that are producing crude oil, the source said, adding that feasibility studies are currently on. The field, which has been under production since August 2009, currently produces more than 400,000 barrel of oil per day, double the output of Barmer, India’s largest onshore field, which is operated by Cairn India.
The second deal OVL is discussing with Rosneft is to buy equity in a greenfield project, Yurubcheno-Takhomskoye. This is a discovered asset and OVL is evaluating picking up 49% stake.
The proposed two deals will bolster the asset base of OVL, whose overseas forays are a key part of India’s energy security strategy. The company, with cumulative investments abroad up to March 31, 2014, of over $22 billion, has stakes in 33 oil and gas projects in 16 countries.
(Source: The Financial Express, November 15, 2014)
NEW GAS-PRICING POLICY TO OVERRIDE UPA’S: GOVT
NEW DELHI: The NDA government today told the Supreme Court that the fresh guidelines framed by it would “supersede” previous UPA dispensation’s policy on price fixation for natural gas, including that from Krishna-Godavari basin, which has been the bone of contention between the Centre and Reliance Industries Ltd (RIL).
“Government has issued new guidelines. It is not going by the formula for gas pricing recommended by C Rangarajan Committee and the new guidelines would supersede the earlier guidelines,” Solicitor General Ranjit Kumar submitted before a bench headed by Justice T S Thakur.
The Centre’s response was to the question raised by the court on September 18 asking it to make its stand clear on fixation of the price for gas from Krishna-Godavari basin as to whether it sticks to the previous UPA dispensation’s policy or making any departure from it.
The Solictor General said ‘new domestic natural gas policy’ was approved by the government on October 18 raising natural gas price to USD 5.61 per mmBtu from November 1 and “recommendation of the Rangarajan Committee would not be given effect”.
The Rangarajan formula on gas pricing was approved by the previous UPA government. Rangarajan was Chairman, Economic Advisory Council to the then Prime Minister.
The Solicitor General said he will place before the bench the submissions to butress why the new guidelines are better than the earlier recommended.
The bench was hearing the PILs filed in 2013 by senior CPI MP Gurudas Dasgupta and the NGO, Common Cause, challenging the UPA government decision to double the price of natural gas from 4.2 US dollar to 8.4 dollar per mmbtu and seeking cancellation of Reliance Industries Ltd’s contract for exploration of oil and gas from the KG basin.
The third PIL on the issue has been filed by advocate M L Sharma.
Responding to the bench’s query, senior advocate Harish Salve, appearing for RIL, said “he is not happy with the new guidelines”.
He also submitted that the court should hear the matter after the proceeding before an arbitral tribunal on the dispute of gas pricing between RIL and Centre is decided.
While the Centre maintained that the issue raised by Dasgupta has been addressed with the new guidelines, advocate Prashant Bhushan said several other issues raised by him in the NGO’s petition needs to be argued and also claimed that a draft CAG report suggested that RIL “hugely over-estimated” the reserves of the KG gas block and other irregularities are cited.
(Source: The Economic Times, November 15, 2014)
KERALA TO BE 1ST STATE TO ROLL OUT CASH TRANSFER SCHEME IN ALL DISTRICTS
KOCHI: Kerala, where Aadhaar penetration is 92 per cent, will become the first state in the country to see the roll-out of modified Direct Benefit Transfer of LPG (DBTL) scheme in all its 14 districts.
The scheme, which is being re-launched tomorrow in 54 districts covering 11 states in the first phase, will cover 23 million crore households, Murali Krishna, general manager, IOCL Kerala and state-level coordinator of Oil Marketing Companies in the state told reporters here.
Currently, the Aadhaar generation level is 95 per cent in these districts.
“Kerala is the first state in which all districts will be covered in the first phase of the roll-out from tomorrow,” he said.
Goa follows Kerala in implementation of the scheme.
In Kerala, Wayanad district has 94 per cent of its LPG customers who have linked their Aadhaar cards to oil companies and banks. There are 146,000 LPG consumers in the backward district, of which 138,000 have already linked their Aadhaar cards with oil companies and banks, deputy general manager, T Satish Kumar,said.
Kerala’s capital Thiruvananthapuram has only 60 per cent of consumers who are cash transfer compliant (CTC), while Idukki district, which has a lot of migrant population, has only 53 per cent consumers CTC compliant.
Consumers, who had joined the scheme earlier and had received cash subsidy in their bank accounts do not need to need to do anything further. They should check their CTC status on www.MyLPG.in.
Those consumers who are not CTC compliant will get a three-month grace period during which they will receive the cylinders at subsidised rate. After this, they will get an additional three months as parking period when they will have to purchase the cylinders at market rate.
Kerala has 7.5 million LPG consumers, 75 per cent of whom are Aadhaar seeded while 65.13 per cent have taken bank seeding.
About 9,000 customers in the country, including 700 from Kerala, have opted out of the subsidy scheme, thus saving Rs 5.31 crore by way of subsidies to the government.
On the proposed LPG terminal at Puthyvypeen, Sateesh said the facility was expected to be ready in another two years.
(Source: Business Standard, November 15, 2014)
NDA DOES A UPA: NEW SUBSIDY REGIME IN NEW YEAR: LPG SOP WILL GO DIRECTLY TO ACCOUNTS
NEW DELHI: All consumers will have to buy cooking gas at market rates from New Year’s Day as the government has issued firm instructions that the subsidy will be transferred directly to bank accounts as it seeks to end illicit supplies to restaurants, cars and factories, besides slashing the subsidy bill and boosting private investment.
After recently eliminating the diesel subsidy, which had ballooned to Rs 62,837 crore, Oil Minister Dharmendra Pradhan has now ordered state oil companies to ensure that the scheme — which is being launched as a pilot on Saturday for 2.33 crore customers in 54 districts — is smoothly expanded to the entire country on January 1, 2015.
Some oil industry executives had expressed doubts about the successful rollout of the scheme to the entire country in barely six weeks of the launch in 54 districts after the UPA government botched up the programme after expanding it to 291 districts just before the general election. It had been forced to withdraw the programme after Congress leaders said it was costing them votes.
The oil ministry is, however, confident about success this time around. “The old DBTL (direct benefit transfer of LPG) scheme failed because Aadhaar number was made mandatory to avail subsidy. We have modified the scheme so that the consumer will not face any difficulty in getting subsidised cylinders,” Pradhan told ET.
Under the modified DBTL, a consumer will be eligible for subsidised LPG cylinders even without the Aadhaar number, Pradhan said.
Consumers without the unique ID will also receive cash directly in their bank accounts. They can switch to Aadhaar-based cash transfers once they have been enrolled by informing dealers and banks.
Customers have six months to tell LPG dealers their bank account numbers without losing the subsidy amount. While subsidised cylinders will be delivered to them in the first three months, they will have to buy at market rates after that. The subsidy will be remitted to their bank accounts within the next three months, officials said.
For the first subsidy payment, the money will be transferred to the bank account of consumers as soon as they make the first booking for a cylinder after joining the scheme, prior to delivery. This advance ensures that consumers have extra cash to pay for the first cylinder at market price. The permanent advance shall be notified for consumers now joining the scheme separately.
The move reflects the embrace of the direct benefits transfer principle introduced, albeit with limited success, by the UPA government. Aadhaar has meanwhile covered more than half the country’s population.
“The UIDAI (Unique Identification Authority of India) has, till date, issued over 70.7 crore Aadhaar numbers,” the government said in a release on Friday. “Nine states/UTs including Andhra Pradesh, Kerala, Delhi and Himachal Pradesh have crossed 90% Aadhaar coverage, while a further seven states/UTs have Aadhaar coverage of between 70% and 90%.”
In the 54 districts in which the pilot is being launched, 95% of consumers already have Aadhaar numbers. The new scheme ensures that consumers receive SMS alerts on their registered mobile numbers at every stage of enrollment in the scheme.
(Source: The Economic Times, November 15, 2014)
ONGC DAZZLES WITH Rs 5,445-CRORE Q2 NET PROFIT
NEW DELHI: State-owned Oil and Natural Gas Corp (ONGC) on Friday reported a 10 per cent drop in its July-September net profit, the first decline in five quarters, after global oil prices slumped.
Net profit in July-September at Rs 5,444.89 crore was 10.2 per cent lower than Rs 6,063.86 crore net profit in the same period a year ago, the company said in a statement.
ONGC earned $102.13 for every barrel of crude oil it produced in second quarter, down from $109.03 a year ago. After paying for fuel subsidy, its net earning was $41.35 per barrel as opposed to $44.86 in second quarter of last fiscal.
The company doled out Rs 13,641 crore to partly subsidise diesel and cooking fuel in the quarter.
This dented its profitability by Rs 11,581 crore, the statement said. Brent crude has dropped 30 per cent this year to the lowest price in more than four years, reducing earnings for oil producers. ONGC said its oil production rose 2.08 per cent to 5.206 million tons but gas output dipped 8.41 per cent to 5.327 billion cubic meters mainly because it had to shutdown some of its fields in the KG basin following a pipeline of transporter GAIL being damaged in a blast. Turnover fell 8.7 per cent to Rs 20,447.76 crore.
The company said it made two new discoveries in shallow waters off Gujarat coast and in Assam basin. The well GKS092NAA-1 in NELP block GK-OSN-2009/2 at Kutch offshore shallow water flowed gas at the rate of 1,15,168 cubic meters per day during tests. ‘This new discovery has provided lead for further exploration in the block,’ it said.
The block is operated by ONGC (40 per cent), while other partners are Adani Welspun Exploration Ltd (30 per cent) and Indian Oil Corp (30 per cent).
In Rudrasagar block in the North Assam Shelf, a new pool of oil was found. ‘This discovery will provide lead for the field growth towards south-west part of the main Rudrasagar field,’ the statement said.
(Source: Millennium Post, November 15, 2014)
INDIA TAKES DIPLOMATIC ROUTE TO RESOLVE OVL WOES IN VENEZUELA
NEW DELHI: India is now taking the diplomatic route to remove business hurdles with energy-rich Venezuela, specifically concerning ONGC Videsh (OVL) operations in the Latin American nation.
“The ministry of external affairs (MEA) may now play an active role in extricating OVL and other Indian companies from their troubles in Venezuela. The petroleum minister (Dharmendra Pradhan) clearly wants the MEA to steer a deal offered by the Venezuelan oil minister Rafael Ramirez recently to sort out the mess,” a top government source told FE.
Petroleos de Venezuela, the national oil company of Venezuela, which is reportedly facing a cash crunch is holding back dividends to OVL, the overseas arm of state-run explorer ONGC. The Indian firm has invested in two projects in Venezuela — San Cristobal and Carabobo-1.
“To placate Indian sentiments over unpaid dividends and slow progress of work in oil fields in which Indian companies have built significant stakes, Ramirez has offered another prolific block in the heavy crude oil Orinico belt to an Indian consortium on nomination basis. Notably, RIL has already taken the lead in engaging with the Venezuelan side for entry in the new block,” said the government official.
The Venezuelan oil minister is also showing a willingness to put in place a mechanism wherein part of the proceeds for payment of crude exported from Venezuela to India could be maintained in Indian rupees, which, in turn, could be used to pay for exports from India to Venezuela, he added.
However, the Indian firms are scared of engaging with Venezuelan authorities as promises made before have not been fulfilled. They now need the MEA help to sort the snags out, says industry watchers.
On September 3, 2013, PMS Prasad, executive director of RIL, had said: “We are looking at two things in Venezuela. One, we have a long-term crude oil supply contract and enhancing the quantities under this contract, possibly from next year. We are also looking at investing in Venezuela. They have given us 2-3 opportunities for us to evaluate.”
In the San Cristobal project, OVL’s share of oil production was 0.767 million tonnes in FY14 and current production is around 31000 bopd.
OVL’s share of investment stands at about $193.13 million till March, 31 2014 in the project. The Indian explorer has 40% stake in the project.
On the other hand, Carabobo-1 project is producing about 7500 barrel of oil per day from 11 development wells. OVL holds 11% participating interest in Carabobo-1 project.
(Source: The Financial Express, November 15, 2014)
ONGC TO INVEST RS.10,600 CRORE
CHENNAI; The board of Oil and Natural Gas Corporation Ltd., on Friday approved an investment of over Rs.10,600 crore in two major projects for enhancing production in western offshore fields.
In its filing to the BSE, ONGC said it would invest Rs.6,069 crore in re-development (phase-III) of Mumbai High (South) and Rs.4,620 crore for integrated development of Mukta, Bassein and Panna Formations.
The first project comprises drilling 36 new wells and 34 sidetrack wells and installation of three well platforms and two clamp-on facilities for wells on existing platforms.
Installation is expected to be completed by April, 2017. Drilling of wells and the overall project completion is scheduled for March, 2019.
The second project is located at a water depth of 50-70m and about 80-90 kilometre from Mumbai coast. The incremental production is expected to start in 2014-15 with incremental production rate of 10 million standard cubic meters per day of gas, 950 barrels of oil, about 1100 cubic meters of condensate per day by 2017-18. The project is scheduled for completion by April 2017.
(Source: The Hindu, November 15, 2014)
GUJARAT GAS POSTS 35% DIP IN Q2 NET
Ahmedabad: In a board meeting held on Thursday, the new chief secretary of Government of Gujarat, DJ Pandian was appointed as the board of director and chairman of Gujarat Gas Company Ltd.
The company registered a 35.13 per cent decline in its consolidated net profit at Rs 77.25 crore for the quarter ended September 30, 2014. As compared to the Q2 of current fiscal, the company posted Rs 119.10 crore for the corresponding period last year.
Along with Pandian, Atanu Chakraborty was also appointed as a board of director of Gujarat Gas Company while Varesh Sinha and Hasmukh Adhia resigned from the post of director in the company. All of them are IAS officers.
Gujarat Gas saw its consolidated total income dip by 17.01 per cent to Rs 699.11 crore for the second quarter of fiscal 2014-15 from Rs 842.41 crore for the corresponding period last year.
On standalone basis too, net profit of Rs 77.03 crore for second quarter declined by 35.52 per cent for Gujarat Gas in the current fiscal when compared with Rs 119.48 crore for Q2 of previous fiscal 2013-14. The total standalone income fell by 17.02 per cent to Rs 698.74 crore for Q2 of FY ’15 as against Rs 842.15 crore of Q2 of FY ’14.
(Source: Business Standard November 15, 2014)
RIL CHALLENGES GOVT’S NEW GAS PRICING NORMS
New Delhi/Mumbai: Reliance Industries Ltd (RIL) told the Supreme Court (SC) on Friday that it had initiated arbitration proceedings against the government over the new domestic gas pricing guidelines.
Senior lawyer Harish Salve, appearing for RIL, said the company had already appointed its arbitrator and it was now up to the government to respond.
According to the new gas pricing formula announced in October by the National Democratic Alliance (NDA) government, the price of domestic gas was raised to $5.61 per million British thermal units (mmBtu) from $4.2 per mmBtu. It was much less than the $8.4 per mmBtu proposed by the United Progressive Alliance government, which was ousted in the 2014 general election.
Salve’s statement came during a hearing on a petition filed by Communist Party of India leader Gurudas Dasgupta, who had alleged that the UPA government’s move to hike the price of gas was aimed at favouring RIL.
Non-profit Common Cause also challenged the price hike. A third petitioner in the case is lawyer Manohar Lal Sharma, who has challenged the constitutional validity of the production sharing contract initially entered into between the government and RIL.
Clarifying that the government had chosen not to accept the recommendations of the Rangarajan committee on which the UPA had announced the $8.4 per mmBtu price, solicitor general (SG) Ranjit Kumar said the new government’s decision was not to benefit any particular company, but for the benefit of the country and people in general.
Dispelling expectations of companies that the guidelines could be implemented with retrospective effect, the centre told the court that the guidelines only came into force from 1 November.
Lawyer Prashant Bhushan, appearing for Common Cause, told a bench of justices T.S. Thakur, J. Chelameswar and Kurian Joseph that the government should take back the gas fields from RIL as it indulged in “gold-plating and over-invoicing of expenditure, and also over-estimation of reserves”.
The dispute is over the gas from the KG basin which the government should reclaim from RIL for not utilizing it, according to Dasgupta’s petition.
The case will come up for hearing on 16 January.
In May, RIL and its partners in the D6 block of the KG basin slapped an arbitration notice on the Government of India for failing to implement the Domestic Natural Gas Pricing Guideline, 2014, which was notified by the UPA government in January this year.
This was one of the two arbitrations that RIL is currently involved in with the government of India. The second arbitration, which was initiated by RIL in July 2012, was on not allowing recovery of cost incurred in the development of D1 and D3 fields—the two flagship fields in the KG-D6 block.
On 14 July, Dharmendra Pradhan, the minister of petroleum and natural gas, in a written reply to a question, informed the Lok Sabha that the ministry had disallowed the recovery of $579 million to RIL and its partners BP Plc. and Niko Resources Ltd in the D6 block on account of low production in 2013-14.
This was the fourth year when the government disallowed the company from recovering cost incurred in exploration and production of oil and gas from the KG basin due to a shortfall in production. Earlier the government had disallowed a cost of $457 million for fiscal 2011, $548 million for fiscal 2012 and $792 million for fiscal 2013, taking the total disallowed cost to $1.8 billion, including fiscal 2014.
(Source: Mint November 15, 2014)
NIKO RESOURCES SAYS EVALUATING PLANS FOR INDIA ASSETS
Bengaluru: Canada’s Niko Resources Ltd said it was evaluating plans for its oil and gas assets in India, citing uncertainty related to the outlook for natural gas prices in the country.
Niko owns 10% in the D6 block, off the eastern coast of India. BP Plc has a 30% stake in the block, while the rest is owned by Reliance Industries Ltd. (RIL).
The company also holds a stake in the Hazira field in western India.
Gas output from the block has fallen sharply over the past few years. Reliance says the decline is due to the geological complexity of the block, while the Indian government believes contractors have failed to drill the promised number of wells.
Demand for gas in India far outstrips production, but prices have been kept low for important industries such as fertilizer production and power generation, deterring investment in the sector.
Last month, the Indian government increased gas prices by 33% to $5.61 per million British thermal unit (mBtu) from 1 November and is expected to revise rates every six months.
Domestic gas producers such as RIL and Oil and Natural Gas Corp. Ltd. (ONGC) insisted on a price hike because the cost of exploring new reserves is more than the current price, leaving them reluctant to take the risk.
Niko said on Friday it would receive a cash benefit of $4 million thanks to the jump in gas prices, but added that it remained concerned about long-term prices.
The company’s sales volumes from the D6 block dropped 13% to 47 million cubic feet equivalent (mmcfe) per day in the second quarter ended 30 September.
Sales volumes from its Block 9 in Bangladesh rose 16% to 65 mmcfe/day.
Niko, which is in the process of restructuring itself, sold its interest in the Grand Prix block in Madagascar in July.
The company also sold its interests in seven Indonesian deepwater production-sharing contracts to a unit of Ophir Energy Plc last month.
Niko, which had raised doubt about its ability to continue as a going concern in November last year, said it had unrestricted cash and cash equivalents of $120 million, as of 30 September.
(Source: Mint November 15, 2014)
HPCL ADVANCES ON ROBUST Q2 RESULTS
HPCL rose 1.96% to Rs 552.40 at 10:37 IST on BSE after the company reported 166.59% surge in net profit to Rs 850.21 crore on 0.35% fall in total income to Rs 51964 crore in Q2 September 2014 over Q2 September 2013.
The company announced Q2 results after market hours Thursday, 13 November 2014.
Meanwhile, the S&P BSE Sensex was up 64.74 points or 0.23% at 28,005.38.
On BSE, so far 90,148 shares were traded in the counter as against average daily volume of 2.17 lakh shares in the past one quarter.
The stock hit a high of Rs 563 and a low of Rs 549.35 so far during the day. The stock had hit a record high of Rs 588.80 on 12 November 2014. The stock had hit a 52-week low of Rs 199 on 22 November 2013.
The stock had outperformed the market over the past one month till 13 November 2014, gaining 6.6% compared with the Sensex’s 5.9% rise. The scrip had also outperformed the market in past one quarter, jumping 30.68% as against Sensex’s 7.8% rise.
Recent fall in crude oil prices has perked up the prices of HPCL stock along with other PSU OMCs. Lower crude oil prices could reduce under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices. The government has already freed pricing of petrol and diesel.
The large-cap PSU oil marketing firm has an equity capital of Rs 338.63 crore. Face value per share is Rs 10.
The Government of India holds 51.11% stake in HPCL as at 30 September 2014.
Meanwhile, government on Thursday, 13 November 2014, hiked excise duty on petrol and diesel by Rs 1.50 per litre each for the two fuels.
Investors are expecting no change in petrol and diesel prices in next revision on 16 November 2014. PSU OMCs review fuel prices on 1st and 16th of every month based on the average imported oil price in the previous fortnight. Recent fall in crude oil prices strengthened the case for a cut in fuel prices but surprise hike in excise duty on fuel prices negated the case for a fuel price cut.
Brent crude oil slumped yesterday, 13 November 2014 to the lowest in four years amid signs that OPEC remains unwilling to reduce output to ease a supply glut. Brent for January settlement was up 54 cents at $78.03 a barrel. The contract had lost $3.63 a barrel to settle at $77.49 a barrel yesterday, 12 November 2014, its lowest close since September 2010.
(Source: Business Standard November 15, 2014)
CRUDE AWAKENING – OIL PRICE FALL CHALLENGES ALL THE THEORIES
Oil experts can explain why the price of crude has fallen by 30 per cent since June. They are paid to come up with reasons for whatever is going on. But behind the glib patter is an intellectual vacuum. Until September 9, the experts’ challenge was to justify the extraordinary price stability. The price of a barrel of Brent crude had traded less than eight percent above or below $108 for 448 consecutive trading days, the lowest price variation in decades. Most of the pundits credited Organization of the Petroleum Exporting Countries (Opec) in general or Saudi Arabia in particular for balancing out sanctions, civil wars and a rapid increase of US production.
The cartel-believers have had to pivot rapidly. They now say Opec has suddenly lost clout or that Saudi Arabia has changed strategy. Either story may be true, but the reasons for the rapid change remain elusive. It is even harder for commentators schooled in traditional market economics, who prefer dispassionate analysis of supply and demand to discussions of potentates’ deeply strategic or possibly irrational decisions. In their models, price is determined solely by the interplay of such factors as the average or marginal cost of production, the availability of product, the pace of demand growth, and the cost and availability of financing. It strains reason to say these have changed enough since the summer to justify the free fall in the price.
The oil experts may be confused, but the economists who analyse the effect of suddenly lower prices on the global economy should be certain. Their models tell them that consumers will enjoy the equivalent of a tax cut. Money saved on fuel bills will be spent on other things, pushing up the pace of gross domestic product (GDP) growth.
That principle, though, is looking a little shaky. Lower oil prices could also accelerate global disinflation, and high leverage will be harder to bear if falling prices turn into falling wages. Fuel savings may just go to speed up debt repayments. Besides, the missing revenues in producing countries and the loss of oil money in financial markets could cause discomfort. No wonder most macroeconomists have chosen to ignore the oil price.
(Source: Business Standard, November 15, 2014)
OIL BOUNCES UP OFF FOUR-YEAR LOWS, ANALYSTS SAY SLUMP NOT OVER
NEW YORK: Crude oil rose on Friday on buying support after the longest stretch of weekly losses that took prices to 2011 lows, but oversupply concerns made analysts skeptical of whether the rebound would continue.
Benchmark Brent crude rose as traders saw a bargain after Thursday’s 3 percent slump and the near 4 percent loss in three earlier sessions. The global benchmark is almost $40 a barrel below its June high above $115, a 30 percent decline over five months.
U.S. crude futures climbed on expectations of higher demand for heating oil as forecasts called for a cold weekend in the Northeast and Midwest regions of the United States.
Brent’s front-month contract LCOc1 was up $1.35 at $78.84 a barrel at 12:05 p.m. EST (1705 GMT.. It sank early to $76.76, its lowest since September 2010, and bounced to a session high of $79.64.
Brent is down 6 percent on the week for its biggest weekly decline since June 2012. It has dropped eight weeks in a row for its longest streak of weekly declines since 1988, when Reuters began keeping records.
U.S. crude CLc1 was up 81 cents at $75.02 a barrel, after a session high of $75.42 and four-year low of $73.25.
“We’re definitely seeing some covering before the weekend, though I wouldn’t hold my breath longer-term,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
“The No. 1 concern in this market is oversupply. As long as OPEC looks powerless to cut enough production to put a floor beneath these prices, there will be no sea change in the long-term directional move lower.”
Few analysts think the Organization of the Petroleum Exporting Countries will do much to prop up prices when the producer group meets on Nov. 27.
OPEC’s barrel price for crude itself has fallen by $35.33 since late June, to $75.15 on Friday.
Smaller OPEC members such as Algeria and Venezuela are pushing to cut output. Qatar also expects to reduce production. But top oil exporter Saudi Arabia has not said it will cut output.
The International Energy Agency, which usually refrains from predicting oil prices, said in its monthly report prices could fall further in 2015, citing pressure from higher output from the United States and other non-OPEC producers.
(Source: The Financial Express, November 15, 2014)
