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US oil export to India becomes double in the month of February
Equities, Market News, Markets - February 24, 2025

US oil export to India becomes double in the month of February

US oil export to India becomes double in the month of February

 

On the 10th January, 2025, the Trump regime imposed sanctions on Russian oil producers, tankers and insurers. The aim of these sanctions was to prohibit secret oil exports and also to block money used for the war with Ukraine. Prior to these sanctions, Russia exported oil in India to around 30 percent. 

In present times, the sanctions have resulted in contraction of crude oil exports from Russia to around 25 percent of the total Russian oil exports to India. In this ongoing scenario, the oil exports from the USA have come close to twice of the earlier export levels. The government of India also plans to expand the level of imports of American energy to about two-thirds which accounts to 25 billion dollars. In the last year, it was around 15 billion dollars. 

 

Russia and USA’s share in India’s crude oil imports

In the initial 20 days of the month of February, 2025, Russia exported an average of 1.07 million barrels of oil per day to India which is lower compared to export of 1.4 million barrels per day in the month of January, 2025. 

In contrast to this, the USA’s crude oil export to India accounts for an average of 0.2 million barrels of oil per day in the month of February. It indicates a higher export level to India compared to 0.11 million barrels per day in the month of February.

The possible reason for expansion in crude oil export by the USA in India is to balance out the losses caused due to sanctions on Russian crude oil, especially ESPO Blend type. 

The ships loaded with Russian oil and the USA crude oil are set to reach India in the month of March. The average time required for the USA ships to reach Indian ports is about 45 days. Russian ships take around 25 to 30 days to reach Indian ports.

 

Oil export’s share of other countries to India

The sanctions have not only led to expansion in oil exports of the USA to India but also export from Iraq and Saudi Arabia. The market share of Iraq oil export expanded to about 1.08 million barrels per day compared to earlier 0.8 million barrels per day. While, the market share of oil imports from Saudi Arabia surged to 0.91 million barrels per day in the period of 1st to 20th February, 2025 compared to 0.77 million barrels per day in the past. 

The average oil export from UAE to India was recorded to be 0.31 million barrels per day in the period of 1st to 20th February, 2025 against 0.48 million barrels per day in the last month.

The average exports from countries in the Middle East to India in the month of February is likely to be marginally lower compared to the average export recorded in the initial 20 days of the month of February, 2025. The reason for this is that exports from the Middle East are usually at low levels in the second half of every month against the export levels in the first half of each month. 

The crude oil loaded tankers from Middle East countries are set to reach in  the month of February only as it takes around 6 to 12 days to reach Indian ports.

 

Impact on Indian companies

The oil loaded on the USA and Russian ships are anticipated to reach India in the month of March. The sanctions imposed by the USA on Russia has led to market disruption in the oil trade between India and Russia. The Indian companies have a period up to 12th March to finalize their trade dealings with sanction-imposed Russian companies. After this, the Indian companies will face secondary sanctions in case of continuing trade with these companies. 

 

Current oil trades of India

In the present times, oil companies in India are purchasing more from the USA and Middle East. Indian oil companies are avoiding imports from  Russia as to not face the issue of blocked delivery due to imposed sanctions. In order to offset the trade imbalance between India and the USA, India is facing pressure from the Trump regime to expand its energy imports from the USA. 

Recently, the government of India announced plans to expand import of energy from the USA by around two-third level which accounts to 25 billion dollars in the upcoming terms. 

 

 

 

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Amid an energy crisis, desperate Europeans turn to firewood for warmth

Amid an energy crisis, desperate Europeans turn to firewood for warmth.

At a summit in Prague, European leaders fell short of agreeing on a price cap for gas amid concerns that any such move could threaten supplies to the region. the gas pipeline is the latest sign of the regions critical position as Russia slashes supplies in the standoff over the war in Ukraine. As much as 70% of European heating comes from the natural gas and electricity and with Russian deliveries drastically reduced.

In france prices for wood pellets have rised nearly doubled to 600 euros a ton. And there are signs of panic buying of the most basic fuel , meanwhile wood stoves can now take months to deliver. The energy level of crisis is intensifying a surge in living expenses , with inflation strapped households across the region are increasingly faced with choosing between heating and other essentials.

Europeans are so angry over sky-high bills and starting to gather the firewood for winter.,
For many Europeans the key concern is doing whatever it takes to stay warm in the coming months. The fear for heat could create health and environmental issues. the diseases can end up deep in the lungs and cause heart attack , strokes etc said by the expert. In Germany facing a yet another crisis after Russia shut down its Nordstrom one national gas pipeline due to technical issues. Germany, where the country’s association of chimney sweeps is dealing with a flood of requests to connect a new and old stoves, and peoples are inquiring about the burning horse dung.

People are anxious for wood and they are buying more than usual. In Berlin , crisis creates unsettling echoes of the desolation following world war 2 with fuel of short supply, residents chopped down nearly all the trees in the central tiergarten park for heating.

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Brent oil fell over 4% in a week amid economic crisis

Brent crude fell over 4% in a week amid economic worries; could trade in $98 and $112 range.

Brent crude reported a weekly drop of 4.1% while WTI down by 3.4%, after the first monthly drop since November. Prices fell on Tuesday as Brent’s $10.73 drop was the contract’s third-biggest daily drop since 1988, when it began trading. On 5th July 2022, Brent Crude fell by $10.73, which was the contact’s first monthly drop since November.
Central banks around the world are increasing interest rates to control inflation, raising fears that rising borrowing costs could slowdown growth. While potential lockdown in shanghai due to covid-19 could affect oil demand. The restrictive monetary policy of major economies threatened economic growth. This led to the fall in US oil benchmark, tracking a decline in a commodity markets. There was a rise in oil prices this year by 35%. This is due to the disrupted oil supply due to the war in Ukraine and also the global economic recovery. This also affected the price of natural gas, as it surged upto 17% in US and EU.

An important export route for Kazakh oil is in the risk of being suspended. It demands a Russian court order for it to temporarily shut down. After labour strike ended in Norway, there was a fall in the crude oil prices. The price of natural gas and crude oil also fell as th e Euro record a 20-year low against the US dollar. According to the US non-farm payroll data,in June the economy added more jobs than expected. This is an indication of constant strength of labour market. This gives gives the Federal Reserve ammunition to deliver another 75-basis-point rate hike this month. The US energy firms this week hit the highest since march 2020 by adding two oil rigs, bringing the total to 597. Due to the economic fears the prices of oil fell this week. However, the markets are still indicating bullish signals. The supply tightness is likely to intensify than to ease. The price volatility may continue this week. The western countries has banned oil export from Russia. This have supported prices and sparked a re-routing of flows while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers struggle to deliver on pledged production increases. In this week the Bent crude could trade could trade in $98 and $112 range. This week the rupee will decide the crude movement. .In the domestic market, crude has very good support at Rs 7970.00, sustaining below this can show Rs 7760, while upsides Rs 8390 and Rs 8550 are acting as a resistance.

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Why do commodities Exchange Exist?

What are commodities Exchange?

The Commodities exchange allows traders to buy and sell goods. It includes both simple goods and manufacturing goods. The function of Commodity exchange is to provide a centralized marketplace where commodity producers and commercials can directly sell to those who want them for consumption or manufacturing. Commodity future exchange connects buyers and sellers easily. It helps businesses to enhance while there is a buyer for every seller. It makes the economy much more efficient with standardized prices for a commodity. Commodities are into two broad categories: hard and soft. Hard commodities consist of natural resources that must be mined or extracted, whereas soft commodities are agricultural products such as grain, meat, dairy, and livestock. Investors use these commodities to diversify their portfolios. Commodities are considered a risky investment class.
It is affected by many uncertainties and risks, such as epidemics, natural calamities, or other unpredictable circumstances. Individuals can invest in commodities through futures, options, exchange-traded funds, and contracts. There are six major commodity trading exchanges in India:

1. Multi Commodity Exchange (MCX)
2. National Commodity and Derivatives Exchange (NCDEX)
3. National Multi Commodity Exchange (NMCE)
4. Indian Commodity Exchange (ICEX)
5. Ace Derivatives Exchange (ACE)
6. The Universal Commodity Exchange (UCX)

Types of commodities:

1. Metals Commodities – This includes the trading of precious metals such as gold, silver, copper, and platinum. Gold is traded by investors as it is the safest way to diversify their portfolios against any uncertainties like inflation or currency devaluation.

2. Energy – This includes commodities like gasoline, natural gas, heating oil, and crude oil. Normally, oil price fluctuates due to the increasing demand for energy commodities. However, individuals entering energy commodities should be aware of economic reforms, a shift in production by OPEC, and new advances in technology.

3. Agriculture commodities – Commodities such as soya, rice, wheat, coffee, corn, cocoa, sugar, and cotton come under agriculture commodities. These commodities are bought by the wholesaler or a firm that uses them as a raw material. 

4. Meat and livestock – This includes commodities like feeder cattle, pork bellies, lean hogs, and live cattle. The trading of livestock is not popular in India. It is mostly done in the US, UK, China, etc.

 

Ways to Invest:

A derivative Contract (Financial Instrument) is a contract between two parties for deriving value from any underlying assets. As the Price of underlying assets changes, the value of underlying assets also fluctuates.

 

The types of Derivative Contracts:

Options – Options are contracts where the buyer has a right to buy or sell a particular security at a predefined price. It is commonly known as a strike price. However, they don’t have obligation to buy or execute the option. One who executes the contract is known as the option writer.
Forwards – It has an obligation in the contract, which is unstandardized and not traded on stock exchanges. Forwards are available over the counter only and cannot de traded directly on market. However, forwards can be customized according to the parties involved. Forwards contract has third party risk. There are chances that the other party defaults in the payment or delivery of the product are not done as there is no regulatory party involved.  
Futures – This is the same as forwards, but futures are standardized and allow holders to sell or buy security at a specified price and date. Futures can directly be traded on market.
Swaps – It involves swapping of obligations between the two parties depending on cash flows which are depended on the rate of interest and agreed upon at the period while entering into the contract. Here, one cash flow is fixed and the other depends on the market interest rate and usually, these rates are swapped.

The best way to trade in commodities is through futures contracts. An agreement to buy or sell a commodity in the future agreed on a date at a pre-determined price.

 

Role of commodity market:

1. Food security – Farmers can use the future market more effectively by selling at a future price by fixing the price. This will ensure that they are not susceptible to future fluctuation in price. Hence, food security can be achieved using the commodity market. Many times commodity markets help farmers in hedging the commodity which is prone to uncertainties and risk. 
2. Agricultural ecosystem – Substantial amount of food grains are lost in the transmission process. The commodity market helps farmers, brokers, middlemen, and customers. If the food gains are not stored properly they get attacked by rats and pests.  
3. Aggregation – Currently, the middleman acts as an aggregator which is not a transparent mechanism. So, commodity exchange provides an organized and guaranteed mechanism for all the essential commodities.
4. Hedging and risk – One important role and function of the commodity market is to hedge and distribute the risk in the market.
5. Speculative excess – The commodity market absorbs speculative excess risk in the market, especially in the spot market. It helps various retail investors to participate in the new asset class.

 

What are Gold funds and what are the benefits?

 

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Business, Economy - May 30, 2020

Coal, Crude oil, Natural Gas and Refinery Products. How these sectors performed in April 2020.

Coal, Crude oil, Natural Gas and Refinery Products. How these sectors performed in April 2020.

 

Coal:

The production of coal in April stood at 47 MT with a fall of 15.46% vs 4% in March 2020. The imports of coal decreased by 29.1% at ₹18.65 MT in April 2020, whereas in April 2019 it stood at 26.34 MT. The fall in the month of April 2020 is due to rise of the pandemic. The coal imports observed a fall of 6.18% in April 2020 over the preceding month. Out of the total imports of coal in April 2020, the volume of non-coking coal stood at 13.05 MT vs. 13.6 MT in the preceding month whereas the volume of cooking imports coal stood at 3.3 MT in April 2020. The total coal import for FY20 stood at 247.1 MT vs. 235.35 MT in FY19, with an increase of 5%. The key coal consumption sector is struggling with poor demand as a result of the lock down and the low capacity of plants. This resulted in a decline of demand for coal. In order to raise coal demand, the government has announced a range of steps such as an expanded availability of dry fuel for linkage consumers. It has also announced a number of relief measures, including the power sector, for CIL consumers.

 

Crude oil:

The production of crude oil in April 2020 stood at 2.5 MT vs. 2.7 MT in April 2019 with a fall of 6.35%. The production in April was 1.44% less than the monthly target. The target was 2,583.03 TMT whereas production was of 2,545.81 TMT. Crude oil production by ONGC stood at 1,681.77 TMT in April 2020 vs. 1,690.78 TMT in April 2019 with a fall of 0.53%. It was less by 0.65% to achieve the monthly target of 1,692.83 TMT in April 2020. Crude oil production by Oil India Limited stood at 248.25 TMT in April 2020 vs. 250.52 TMT in April 2019 with a fall of 6.39%. It was less by 0.9% to achieve the monthly target of 250.52 TMT in April 2020. Crude oil production by PSC Fields stood at 615.80 TMT in April 2020 vs. 639.68 TMT in April 2019 with a fall of 19.25%. It was less by 3.73% to achieve the monthly target of 639.68 TMT in April 2020.

 

Natural Gas:

The production of Natural gas in April 2020 stood at 2,161.33 MMSCM vs. 2,655.89 MMSCM in April 2019 with a fall of 10.88%. The production in April was 10.88% less than the monthly target, the target was 2,425.32 MMSCM. Natural gas production by ONGC stood at 1,725.69 MMSCM in April 2020 vs. 2,037.71 MMSCM in April 2019 with a fall of 15.31%. It was less by 12.73% to achieve the monthly target of 1,977.42 MMSCM in April 2020. Natural gas production by Oil India Limited stood at 202.05 MMSCM in April 2020 vs. 224.49 MMSCM in April 2019 with a fall of 9.9%. It was less by 4.64% to achieve the monthly target of 211.88 MMSCM in April 2020. Natural gas production by PSC Fields stood at 233.59 MMSCM in April 2020 vs. 393.70 MMSCM in April 2019 with a fall of 40.67%. It was less by 1.03% to achieve the monthly target of 236.02 MMSCM in April 2020.

 

Refinery Products:

The production of Refinery products in April 2020 stood at 14,745.18 MT vs. 2,20,703.06 MT in April 2019 with a fall of 28.78%. The production in April was 22.01% less than the monthly target, the target was 18907.44 TMT. Refinery Products production by CPSE Refineries stood at 7,103.76 TMT in April 2020 vs. 11,263.33 TMT in April 2019 with a fall of 36.93%. It was less by 28.91% to achieve the monthly target of 9,992.36 TMT in April 2020. Refinery Products production by JV Refineries stood at 925.13 TMT in April 2020 vs. 1,721.66 TMT in April 2019 with a fall of 46.26%. It was less by 22.71% to achieve the monthly target of 1197 TMT in April 2020. Refinery Products production by Private Refineries stood at 6,716.28 TMT in April 2020 vs. 7,718.08 TMT in April 2019 with a fall of 12.98%. It was less by 12.98% to achieve the monthly target of 7,718 TMT in April 2020.

 

 

Weekly market update (26th May – 29th May).

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Negative crude oil price leads to multiple legal battles

Negative crude oil price leads to multiple legal battles

 

In late April 2020. for the first time in history crude oil prices dropped below zero. To avoid storage cost sellers are paying buyers to take the consignments as oil demand has crashed globally.

This was the historic crash in prices of crude oil in US. Due to this. the oil contracts of April which are executed by the Multi-Commodity Exchange of India Ltd (MCX) are settling at negative ₹2,887 per barrel. This gave rise to multiple court cases in India.

 

Legal battles in India due to negative crude oil price:

Altogether, there are 5 cases floating across 3 jurisdictions in India. There are 3 cases in Bombay High Court and the rest two are from Rajasthan High Court and Delhi High Court.

 

The first lawsuit:

The first case is filed by PCS Securities Ltd, Motilal Oswal Financial Services Ltd, and Religare Securities. On 22nd April 2020, they jointly filed a lawsuit in Bombay high court against Multi-Commodity Exchange of India Ltd (MCX) and Securities and Exchange Board of India (SEBI). They appealed to the Bombay high court that, do the commodity exchanges in India including Multi-Commodity Exchange of India Ltd (MCX) have any provision to execute the trade of commodities in negative value? They further added, negative values cannot calculate any risk and margins for future contract using any software.

 

The Second lawsuit:

The second case is again filed by Motilal Oswal Financial Services Ltd on Dhanera Diamonds. Dhanera Diamonds is the trading client of Motilal Oswal Financial Services Ltd. This case was filed in Bombay High Court in which Motilal Oswal Financial Services Ltd appealed in court to secure the dues from Dhanera Diamonds. The dues amount to ₹80.74 crore. The outstanding dues was on its settlement obligations for trades in crude oil contracts from Dhanera Diamonds.

 

The Third lawsuit:

In retaliation, Dhanera Diamonds filed a case against Motilal Oswal Financial Services Ltd and Multi-Commodity Exchange of India Ltd (MCX) demanding ₹56 crore due. They appealed that commodity exchanges in India including Multi-Commodity Exchange of India Ltd (MCX) do not have any provision to execute the trade of commodities in negative value, so there is big question how these contracts are settled?

 

The Fourth lawsuit:

Ganganagar Commodity Limited filed a case against Multi-Commodity Exchange of India Ltd (MCX) in Rajasthan High Court. Ganganagar Commodity Limited laid the same allegation on Multi-Commodity Exchange of India Ltd (MCX) that how negative trading is executed when they do not have any facility to allow negative trading. The fifth lawsuit was filed at Delhi High Court which is similar to fourth lawsuit.

 

New laws can be implemented:

All these court cases are pending. When all these court cases close, this will not only settle the obligation but also set new supersede on contract law. The big question revolves around contract law is whether exceptions should be made to established norms and regulation for unexpected situations.

 

Effect of fall in crude oil price on Indian economy:

Even in the midst of chaos, falling crude oil prices can reduce India’s economic pain. India went under lock down due to COVID-19. This resulted in gradual slowdown of Indian economy, but on the contrary helped the government to accomplish their various annual target. India can raise oil-related taxes due to negative crude oil prices, which can help to offset other losses. The sudden fall in crude oil prices may help India to control inflation and boost tax revenues. Decrease in oil price can be beneficial for India as money paid will be less to buy oil from abroad as approximately 80% of crude oil requirements are imported in India. But some drawbacks are that India does not have adequate oil storage space.

India has an estimated over 15 million tons of oil assets. The maximum storage space available is just 5.33 million tonnes. The rest of the capacity is not prepared at this point. The current corona virus shutdown in India indicates that there is no substantial demand for oil from the industry. Indian refiners also have current stocks. Agriculture sector may enjoy the fall in price as the cost of fertilizers which are directly or indirectly related to oil may decline. Indian oil companies are unlikely to improve in near future.

 

 

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