Energy News Monitor | Volume XIII: Issue 28 | Price of fuel
Oil News Commentary: November — December 2016
India
The demonetisation drive has reportedly increased fuel demand by 12.1 percent in November. Petroleum product consumption is reported to have increased to 16.64 MT from 14.85 MT the same month in FY16. Petrol consumption increased by 14.24 percent to 2.03 MT while diesel sales increased by 10.47 percent to 6.75 MT. But compared to October, the sales were up only marginally. 16.55 MT of petroleum products were sold in October 2016 with petrol sales at 2.11 MT and diesel at 6.67 MT. LPG sales in November surged 16.5 percent to 1.88 MT and Naphtha consumption was up 6.9 percent to 1.08 MT when compared with the same month in FY16.
One of interesting observations from Petrotech was the remark from the Secretary General of OPEC Mohammed Sanusi Barkindo said India’s oil demand would almost double to 10 mbpd by 2040 from the present 4.1 mbpd and being an important oil consumer, the country would play an important role in oil market stability. He also observed that for OPEC India represented an important source of rapidly growing oil demand now at its highest, at nearly 300,000 bpd, that surpasses China’s demand growth. According to OPEC global demand is forecast to increase by nearly 17 mbpd until 2040 when it could reach around 110 mbpd. Emerging and developing economies in Asia are expected to make up roughly 70 percent of this growth, which is being spurred on by the region’s population growth, a rapidly expanding middle class, urbanisation and industrialisation. OPEC says that $10 trillion of investment is required in the oil sector till 2040 to maintain production supplies to meet the needs of consumers. The Secretary General made a case for sustaining oil prices at a higher level to ensure stability in prices. Oil revenue has already declined 26 percent in 2015 and is projected to decline by 22 percent in 2016. Combined, this amounts to more than $300 billion and this trend is expected to extend into its third year according to the Secretary General of OPEC.
Reuters reported that Iran overtook Saudi Arabia as India’s top oil supplier in October. Iran used to be India’s second-biggest oil supplier until it was put under sanctions when Iraq took its place. In October Iran’s oil imports to India surged threefold compared with the same month last year, rising to 789,000 bpd. That compares to 697,000 bpd supplied last month by Saudi Arabia. Over the whole January to October period, though, Saudi Arabia still holds India’s top supply spot, at an average of 830,000 bpd versus Iraq’s 784,000 bpd and Iran’s 456,400 bpd. The surge from Iran is attributed to Iranian price discounts and increase in Saudi refining capacity.
Rest of the world
China, the world’s fifth-biggest producer last year, has reportedly reduced output by about 300,000 bpd this year, more than the combined cuts announced by non-OPEC countries, excluding Russia, as part of a deal coordinated with the producer group. The decline is expected to continue next year, with Chinese production shrinking as much as 200,000 bpd. Malaysia and Brunei were reported to be the only Asian nations in the group of producers outside the OPEC that agreed to cut output by a combined 558,000 bpd starting 1 January 2017. The region will use 32.88 mbpd accounting for more than a third of global consumption, according to data from the IEA.
The IEA’s World Energy Outlook 2016 says that global oil consumption will not peak before 2040, leaving its long-term forecasts for supply and demand unchanged despite the 2015 Paris Climate Change Agreement entering into force. While demand for oil to power passenger cars, may drop, other sectors may offset this fall. From 2020, the EU is expected to impose much tougher legislation to control vehicle emissions, which many expect to quickly erode use of traditional fuels such as gasoline and diesel, a major source of oil demand.
NATIONAL: OIL
Will cut VAT on petrol to keep price under ₹60 per liter: Goa CM
December 20, 2016. The Goa government will reduce value added tax (VAT) on petrol to maintain the petrol price below ₹60 per litre, since its selling price is ₹62.73 per litre at present. The BJP government had assured the people of the state that it will not allow the petrol price to exceed ₹60 per litre. Petrol price in the state crossed ₹60 per litre after the oil marketing companies increased petrol price by ₹2.21. In June, the state government had reduced VAT on petrol by 2% to maintain the petrol price below ₹60 per litre. Goa Chief Minister (CM) Laxmikant Parsekar had hiked VAT on petrol despite the BJP promising to lower fuel prices in their 2012 manifesto. Petrol prices were hovering around ₹51.10 in the state when Parsekar announced the increase in VAT to 22%.
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