Crude jumps 26% on MCX, bullion gains on hope of end to Saudi-Russia rift

Crude oil prices jumped 26 per cent in late afternoon trade on the Multi Commodity Exchange (MCX), on Friday. This followed the move in global markets on hopes of an end to the price war between Russia and Saudi Arabia with their agreement on an output cut. The countries are scheduled to meet next week.
The benchmark crude oil futures for delivery in April hit several upper circuits, to trade with an overall gain of 26.03 per cent at Rs 2,043 a barrel on Friday. With almost similar gains, Brent crude surged to trade at $30 a barrel in the international markets, on an improvement in overall sentiment after US President Donald Trump tweeted on Thursday that he had spoken to authorities in both Saudi Arabia and Russia about an output cut.

The fight between the two crude oil-rich nations has resulted in a two-third decline in prices over the last three months, to hit the lowest level since 2016.
Along with crude oil, bullion and base metals also rose, albeit marginally. Gold for delivery in June jumped 1.11 per cent to trade at Rs 43,722 per 10g, while silver futures for May delivery surged 3.4 per cent to Rs 41,227 a kg. Copper, zinc and other base metals futures for near-month delivery rose by almost 1 per cent, amid global demand woes.
MCX iComdex composite jumped 3.9 per cent to 8,549.27 in late afternoon trade on Friday.
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“Crude oil prices led the jump in bullion and base metals on Friday, amid hope for an agreement between Saudi Arabia and Russia. Gold is getting some investor interest, as global central banks continue to add gold to their existing holding as a hedge against economic uncertainty. Silver and base metals have risen on short covering,” said Gnanasekar Thiagarajan, director of Commtrendz.
“Crude oil demand has declined by nearly a third in the last one month. Global markets are flushed with supply of around 30 million barrels,” said Kishore Narne, associate director, at Motilal Oswal Financial Services.
Standard gold in Mumbai’s Zaveri Bazaar gained 1 per cent to close at Rs 43,760 per 10g on Friday, against Rs 43,300 per 10g on Thursday. Silver prices gained 2 per cent to close at Rs 40,310 a kg on Friday, as compared to Rs 39,250 a kg on Thursday.
Even if OPEC and non-OPEC members arrive at a decision to cut 10-15 million barrels of output, the market will remain surplus with 15-20 million barrels of its total production of 98 million barrels a day

Crude oil adds over 4%, gold and silver up as markets recover sharply

Crude oil, precious metals and base metals recovered on Friday from their recent lows on news of factories and retail showrooms in China gradually reopening after several weeks of lockdown following coronavirus (Covid-19) spread.
Gold for settlement in April on the Multi Commodity Exchange (MCX) of India jumped by 2 per cent to Rs 40,624 per 10 grams on Friday as traders booked took positions amid expectation of a further increase in prices on safe haven buying. May Silver gained 2.87 per cent to trade at Rs 36,109 a kg on MCX by the end of the day.

Crude oil futures jumped by 4.39 per cent to Rs 2,067 a barrel on hopes that the Organization of Petroleum Exporting Countries (Opec) will convene an emergency meeting of its members and pass a resolution to cut production to arrest a free fall in prices. Crude futures on MCX went up as high as 8 per cent, before retreating. Russia's refusal to cut crude oil output, sparked a price war with Opec, which pulled down prices by a massive 50 per cent since the Covid-19 was first reported in China this January.
"Sentiment looked positive on Friday with no new cases of Covid-19 reported in China's Wuhan region, the epicentre of the current pandemic. Factories and retail showrooms have started re-opening after weeks of lock down. While many Asian and European countries continue to remain in the grip of Covid-19 and lock down continues there, the partial recovery of trade in China has raised hopes of life gradually coming back on track, and a rebound in demand in the coming weeks," said Ajay Kedia, Director, Kedia Commodity.
Meanwhile, base metals on the benchmark London Metal Exchange (LME) moved up in tandem with their movement on the Shanghai commodity exchange. Reflecting a similar trend, April copper on the MCX added 1 per cent to Rs 378.3 a kg towards end of morning session on Friday. Zinc and lead futures gained between 1.5 per cent and 2.5 per cent following their movement on the LME.
Meanwhile, the decline in metal and energy prices was more pronounced on Indian exchanges than international ones due to a fall in the rupee against the dollar. The Indian currency slipped to a historic low of below 75 against the greenback on Friday.
In the spot market, standard gold price gained almost 2 per cent to close at Rs 41,169 per 10g in Zaveri Bazaar on Friday. Silver followed suit, adding over 5 per cent to close at Rs 37,140 a kg today, from Rs 35,220 a kg on Thursday. The recovery in bullion prices prompted traders and consumers to stay away from fresh orders amid the ongoing uncertainty in global economy.
Sentiment in commodities also improved due to the European Union's decision to extend monetary support to an economy faced with the prospects of defaults. While China now appears to be containing Covid-19 effectively, European Union and other countries are finding it difficult to extricate themselves from the grip of the pandemic.

India to import Iranian crude oil using rupee payment mechanism: Source

India has signed an agreement with Iran to pay for crude oil it imports from the Persian Gulf nation in rupees, sources in know of the development said.
The memorandum of understanding (MoU) was signed following the US letting India and seven other nations to keep buying Iranian oil despite sanctions were reimposed on the Islamic state on November 5.

Sources said Indian refiners will make rupee payments in a UCO Bank account of the National Iranian Oil Co (NIOC).
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Half of these funds would be earmarked for settling payments for exports of Indian goods to Iran, they said.
Under US sanctions, India can export foodgrains, medicines and medical devices to Iran.
India had won the exemption after it agreed to cut imports and escrow payments.
Under the 180-day exemption, India is allowed to import a maximum of 300,000 barrels a day of crude oil. This compares to an average daily import of about 560,000 barrels this year.
India, which is the second biggest purchaser of Iranian oil after China, has since then restricted its monthly purchase to 1.25 million tonne or 15 million tonne in a year (300,000 barrels per day), down from 22.6 million tonne (452,000 barrels per day) bought in 2017-18 financial year, sources said.
Two of its refiners -- Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) -- bought 1.25 million tonnes of oil from Iran in November and December.
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India, the world's third biggest oil consumer, meets more than 80 per cent of its oil needs through imports. Iran is its third largest supplier after Iraq and Saudi Arabia and meets about 10 per cent of total needs.
US President Donald Trump in May withdrew from the 2015 nuclear accord with Iran, re-imposing economic sanctions on the Persian Gulf nation. Some sanctions took effect from August 6, while those affecting the oil and banking sectors will start from November 5.
Prior to this, India paid its third largest oil supplier in euros using European banking channels. These channels got blocked from November.
During the first round of sanctions when EU joined the US in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought. Beginning February 2013, India paid 45 per cent of the oil import bill in rupees while keeping the remainder pending till the opening of payment routes. It began clearing the dues in 2015 when the restrictions were eased.
Sources said New Delhi may export goods, including wheat, soybean meal and consumer products, to Iran during the exemption period.
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Iran was the India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions over the Persian Gulf nation's suspected nuclear programme relegated it to the seventh spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 million tonne and 10.95 million tonne crude, respectively from Iran.
Sourcing from Iran increased to 12.7 million tonne in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tonne to catapult it to the third spot.
Iranian oil is a lucrative buy for refiners as the Persian Gulf nation provides 60 days of credit for purchases, terms not available from suppliers of substitute crudes -- Saudi Arabia, Kuwait, Iraq, Nigeria and the US.
Besides blocking of banking channels from November, shipping firms are unwilling to transport Iranian oil. To get around this, Iran is using its own ships to transport crude to India. Its insurance companies are also providing insurance cover for such shipments, sources added.

Even $1 rise in crude can inflate import bill by Rs 61.6 bn: India Ratings

As India continues to be a large importer of crude oil, a change of even $1 per barrel will impact the country's import bill by Rs 61.6 billion, says India Ratings (Ind-Ra).
According to the ratings agency, if the organisation of the petroleum exporting countries (Opec) and its allies decide to hold their supply, oil prices are likely to rebound.
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"This will increase India's import bill as it meets over 80 per cent of its demand through imports, and a change of even $1 per barrel will impact the country's import bill by Rs 61.6 billion," it said.
According to Ind-Ra, Brent crude oil price, the global benchmark for crude prices, continued its upward trajectory to hit a four-year high of $86.07 per barrel on October 4 this year, as the market grappled with the expected loss of oil supply from sanction-hit Iran.
From mid-October 2018, however, an increase in supply led to a gradual decline in brent crude oil prices.
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Furthermore, the US waived off such sanctions on November 3 for eight countries, including India and other major importers of oil from Iran.
Subsequently, the prices dipped to $72.68 per barrel on November 5, down 14.6 per cent month-on-month, on fears of a glut in the market.
The declining trend was reversed again when Brent crude oil prices increased on November 12 on an announcement by Saudi Arabia that it would cut its exports by 500,000 barrels per day in December, and speculations that the Opec will slash output in 2019.

Govt hikes import tariffs on 19 items; ACs, refrigerators, footwear hit

The government Wednesday raised import duties on 19 items, including jet fuel and air conditioners, as it looks to check the widening current account deficit resulting from high crude oil prices and the rupee dipping to a historic low.
The enhanced duty rates, which will make these imported goods expensive, will come into effect from midnight of September 26-27, said a government statement.

"The total value of imports of these items in the year 2017-18 was about Rs 86,000 crore," the statement said.
"The central government has taken tariff measures, by way of increase in the basic customs duty, to curb import of certain imported items. These changes aim at narrowing the current account deficit (CAD). In all the customs duty has been increased on 19 items," it said.
The import duty on air conditioners, household refrigerators and washing machines (less than 10 kg) doubled to 20 per cent. The basic customs duty on compressors, speakers and footwears raised to 10 per cent, 15 per cent and 25 per cent respectively.
The duty on radial car tyres raised from 10 per cent to 15 per cent while for cut and polished diamonds, semi-processed diamonds, lab grown diamonds, coloured gem stones the import hiked from 5 per cent to 7.5 per cent.
The articles of jewellery, goldsmith and silver wares will now attract a duty of 20 per cent, up from 15 per cent earlier.
Import of bath wares, packing material, tableware, kitchenware and office stationary items, decorative sheets, beads and bangles, trunk, suitcases, and travel bags will now attract basic customs duty of 15 per cent as against 10 per cent earlier.
Besides, the government has also announced an import duty of 5 per cent on aviation turbine fuel (ATF). It was nil earlier.
The announcement follows a decision taken by the government on September 14 that the centre would impose curbs on import of non-essential items to contain the widening CAD and check the rupee fall. The CAD widened to 2.4 per cent of the GDP in the first quarter of 2018-19.
Niti Aayog Vice chairman Rajiv Kumar, "Some actions had to be taken. In 2013 if you remember, same sort of thing had been done. These are steps to assure industrialists and others that the government is ready to take steps to get the external account into balance and control the CAD. But the key is to increase the exports."
"To address the issue of expanding CAD, the government will take necessary steps to cut down non-essential imports and increase exports. The commodities of which imports will be cut down will be decided after consultations with concerned ministries and will be WTO-compliant," Finance Minister Arun Jaitley had said after a meeting chaired by Prime Minister Narendra Modi to review the economic situation.
Large trade deficit and rupee decline against the US dollar are putting pressure on the CAD, and these steps are likely to have a positive impact on the external sector.
The rupee touched an all-time closing low of 72.91 against the dollar on September 12. Today it closed at 72.6 against the US dollar.
The domestic currency has declined by around 6 per cent since August. Petrol and diesel prices have also touched record highs recently.
TariffTariff Photo: PIB

Crude oil prices may rise further in 2018, remain above $75 a barrel: IEA

In what could be the bad news for consuming countries like India, the International Energy Agency (IEA) has said crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world — including Iran sanctions and drop in Venezuela production.
Fatih Birol, the Executive Director of the International Energy Agency (IEA), said the world may “unfortunately see a further tightening of markets” towards the end of this year, which will in turn put upward pressure on prices unless the Organization of the Petroleum Exporting Countries (OPEC) go for a significant increase in production. He indicated it is likely to remain over “$75 a barrel” for some time.
This comes at a time when international benchmark Brent crude price was seen at $77.38 a barrel on Thursday inching closer towards $80-mark on signs that Iran sanctions may limit global supply, while the US West Texas Intermediate (WTI) crude was seen at $ 69.84 a barrel at one point.
“I wish I could tell you that we expect a downward trend in the crude oil prices, given the reliance of India and other countries on imports. But the picture we see in fact the opposite. One reason for this is that the oil demand growth this year and next year seems very strong, which is around 1.5 million barrels per day significantly higher than historical averages,” Birol told Business Standard on the sidelines of an energy meet organized by The Energy and Resources Institute (TERI) in New Delhi.
The Indian crude oil basket was seen at $74.75 a barrel on August 30, which is almost 8 per cent higher than the monthly average of $69.22 a barrel in the month of April. Rising prices are a cause of concern for India as the country had budgeted an average crude oil price of $65 a barrel for the current financial year, based on which the import bill was supposed to be around $109 billion, compared to $88 billion in 2017-18.
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According to Birol, the drop in production from Venezuela is another important reason for this declining trend in the last two years. “Unfortunately, we expect further decline in Venezuelian oil. In addition to this, several Middle East countries are going through difficult times because of geo-political situations. This is ranging from Iraq, Iran, Libya and also Nigeria,” he said, adding that unless production is increased by OPEC, the world may see further tightening of markets towards the end of this year.
After exports from Iran nose dived to an average of 1.68 million barrels per day (bpd) from August 1-16, compared to 2.32 million barrels a day for July, there were speculations that Iran oil consumers may wind down purchases further. Meanwhile, another report states that during the period under review, demand from India has also declined to 203,938 bpd, compared to 706,452 bpd in July.
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According to a report by India Ratings and Research, crude oil prices may increase but remain between $65-70 a barrel for the remainder of 2018-19. “Crude oil supplies from the OPEC have declined due to rising geo-political tensions. Sanctions on Iran, unplanned shutdowns in Libya, along with debt crisis in Venezuela have led to supply constraints. Also, US crude oil production growth has stabilised, there have been draw downs in crude oil inventory stocks and the total exploration capex in the US has slowed down, supporting the upward trend in crude price,” the report said.
On Thursday, diesel prices hit a record high in Delhi at Rs. 69.93 a litre, while that of petrol was seen at Rs 78.30 a litre. Petrol had touched an all-time high of Rs 78.43 in Delhi on May 29 this year.

India's trade deficit widens to five-year high in June; exports up 17.57%

A sharp rise in crude oil bill led to India's trade deficit widening to a 61-month high in June, despite sustained growth in engineering and pharmaceutical products that boosted exports by 17.57 per cent.
The trade deficit increased to $16.61 billion, up from the $14.62 billion gap in May. This was primarily fuelled by a jump in crude oil imports, which rose more than 56 per cent to $12.72 billion in June, up from $11.5 billion a month back.
The overall imports rose at a five-month high pace of 21.31 per cent as compared to the 14.85 per cent rise seen in May. Total imports stood at $44.3 billion in June as compared to $ 43.48 billion in May. This is set to put pressure on the current account deficit in the first quarter of the current financial year, after it stood at 1.9 per cent of GDP in the fourth quarter of 2017-18 compared to 2.1 per cent in the third quarter.
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“The monthly merchandise trade deficit is likely to print at an uncomfortably high average of $15.5-16 billion over the remainder of FY2019. Crude oil imports accounted for 57 per cent of the YoY rise in merchandise imports in June 2018, in line with the spike in crude oil prices,” said Aditi Nayar, principal economist at ICRA.
The cost of the overall oil imports is expected to grow in the coming months. Experts predict that India’s oil bill will continue to rise in the current financial year as external pressures, such as the fallout of the Iran deal and a possible cut in production by oil producers, might heat up prices. The growth of non-oil non-gold merchandise imports also remained in double-digit in June, driven by inputs such as machinery, coal, chemicals, fertilisers, iron and steel, and non-ferrous metals, as well as electronic goods.

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The current account deficit is likely to widen to $16-17 billion, or around 2.5 per cent of GDP, in Q1 FY2019, from $14 billion in Q1 FY2018, with higher crude oil prices negating the contraction in gold imports, Nayar added.
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However, India continued to take advantage of the same rising global crude prices on the exports side, as receipts from processed petroleum exports swelled by 52.53 per cent to $4.06 billion.This was albeit lower than the 102 per cent growth seen in May.
Overall, the country exported goods worth $ 27.7 billion in June, thereby ensuring that outbound shipments rose for the third straight month.
Among major sectors, engineering goods exports maintained a sustained growth of 14.19 per cent in June to ship out merchandise worth $6.74 billion, down from the 14.77 per cent rise seen in May. Pharma exports also rose to $ 15.8 billion, growing by 14.71 per cent in June, down from the 25.67 per cent rise in the previous month.
However, major labour-intensive sectors showed signs of built up stress reducing and growth approaching. Export of ready-made garments continued to drop in June, contracting by 12.34 per cent, albeit lower than the 16.62 per cent fall seen in May. Industry experts pointed out that the sector has seen a downturn since since October, 2017.
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On the other hand, gems and jewellery exports rose by 2.72 per cent after months of contraction. The level of fall in the category had slowly been reducing over the past few months. May exports had fallen by 6.47 per cent. Despite this, gold imports continued to remain in negative territory for the sixth consecutive month, a position it has remained in, ever since news about the Rs 140-billion Nirav Modi scam broke earlier this year. However, the fall in gold imports slowed down for the third straight month to register a total bill of $2.38 billion. Imports of the shiny metal fell by only 2.8 per cent in June as compared to the much larger 29.85 per cent fall seen in May.
“The MSME sectors of exports are still feeling the pinch of liquidity crunch as banks and lending agencies have continuously been tightening their lending norms. In June, yet again exports have been provided a cushion by the petroleum sector, as it not only outperformed all other sectors of exports but also helped maintain an overall double digit growth trajectory,” Ganesh Kumar Gupta, President of the Federation of Indian Exports Organization said.
Of the 30 major product groups, 22 recorded growth in May, down from the 23 a month ago.

India, oil's fastest growing buyer, guzzling Iran's crude as sanctions loom

The world’s fastest-growing oil consumer is guzzling down Iranian crude before US sanctions start squeezing supplies from the Persian Gulf nation.
India imported 771,000 barrels of crude oil a day from Iran in May, a 35 per cent rise from the previous month, tanker tracking and shipping data compiled by Bloomberg show. This pushed the Islamic Republic up the ranks as the second-biggest supplier to the Asian nation, overtaking Saudi Arabia. Iraq retained the top position.

There is “a ratcheting up of competition among suppliers to capitalise on the Indian market as the country’s demand for oil grows,” said Abhishek Kumar, senior analyst at Interfax Global Energy in London. “Nevertheless, even Iranian supplies are not secure as the reimposition of US sanctions start to bite.”
India, which imports over 80 per cent of its oil, is attracted to Iran’s crude largely due to geographic proximity that can save on shipping costs, as well as the favourable financial terms offered by the Persian Gulf state, including the longest credit period among all of India’s suppliers. Refiners in the south Asian nation were quick to ramp up imports from the Persian Gulf state after the previous round of sanctions were lifted in 2015.
India's refiners were forced to slash Iranian oil purchases to about half their previous levels during the earlier sanctions before the landmark accord to curb the Islamic Republic’s nuclear program was struck between world powers in 2015.
This May, Indian Oil, the nation’s biggest refiner, boosted its crude purchases from the Middle East producer seven-fold, and plans to buy term supplies of 7 million metric tons during the 12 months beginning April, up from 4 million tons in the year earlier.
“No one knows what’s going to happen” with the sanctions this time, said R Ramachandran, the head of refineries at Bharat Petroleum Corp. “But people are conscious and maybe acting according to what they anticipate as coming.”

As crude hits $80 a barrel, oil import bill may cost govt up to $50 bn

A day after crude oil prices hit $80 a barrel, the government said it expected an increase of $25-50 billion in the import bill for 2018-19. That could lead to an oil import bill of $130-155 billion.
India’s crude oil import bill for 2018-19 was estimated at $105 billion, according to the Ministry of Petroleum’s Petroleum Planning and Analysis Cell.
“Under different scenarios, we see the impact of higher crude prices ranging from $25 billion to a maximum of $50 billion on the oil import bill. The increase in the oil import bill will also affect the current account deficit,” Economic Affairs Secretary S C Garg said in a conference on Friday.
Garg, however, said the government saw no impact on its fiscal situation and subsidy bills. “There is no reason for us to believe there will be any great impact on the fiscal deficit. We will continue to ensure that there is no adverse impact on fiscal deficit.” Asked if the government would cut the excise duty on petrol and diesel, he said: “Just watch. There has been adjustment to the prices past few days. What does that indicate?” Excise duties account for a fourth of retail selling price of the fuels.
The gross oil import bill during 2017-18 stood at $109.11 billion, more than 25 per cent higher than the year before. India’s earnings from processed crude exports, one of the largest export segments, trailed expectations in the same year. Garg said net oil import bills in 2017-18 were around $70 billion.
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Oil prices hit $80 a barrel on Thursday for the first time since November 2014 on concerns that exports from Iran could fall because of renewed US sanctions, reducing supply in an already tightening market.
graph On Friday evening, Brent crude futures rose by 22 cents to $79.52 a barrel. US West Texas Intermediate crude futures were unchanged at $71.49 a barrel, and set for a third straight week of increase. The price of the Indian crude oil basket stood at $77.73 a barrel. The 2018-19 Budget had assumed an average crude oil price of $65 per barrel for the year.
Emphasising there would not be much impact on macro-economic and fiscal indicators, Garg said: “The growth parameters are extremely sound; macro-economic parameters continue to be sound; inflation is within our comfort range. We have no downward revision on growth and upward revision on the fiscal deficit despite changes in bond yields. We are continuing uninterrupted on our borrowing programme.”
For 2018-19, the Centre has assumed an oil price of $65 a barrel. At that price, the petroleum subsidy has been budgeted at Rs 249 billion. The fiscal deficit for the year has been budgeted at Rs 6.24 trillion, or 3.3 per cent of gross domestic product.
On the currency situation, Garg said an adequate amount was available across the country and there were no reports of shortage. “In fact, we are seeing net increase in the currency. In the past 3-4 days, there is surplus deposit of Rs 40 billion,” Garg said.

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graph At least six states faced currency shortage in April, pushing the government and the Reserve Bank of India to work overtime for correcting the situation.
On foreign portfolio investors (FPIs) exiting Indian markets, Garg said the situation was not a matter of concern. “Some changes in unwinding of monetary policy in the US plus oil prices have altered incentives for FPIs to some extent. They might be seeing some advantage in selling now and buying later. Hence, we have seen some outflows from equity and bond markets. The situation is not alarming,” he said and added that the level of outflow in the last one and a half months was $4-5 billion, which was in no way excessive. Garg also said that a panel on cryptocurrencies, led by him, will submit its recommendations to the government soon.