Archives of “May 2020” month

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Covid-19 lockdown: Petroleum sector throttled

  
  Analysis
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The lockdown has severely hurt the petroleum sector, with oil and gas as well as refining suffering a sharp decline in production.

 

Gas output in April fell 18.6 per cent to 2.16 billion cubic metres (bcm) against 2.65bcm a year ago, according to the oil ministry.The country’s top gas producer ONGC reported a 15.3 per cent drop in output at 1.72bcm.

“The shortfall in gas production (by ONGC) is primarily due to less gas offtake by consumers,” the ministry said.

State-owned Oil India Ltd also produced 10 per cent less natural gas at 202.05 million cubic metres because of the presence of carbon dioxide at one of its fields in Assam and less purchases by consumers because of the lockdown.

Crude oil production fell 6.35 per cent to 2.5 million tonnes (mt) in April.Production at ONGC was marginally lower at 1.7 mt, while private player Cairn produced 19.2 per cent less at 615,800 tonnes.

ONGC had to shut down some of its wells on the western coast because of lower demand from GAIL and the restriction of movement of its staff.

Refineries produced about 30 per cent less fuel in April at 18.9mt as the lockdown kept most vehicles off the roads.

“Reasons for the shortfall in production mainly include low demand due to Covid-19 lockdown,” the ministry said.

Petroleum product demand is expected to fall eight per cent to 4,597 thousand barrels per day in 2020, the International Energy Agency (IEA) said as part of its May oil market report.

Demand is projected to fall 350 thousand barrels per day in the second quarter of 2020, primarily because of mobility restrictions.

The IEA has projected demand to fall 60 per cent year-on-year in April and May.Diesel demand is projected to contract 690 thousand barrels per day in the second quarter of 2020, while demand for aviation turbine fuel (ATF) and kerosene is projected to fall almost 40 per cent in April-May.

Roughly half of the kerosene produced is used as jet fuel and will be severely impacted by airline restrictions, the IEA said.

Overall, India’s oil demand is expected to fall 4.60 million barrels per day in 2020 compared with 5.01 million barrels per day in 2019.

The agency expects domestic crude oil production to continue to decline in 2020.

Weekend reports of China incursion into India

  
  Analysis
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Indian media reports over 5,000 Chinese soldiers have intruded at five points into India

Since late in April.
  • in sending thousands of PLA troops three-to-four kilometres into the Galwan Valley, China has violated its own claim line and occupied territory that Beijing itself has traditionally acknowledged to be Indian. 
  • This is not shaping up like a routing patrol confrontation, or even a temporary occupation of disputed territory 
  • This time the PLA soldiers are digging defences, preparing bunkers, moving in heavy vehicles and have reportedly even moved artillery guns to the rear (albeit in their own territory) 

Japan has begun finalizing a coronavirus relief package of more than 100 trillion yen

  
  Analysis
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This would be the second supplementary budget for fiscal 2020

  • A follow up on last month’s 117 trillion yen stimulus
  • This extra budget will gop to Japan’s cabinet for approval on Wednesday
  • aid to firms and and increase support for idled workers
  • More than 60 trillion yen will go toward unsecured financing to businesses, which will pay little or no interest.
Via Nikkei report, link for more (may be gated)
japan pm abe coronavirus

China says the US bill to delist Chinese companies is “directly targeting China”

  
Analysis, Politics
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Comments regarding the US’ Holding Foreign Companies Act from the China Securities Regulatory Commission (CSRC) weekend statement

  • the US bill that aims to delist Chinese companies from the US stock exchange is “directly targeting China”
  • is grounded in political rather than professional motives
  • would force Chinese companies to adhere to US securities law and could potentially delist Chinese companies if passed, while some of its content explicitly targets China.
Another indication of rising US/China strains. As these increase they tend to be a negative input for financial market risk assets (and FX) and supportive of safe haven alternatives. Add it the growing list:
  • coronavirus origin and spread
  • trade
  • tension over new rules from Beijing to be imposed on Hong Kong
  • Taiwan
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