Page 5 - Policy Economic Report - October 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Growth in new orders and new export order led to this growth in October 2024, thereby improving
business confidence. The HSBC Flash India Manufacturing PMI – a single-figure snapshot of factory
business conditions calculated from measures of new orders, output, employment, supplier delivery times
and stocks of purchases – posted 57.4 in October as against 56.7 in September. The reading signaled a
further marked strengthening in business conditions for goods producers. The services industry reading
rose slightly to 57.9 this month from 57.7 in September 2024.

On the external front, India's forex reserves stand at $ 690 billion as of 11th October, 2024 according to
RBI. According to the Weekly Statistical Supplement released by the RBI, foreign currency assets (FCAs)
fell by $10.5 billion to $602 billion. Gold reserves decreased by $98 million, bringing the total down to
$65.6 billion. The Special Drawing Rights (SDRs) dipped by $86 million, now totaling $18.3 billion, while
the reserve position in the International Monetary Fund (IMF) contracted by $20 million, now standing at
$4.3 billion.

As far as oil and gas industry is concerned, Benchmark oil prices bounced sharply higher in early October,
as potential oil supply risks once again took centre stage. Escalating tensions between Israel and Iran are
fuelling fears of a broader Middle East conflict and disruptions to Iranian exports. However, a resolution
to a political dispute in Libya, which temporarily halved its oil exports, along with relatively modest
production losses from major hurricanes in the US Gulf Coast and weak end-user demand, have
contributed to stabilizing markets.

Hedge funds and other money managers continued to be bearish on oil futures in September. This fuelled
volatility and accelerated the decline in oil futures prices. Similarly in petroleum products, speculators
turned net bearish on gasoil/diesel in both US and European markets. Between the weeks of 27 August
and 10 September, speculators sold an equivalent of 174 mb of oil in ICE Brent and NYMEX WTI futures
and options.

The sweet-sour crude differentials showed mixed movement among regions. In Europe and Asia, the
spread contracted due to a softening of market fundamentals for light sweet crude, primarily driven by
slowing demand during the maintenance season and the high availability of light sweet crude in the
Atlantic Basin, including increased US crude exports. A decline in gasoline crack spreads in all refining hubs
also weighed on the value of light sweet crude. However, the value of medium sour crudes experienced
a smaller decline compared to light sweet crudes. In the US Gulf Coast (USGC), the sweet-sour crude
spread widened slightly.

Natural gas spot prices at the US Henry Hub benchmark averaged $2.28 per million British thermal units
(MMBtu) in September 2024. Henry Hub's natural gas prices rebounded in September after two
consecutive months of decreases, up by 13.1%, m-o-m. Prices rallied on the back of supply disruptions in
the Gulf of Mexico amid the hurricane season. They were further supported by higher US LNG exports to
Asia ahead of the winter demand season. Higher price differentials in Asia compared with Europe’s prices
supported more US LNG volumes heading to Asia. Prices were down by ~14%, y-o-y.

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