India: Economy, Energy, and Outcomes
India is expected to take over China as the world's most populous country in 2023. Socioeconomic outcomes are lagging Chinese counterparts, but some data suggests improvements are on the horizon.
On Today’s Energy Shots:
Recapping the week’s top news and policy updates
Why India’s Energy Consumption is Poised to Skyrocket
Top News & Policy:
U.S. Announces Another SPR Buyback
On Friday, the Department of Energy announced plans to purchase up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR) for March 2024 delivery.
Russia-Saudi Arabia Joint Statement
The Saudi press agency released a Saudi-Russia joint statement covering the discussions and agreements from the latest visit from President Putin. The statement covered existing trade, energy (including the latest OPEC+ cuts), low-carbon technology, and defense. The two countries acknowledged a 46% increase in bilateral trade in 2022 compared to 2021 and expressed intentions to further enhance and diversify trade and investment. They emphasized the importance of mutual and joint investments, developing investment-attractive environments, and addressing challenges in these sectors.
In energy, both nations praised their cooperation within OPEC+ and the role it played in stabilizing global oil markets. They underscored the need for all OPEC+ members to adhere to agreed-upon terms, benefiting both producers and consumers and supporting global economic growth. The meeting also covered extensive areas of cooperation, including oil and gas, peaceful nuclear energy, renewable energy, and agriculture.
China Exports, Imports, and Petroleum Demand
China's export sector rebounded in November, recording a 0.5% year-over-year growth, snapping a six-month decline. This uptick defied expectations of a continued slump, signaling resilience in the world’s second-largest economy. However, this growth is partly tied to exporters' strategic price cuts. The Baltic Dry Index, which tracks the average shipping costs paid for dry bulk materials, hit a three-year peak.
In contrast, China's crude oil imports in November dipped by 9.2% year-on-year, the first annual decrease since April. Year-to-date crude imports averaged 11.27 million bpd, up 12.1% from last year. Refined product exports for November fell to 36.3 million barrels of oil equivalent (MMboe) from 36.9 MMboe in October. November’s refined product exports were down 17% YoY.
China’s refined product imports in November climbed over 30% YoY to 29.7 MMboe. Natural gas imports increased 6% YoY to over 533 Bcf, a 24.5% increase from October’s 428 Bcf.
November coal imports climbed 20.9% MoM to 43.51 million metric tons, a 34.7% increase from November 2022. China ended its Australian coal import ban in January 2023. According to General Administration of Customs data, YTD coal imports rose 62.9% from 2022 levels to 427.14 million metric tons.
China's manufacturing sector continued its contraction for a second consecutive month, with the official Purchasing Managers' Index (PMI) dropping to 49.4 in November from 49.5 in October. The 50-point mark distinguishes expansion from contraction. This downturn has been a persistent trend, with the factory PMI contracting in seven out of the past eight months, only rising above the contraction-expansion threshold in September. The last instance of such prolonged negative PMI readings was in the six months leading up to October 2019.
Additionally, the non-manufacturing PMI, which encompasses services and construction sectors, also slowed down, registering a decline to 50.2 in November from 50.6 in the previous month. This marked the first contraction in the vast services sector in 12 months. Moreover, the new orders sub-index and the new export orders component both continued their downward trend, with the latter extending its decline for a ninth consecutive month
US Farmers Eye More Soy, Less Corn
U.S. farmers are gearing up for significant changes in their 2024 crop plans, with a notable shift towards soybean cultivation due to its rising demand, particularly for soy-based biofuels. The increase in soybean acreage is a response to both the growing market and the challenges faced in key soybean-producing countries like Brazil and Argentina, which have suffered from droughts. In contrast, corn planting is anticipated to decrease as farmers seek better profitability in soybeans, with corn prices hovering around three-year lows.
The latest CFTC Commitments of Traders report shows managed money increasing short positions on corn by 5,045 contracts through November 28th for a total short position of 367,955. Long positions on corn fell 5,188 contracts week-over-week to 155,932. Managed money short positions on soybeans increased 5,114 contracts to 41,127, while long positions fell 9,557 to 112,278 contracts.
The USDA projects an increase in soybean planting to 87 million acres in 2024, up 3.4 million acres from 2023, while corn plantings are expected to drop to 91 million acres, down by 3.9 million acres. This change is also reflected in the current market conditions, where corn futures are near their lowest since late 2020, and soybeans have shown a 12% increase from late 2020 levels. Furthermore, corn stockpiles in the U.S. are projected to reach a five-year high by September 1, 2024, at 2.1 billion bushels, while soybean stocks are expected to be tighter, with the USDA forecasting a three-year low before the next harvest
Venezuela-India Oil Cargoes
The Venezuelan state oil company PDVSA has scheduled the shipment of two oil cargoes to India this month. These shipments are under crude spot deals with Italy's ENI and Chevron. Indian refiners, including Reliance Industries, Indian Oil Corp, and HPCL-Mittal Energy (HMEL), have actively sought Venezuelan crude cargoes since the relaxation of sanctions in October. Some of these refiners have secured purchase agreements with trading houses that have access to Venezuelan oil, while others are procuring directly from PDVSA's partners.
Reuters reports that two cargoes, each with two million barrel capacity, are preparing to load. A separate very-large crude carrier (VLCC) loaded last week but has yet to sail. The VLCC, initially destined for Malaysia through Hangzhou Energy, is reportedly awaiting confirmation from an Indian refiner.
India: Economy, Energy, and Outcomes
India is poised to overtake China as the world’s most populous country in 2023. The composition of India’s booming population differs from China’s in important ways that impact the outlook for economic growth and energy consumption.
The country’s Prime Minister has repeatedly stated plans to make India a high-middle income developed country by 2047 from a low-middle income developing nation today. As we discuss in detail below, India’s socioeconomic outlook is acutely tied to the country’s energy availability, reliability, and security.
In order to deliver on those 2047 plans, the country needs energy. Today, India overwhelmingly relies on coal-generated power to satisfy demand. That policy runs anti-parallel to wealthy Western nations’ calls to abate fossil fuel consumption— an argument that is both hypocritical and misanthropic.
Hypocritical because the center of anti-fossil fuel policy, the EU, consumes roughly 9.8 million barrels per day of oil with a population of ~450 million people. India, meanwhile, consumes 4.1 million barrels per day with a population of ~1.43 billion. In other words, the EU consumes nearly 8 barrels of oil per capita per annum. India consumes a bit over 1 barrel of oil per capita per annum.
Misanthropic because energy consumption and economic outcomes are tied in lockstep. India has made tremendous steps in reducing its share of citizens living in extreme poverty, but the figure still exceeds 100 million. Furthermore, foreign policymaking that targets energy availability stunts human capital in affected countries. For India, those policies prohibit changes in sanitation, stunting rates in children, and years of education. As shown below, per capita energy consumption and years of schooling have a correlation factor of 0.985. A figure of 1 represents a direct positive correlation, 0 represents no correlation, and -1 represents a negative correlation.
Today’s Energy Shots dissects why we believe wealthy Western nations underestimate global energy demand and the necessary contribution of oil and gas investments in developing nations like India. We highlight India’s economic and energy status in the context of population-rivaling China. We break down India’s existing energy mix and the country’s import-export dynamics. We finish with an overview of recent policy measures that, if actualized, could launch India into a new wave of economic growth.
India By The Numbers
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