2024.08.09

 Oil Prices Rise Amid U.S. Jobs Data and Middle East Tensions

Oil prices increased for the third consecutive session, with Brent crude settling at $79.16 per barrel and U.S. West Texas Intermediate at $76.19. The rise was driven by positive U.S. jobs data, which eased demand concerns, and ongoing tensions in the Middle East. A significant drop in U.S. crude inventories also supported prices. Additionally, geopolitical risks, including potential Iranian retaliation and disruptions in Libya, contributed to the market’s upward trend. Analysts suggest prices could rise to the low-to-mid $80s for Brent.

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U.S. Refiners Cut Q3 Production Amid Weak Margins and Maintenance

U.S. crude oil refiners are reducing their third-quarter production plans due to weaker profit margins and lower summer fuel demand. Companies like Marathon Petroleum, Valero Energy, and Phillips 66 are planning to operate at reduced capacities, incorporating more maintenance downtime into their schedules. This adjustment follows a period of high processing levels that led to abundant gasoline stocks, benefiting consumers but hurting profits. Refiners hope that by lowering supply, they can improve margins.

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Singapore’s Middle Distillates Stocks Hit Three-Year High

Singapore’s middle distillates stocks reached a three-year high of nearly 12 million barrels, driven by a significant drop in diesel/gasoil net exports despite gains in jet fuel/kerosene net exports. Diesel/gasoil net exports fell by 44% week-on-week, with total exports dropping by 57% due to reduced shipments to key regional destinations. However, imports from India remained strong.Jet fuel/kerosene front, net exports climbed by almost two-fold as total exports declined at a slower pace than total imports. Some traders say several cargoes from northeast Asia are waiting for discharge at Singapore tanks in the coming two weeks.

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Renewed Attacks on Ships Near Yemen

 A rocket-propelled grenade exploded near the Delta Tankers-owned suezmax, 158,000-dwt Delta Blue (built 2012), off the coast of Yemen. The vessel and crew are safe.

The Houthis claimed to have targeted the 1,118-teu Contship Ono (built 2007) with ballistic missiles and drones, citing violations of a ban on entering Israeli ports.

But, at the time, the Contship Ono was reported to be in Saudi Arabia’s port of Jeddah.

The day’s attacks were the first reported on a merchant ship since 3 August, when the 2,500-teu Groton (built 2002) was fired on in multiple attacks.

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Record VLCC Loadings in US Gulf Expected in August

VLCC loadings in the US Gulf are forecasted to reach record highs in August, with 35 VLCCs scheduled to load.

Most of these loadings are destined for Asia. Despite the high activity, US Gulf VLCC rates have dropped recently, with the going rate falling from $7.35 million to $7 million. This has left the tonnage list longer than expected.

In the Middle East, a late surge in cargo nominations has tightened VLCC availability, but a lack of cargoes persists. VLCC spot rates for post-2015 tonnage were assessed at $32,100 per day on average, down 2% from the previous day.

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Western Insurers Continue to Cover Russian Oil Despite G7 Price Cap

Despite a G7 price cap aimed at limiting Moscow’s ability to fund the war in Ukraine, several Western insurers, including American Club, West of England, and Norway’s Gard, have continued to provide coverage for tankers carrying Russian crude. This has allowed Russian oil to keep flowing to Asia, even though many in the trade sector withdrew due to concerns about breaching the price cap rules. The cap, set at $60 per barrel, has been bypassed as Russia sold its Urals crude at an average of $69.4 per barrel this year.

The International Group (IG) of P&I Clubs, which insures 90% of the world’s fleet, criticized the attestation process for being flawed and potentially exposing members to breaches of the G7 price cap on Russian oil. Insurers like American Club and Gard rely on attestation letters from trade participants to ensure compliance with sanctions. However, these letters do not require the inclusion of the price paid, raising concerns about the effectiveness of the process. Insurers have stated they would withdraw coverage if they found the attestation to be inaccurate.