2024.10.17

Mediterranean emissions rules set to boost product tankers as low-sulphur fuel demand declines

Starting May 1, 2025, the Mediterranean will become an Emissions Control Area (ECA), reducing the maximum allowable sulphur content in fuel from 0.5% to 0.1%, unless vessels are fitted with scrubbers. UK shipbroker Gibson expects this shift to benefit clean tankers, as demand for very low-sulphur fuel oil (VLSFO) is projected to drop from the current 21.5 million tonnes annually. Ships will shift to 0.1% marine gasoil and ultra-low sulphur fuel oil within the ECA, while demand for VLSFO will remain for use outside the area. This change could lead to higher fuel and freight costs, increased gasoil imports, and new export opportunities for surplus fuel oil, particularly to markets east of Suez.

[SLOW] https://slowspace.io/ Polygon Filter ECA

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Crude tankers' shift into clean product trades squeezes product tanker rates

Crude tankers like VLCCs and suezmaxes continue to enter the clean petroleum product trades, pressuring product tanker rates. This trend has been attributed to the struggling earnings in the product tanker market, with uncoated crude tankers now accounting for 3% of clean petroleum trade capacity but 6% in tonne-miles, especially on longer routes around Africa. As a result, rates for product tankers have dropped across the board. LR2 rates have fallen by 3.6%, LR1 by 10%, and MR rates have plummeted by 34%. Analysts suggest that competition from crude tankers is a key reason for this decline, though relief is expected as winter boosts crude tanker rates, reducing competition.

[SLOW] Clean MR Market Monitor _ World : TCE comparison by MR route

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Oil leak near Iran’s key Kharg island terminal raises concerns

Iran experienced an oil leak near its major export hub, Kharg Island, in the Persian Gulf. The leak occurred on subsea pipelines around four miles from the island, creating two slicks. While the cause of the incident remains unknown, authorities are working to contain the spill. It is unclear if the leak will affect Iran's oil exports. This comes amid heightened tensions following an Iranian missile attack earlier this month, with traders speculating on possible retaliatory actions by Israel. However, Israel has reportedly ruled out targeting Iran's oil infrastructure in response.

[SLOW] https://slowspace.io/ _ Kharg island

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Expanded US sanctions target Iran’s petrochemical sector

The US Treasury and State departments have expanded sanctions on Iran’s petroleum and petrochemical sectors, signaling increased pressure on Tehran's economy. Legal experts believe these new sanctions bring broader authority over Iran's petrochemical industry, including shipments via chemical, product tankers, and LPG carriers. Washington has been ramping up efforts to track and sanction companies and vessels involved in Iranian trade, with 23 ships added to the sanctions list. Sanction evasion techniques like location spoofing have also increased, complicating enforcement efforts. While Iran condemned the sanctions as "illegal and unjustified," critics of the Biden administration welcomed the measures but argued they should have been implemented sooner. The new sanctions are seen as aligned with the recently enacted Stop Harboring Iranian Petroleum (SHIP) Act, further tightening control over Iran’s petrochemical exports.

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[SLOW] OFAC Sanction Tanker List _ OFAC-listed tanker count flow

US sanctions hit Russian oil tankers harder than Europe’s, but shadow fleet persists

Western sanctions targeting Russian and Iranian oil exports have had mixed results, with US measures proving more effective than those imposed by European governments. According to Vortexa, nearly 70% of Russia-linked tankers blacklisted by the EU and UK continued to operate, compared to fewer than 20% of vessels sanctioned by the US. The difference stems from the US's influence over Indian buyers, who avoid blacklisted ships to maintain relations with the US, especially given India’s access to Venezuelan oil under US waivers. China, on the other hand, does not recognize unilateral sanctions, leading to less disruption for sanctioned oil shipped to China.

Sanctioned tankers use ship-to-ship (STS) transfers to avoid port calls, and around 478 "dark fleet" tankers have been involved in lifting Russian, Iranian, or Venezuelan cargoes, with many engaging in unsafe practices like turning off AIS signals, raising environmental and safety concerns. Despite this, the shadow fleet remains resilient and is growing, posing risks of a major oil spill that could strain international insurers.

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Nordic American Tankers secures $64 million five-year charter amid rising Suezmax rates

Nordic American Tankers (NAT), a New York-listed company led by Herbjorn Hansson, has secured a five-year charter for one of its suezmax vessels with a major international energy company. The charter rate is estimated in the mid-to-high $30,000s per day, beginning in November, potentially valuing the deal at $64 million. Shipbroker BRS Group estimates the current rate for eco suezmax charters at $35,000 per day, while NAT's suezmax vessels average lower spot rates of $40,000 per day. The global suezmax market, recovering after a recent dip, is showing signs of improvement with moderately bullish expectations from vessel owners.

[SLOW] Suezmax Market Monitor _ TCE comparison by Suezmax route

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China’s shift to LNG trucks disrupts global crude and diesel tanker markets

China's increasing use of LNG-powered trucks is disrupting global tanker markets, as the country's demand for diesel declines while its LNG imports rise. Flex LNG's CEO, Oystein Kalleklev, highlighted that LNG trucks, despite being 25% more expensive than diesel trucks, have lower overall costs due to cheaper LNG prices. This shift has reduced China's diesel sales by 6% and increased LNG imports by 12% in July. As a result, China's crude and diesel demand has weakened, impacting VLCC rates, which depend on rising Chinese imports for higher profits. Although crude imports to China have shown some recent recovery, much of it is attributed to restocking rather than increased demand, limiting sustained growth for tanker markets.

[SLOW] Oil Market _ LNG Price

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Sinopec boosts shale oil output in east China

Sinopec is significantly increasing production from its Jiyang shale oil project in east China, with current output reaching 1,600 metric tons per day, up from just 100 tons in 2021. The company is on track to meet its target of producing 500,000 tons annually by 2025. The project, located primarily in Shandong province, is part of China's broader effort to boost domestic energy security and reduce dependence on fast-depleting conventional oilfields. Despite the large resource size of 10.5 billion tons, shale oil remains challenging and costly to extract, currently representing just 1% of China's total crude production.

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[SLOW] Oil Market _ Med Sea Oil Price

Libyan oil export recovery floods European market, forcing price cuts

Libya's resumption of crude oil production after a political crisis has led to an oversupply in the European crude market, driving down prices for competing oil grades. Following the appointment of a new central bank governor, Libya's oil output has quickly recovered to 1.3 million barrels per day, nearing pre-crisis levels. However, European refinery maintenance, especially in the Mediterranean and northwest Europe, has weakened demand, forcing sellers to reduce their prices. Competing crude grades such as Azerbaijan's Azeri Light and West African grades have seen their price premiums drop significantly. The excess supply in Europe is expected to persist, with further pressure anticipated as Kazakhstan’s Kashagan field resumes production after maintenance in November.

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[SLOW] EIA - Crude Oil Outlook _ Non-OPEC oil supply outlook

Traders brace for 2025 oil oversupply as non-Opec output grows and demand forecasts drop

Oil traders have become increasingly pessimistic about the market outlook for 2025, despite the ongoing turmoil in the Middle East. The bearish sentiment is driven by expectations that global oil supplies will outpace demand, with significant production increases expected from non-OPEC countries like the U.S., Brazil, Guyana, and Canada. Major oil agencies, including the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA), and OPEC, have all revised their demand growth forecasts downward for both 2024 and 2025. While supply is projected to grow, demand growth forecasts for 2025 have been consistently reduced, fueling concerns of an oversupply in the market. However, short-term market conditions remain uncertain, as the IEA has noted discrepancies between its supply-demand balances and observed inventory data, which could result in revisions.

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Fuel tanker explosion in northern Nigeria kills 147

A tragic fuel tanker accident in Nigeria's northern state of Jigawa claimed the lives of at least 147 people after the vehicle overturned and spilled petrol, which later exploded. The tanker lost control while traveling between Kano and Yobe State, leading villagers to gather and attempt to collect the spilled fuel before it ignited. In addition to the deaths, 50 others were injured and are receiving treatment. This incident is one of the worst accidents in Nigeria in recent years, a country already grappling with infrastructure issues and safety concerns. Mass burials for the victims have been held.