2024.11.29

Oil Prices Rise Amid Ceasefire Tensions and OPEC+ Meeting Delay

Oil prices edged higher as Israel and Hezbollah accused each other of violating a newly established ceasefire, with Israeli tanks firing on southern Lebanon. While the Middle East conflict hasn’t disrupted oil supply, it has added a risk premium to prices.

Brent crude rose 0.5% to $73.17 per barrel, and U.S. West Texas Intermediate gained 0.2% to $68.88, though trading was muted due to the U.S. Thanksgiving holiday.

Additionally, OPEC+ postponed its policy meeting to December 5 and is expected to discuss delaying a planned January production increase due to weak global demand. Meanwhile, U.S. gasoline stocks unexpectedly grew by 3.3 million barrels last week, adding downward pressure on prices already weighed down by slowing demand in the U.S. and China.

[SLOW] Oil Market

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OPEC+ Postpones Policy Meeting Amid Discussions on Delayed Output Hike

OPEC+ has postponed its upcoming policy meeting from December 1 to December 5, citing scheduling conflicts with a Gulf Arab summit.

The group is reconsidering its planned oil output hike, initially set for January 2025, due to slowing global demand and increased non-OPEC production, which have pressured oil prices.

Current discussions include addressing a previously agreed 300,000 barrels per day (bpd) hike for the UAE and the gradual unwinding of broader production cuts through 2025.

Despite supply cuts, Brent crude oil prices remain within the $70–$80 per barrel range, with recent lows dipping below $69.

The decision follows consultations between top OPEC+ members, including Saudi Arabia, Russia, and Iraq, amid challenges to balance global market dynamics.

[SLOW] Trade Flow- From OPEC+ To World Monthly Trade Flow (CRUDE)

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Asia Poised to Gain as Canadian, Mexican Oil Faces Tariff Threats Under Trump

If U.S. President-elect Donald Trump enforces a 25% import tariff on Canadian and Mexican crude, both countries may redirect oil supplies to Asia, offering discounts to offset higher shipping costs. This could benefit Asian refiners, particularly in China and India, which are well-equipped to process heavy crude grades from these regions.

Canada and Mexico collectively supply 63% of U.S. crude imports, primarily heavy high-sulfur oil refined by complex U.S. refineries. Tariffs could strain Canadian and Mexican producers, forcing deeper price cuts and potential revenue losses. While Europe might see minor benefits, particularly in Spanish refineries handling Mexican Maya crude, Asia is expected to absorb most displaced volumes.

Despite these potential shifts, analysts caution that imposing such tariffs could harm U.S. refiners, raise consumer costs, and spark inflation, making their implementation uncertain.

[SLOW] VLCC Market Monitor

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Tanker Market Faces Muted Earnings Amid Tight Balances, Says Source

Source described the tanker market as a "roller coaster bull market," with spot earnings currently range-bound between $25,000 and $50,000 per day. Despite tight balances, the expected winter demand boost has yet to materialize, and the first quarter now appears more lucrative than year-end.

Source emphasized the need for a shift in market dynamics, particularly increased Atlantic Basin exports to Asia, to drive rates higher. Meanwhile,  they noted reduced interest in older tankers and a saturated market for sanctioned trades. they remains optimistic about modern vessel values but sees older ships as high-risk investments amid stagnant sale-and-purchase activity.

[SLOW] Daily VLCC Market - VLCC TEC Comparison by Routes - 365 days Range

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Russia Escalates Strikes on Ukraine's Energy Grid, Fueling Winter Crisis

Russia launched its second major assault on Ukraine's energy infrastructure this month, causing widespread power outages affecting over a million people. The strikes targeted energy facilities in nine regions, with Ukraine accusing Russia of using cruise missiles, drones, and advanced decoys to overwhelm air defenses. Ukraine’s state grid operator imposed rolling blackouts, warning some areas could face outages lasting over 12 hours.

President Putin claimed the attacks were retaliation for Ukraine's use of U.S.-supplied ATACMS missiles on Russian territory. Ukrainian President Zelenskyy condemned the strikes as a "despicable escalation" and called on Western allies for stronger military and air defense support. U.S. President Biden called the attacks "outrageous," reaffirming support for Ukraine.

The damage deepens concerns over energy security as winter temperatures drop. Ukraine disconnected its nuclear power plants from the grid as a precaution, though this exacerbated the power shortage. Russia's renewed focus on critical infrastructure marks the 11th major energy attack since March, leaving Ukraine’s grid severely compromised as the war drags on.

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