2025.01.08

"Oil Prices Rise Amid Supply Concerns and Hopes for Chinese Demand"

Oil prices climbed on Tuesday due to potential supply disruptions from Iran and Russia under Western sanctions, coupled with optimism over higher demand in China. Brent crude settled at $77.05 per barrel, up 0.98%, while WTI closed at $74.25 per barrel, up 0.94%. Analysts pointed to Chinese economic stimulus plans and tight supplies after the holidays as key drivers, though the broader trend remains bearish.

Middle Eastern oil prices gained support from Saudi Arabia’s decision to raise February oil prices for Asia, the first hike in three months. Additionally, China's Shandong Port Group blacklisted U.S.-sanctioned vessels, potentially limiting imports through major eastern ports.

Despite demand bolstered by cold weather in the U.S. and Europe, concerns over eurozone inflation and global economic data tempered further price advances. Analysts expect continued market volatility, with focus shifting to upcoming U.S. employment data.

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"Shandong Port Ban on U.S.-Sanctioned Vessels Challenges Oil Imports and Refining Costs"

Shandong Port Group, managing major eastern Chinese ports like Qingdao, Rizhao, and Yantai, has banned U.S.-sanctioned tankers from docking, unloading, or receiving services. The region, which imported 1.74 million barrels per day of oil from Iran, Russia, and Venezuela in 2024, relies heavily on discounted sanctioned crude. This ban is expected to increase shipping costs for independent refiners in Shandong, already struggling with low margins and weak demand.

The decision comes amid tightened U.S. sanctions on shadow fleets carrying Iranian and Russian oil.

(The ban came after sanctioned tanker Eliza II unloaded at Yantai Port in early January, the notice said. The vessels included Phonix, Vigor, Quinn and Divine, which are all sanctioned by the U.S. Treasury.)

Traders anticipate slower oil imports into China, the world’s largest oil importer. While Shandong Port downplayed the impact, analysts predict higher logistics costs and reduced access to sanctioned crude.

Global oil markets are also responding, with Iranian crude prices reaching multi-year highs due to limited tanker availability. Goldman Sachs projects a 300,000 barrels per day drop in Iran's crude exports by mid-2025, while further sanctions on Russian oil may sustain elevated prices.

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"OPEC Oil Output Declines in December Amid UAE Maintenance and Iranian Reductions"

OPEC's oil production dropped by 50,000 barrels per day (bpd) in December to 26.46 million bpd, according to sources. The decline followed two months of increases and was primarily driven by a 90,000 bpd reduction in the UAE due to field maintenance and a 70,000 bpd drop in Iran’s output. Iran's production, despite reaching its highest since 2018 last year, is expected to face further pressure from incoming U.S. sanctions.

While Saudi Arabia and Iraq maintained steady output, Nigeria and Libya boosted production by 50,000 bpd each. Nigeria's increase reflected higher domestic refining and exports, while Libya's growth continued following the resolution of a central bank dispute.

The modest OPEC decline coincided with the wider OPEC+ group's decision to maintain production cuts amid global demand concerns. Despite variations in data sources, the group remained below its implied output targets for members under supply agreements.

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Torm Sells Second Vintage Tanker After Prolific Fleet Expansion

Danish product tanker owner Torm has sold the 46,200-dwt Torm Helvig (built 2005) for $18 million, marking its second vintage tanker sale in two months. The ship, now renamed Victorious, follows the December sale of the 46,900-dwt Torm Republican (built 2006) for $18.8 million.

The sales come after a fleet expansion spree in 2024, during which Torm acquired 16 MR tankers in deals worth $579 million. Despite these additions, CEO Jacob Meldgaard indicated the company might offload older vessels to optimize its fleet.

The Torm Helvig sale price exceeded valuation estimates from VesselsValue and MSI Horizon, underscoring the demand for secondhand tankers amid a robust market. Post-sales, Torm retains three MRs from 2005 and two tankers built in 2007.

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Russia's Seaborne Crude Exports Hit 16-Month Low Amid Declining Shipments

Russia's crude oil exports have fallen to their lowest level in 16 months, with a notable decrease in shipments from its western ports, particularly from Ust-Luga. Since October, exports have dropped by 540,000 barrels per day, driven by reduced cargoes and lower refinery runs. The slowdown, which continued into January, has led to a 25% decline in four-week average flows compared to October. Despite the drop, Russia's crude export value remained relatively stable due to rising prices, though income still slipped slightly. Exports to Asian markets, including China and India, also decreased, while shipments to Turkey remain the only significant flows to Europe. Russia's crude production slightly missed its OPEC+ target in December, contributing to the reduced exports.

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Cosco Responds to US 'Blacklist' Designation, Vows Uninterrupted Global Trade

Chinese state-owned shipping giant China Cosco Shipping has strongly opposed its inclusion on a US Defense Department list classifying it as a "Chinese military company." The list aims to deter US businesses from engaging with listed entities but does not impose sanctions.

In a statement, Cosco emphasized that neither it nor its subsidiaries, including Cosco Shipping (North America) and Cosco Shipping Finance Co., are military-related. The company pledged to engage with US authorities for clarification while reaffirming its commitment to compliance with international laws and maintaining uninterrupted global trade operations.

Cosco's vast fleet of 1,086 vessels, spanning sectors like VLCCs, VLOCs, and ultra-large container ships, underscores its critical role in global shipping. However, the designation has raised concerns about potential operational restrictions, including trading in US ports, as noted by Fearnley Securities.

Cosco shares fell 4.4% in Hong Kong following the news, amid broader implications for other Chinese entities on the list, including China State Shipbuilding Corp and Sinotrans & CSC Holdings. Despite past sanctions in 2019, later lifted in 2020, Cosco continues to navigate challenges in its global operations.

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Russian Fuel Exports Reach Five-Month High with Surge in Diesel and Naphtha Shipments

Russia's oil-product exports rose to a five-month high in December, reaching 2.24 million barrels per day, driven by increased flows of key fuels like diesel, gasoil, and naphtha following the end of seasonal refinery maintenance. Diesel and gasoil exports hit a five-month peak of 899,000 barrels per day, with significant growth in shipments to Africa. Naphtha exports also surged by 22% to 444,000 barrels per day, led by increased demand from Asia, particularly Taiwan. Fuel oil shipments climbed 8%, while gasoline exports halved. Despite the month-on-month growth, Russia's overall refined-fuel exports were still about 10% lower than the previous year and 12% below 2022 levels, as Europe had stopped importing Russian fuels.