2025.01.10

Oil Prices Climb 1% Amid Cold Weather and Winter Fuel Demand Surge

Oil prices rose over 1% on Thursday as cold weather across parts of the U.S. and Europe boosted demand for winter fuels like heating oil and propane. Brent crude settled at $76.92 a barrel, and West Texas Intermediate (WTI) at $73.92, recovering from previous declines. Ultra-low sulfur diesel futures hit a three-month high at $2.38 per gallon. Analysts from JP Morgan estimate that colder-than-average temperatures increase heating fuel demand significantly.

Extreme winter conditions also threaten supply disruptions, with freezing temperatures potentially halting production temporarily. Meanwhile, the Brent futures market indicates tightening supplies as demand rises, shown by the widening backwardation gap.

Additionally, U.S. President Joe Biden is expected to announce new sanctions targeting Russia's economy, with potential impacts on its oil industry. Looking forward, WTI prices are projected to fluctuate between $67.55 and $77.95 amid global economic uncertainties.

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Saudi Arabia’s Crude Oil Supply to China Expected to Decline in February

Saudi Arabia is set to reduce its crude oil supply to China in February, with shipments expected to drop to 43.5 million barrels from 46 million barrels in January. This decline follows a price hike by Saudi Aramco and OPEC+ extending production cuts in the first quarter. Chinese refiners, including CNOOC, PetroChina, and Hengli Petrochemical, will be receiving less oil, while Sinopec and Sinochem will see an increase in supply. The reduction in supply comes as Saudi Arabia raises official selling prices for Asia for the first time in three months. Despite this, Saudi Arabia remains the second-largest crude oil supplier to China after Russia.

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Saudi Arabia’s Crude Oil Supply to China Expected to Decline in February

Saudi Arabia is set to reduce its crude oil supply to China in February, with shipments expected to drop to 43.5 million barrels from 46 million barrels in January. This decline follows a price hike by Saudi Aramco and OPEC+ extending production cuts in the first quarter. Chinese refiners, including CNOOC, PetroChina, and Hengli Petrochemical, will be receiving less oil, while Sinopec and Sinochem will see an increase in supply. The reduction in supply comes as Saudi Arabia raises official selling prices for Asia for the first time in three months. Despite this, Saudi Arabia remains the second-largest crude oil supplier to China after Russia.

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Fuel Leak Reported from Grounded Tanker off Japan’s Cape Esan

The 5,000-dwt Sanwa Maru tanker ran aground off Cape Esan in northeastern Japan on Monday, resulting in a fuel leak. The vessel, which was en route from Tomakomai to Funagawa Port, is carrying 200,000 liters of fuel, with a slick of about 2.7 km by 1 km seen by Wednesday. Seven crew members were evacuated, and no injuries were reported. While the tanker’s cargo of diesel and kerosene hasn’t leaked, damage near the stern fuel tank caused an oil spill. The crew deployed a containment boom, and authorities are investigating the cause of the accident. Salvage efforts to refloat the vessel are ongoing.

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Angola’s February Oil Sales Accelerate, Driven by Stronger Asian Demand

Angola’s oil sales for February-loading crude have picked up pace, with only 20-30% of the 29 scheduled cargoes still seeking buyers. This faster pace, compared to previous months, is attributed to stronger demand from Asia, including new Chinese refiner Shandong Yulong Petrochemical and established buyers like Unipec, Sinochem, and Indian Oil Corp. Additionally, concerns over tighter tanker supplies, especially due to sanctions on Chinese shipping lines, are prompting China to source more oil from the Atlantic region, including Angolan crude.

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China Unaware of Shandong Port Group’s Ban on Sanctioned Tankers

The Chinese government has expressed no knowledge of Shandong Port Group's (SPG) decision to ban US-sanctioned tankers from unloading at its terminals. SPG operates major ports in Shandong, including Qingdao, Rizhao, and Yantai, which handle a significant portion of China's imports of crude oil from Iran, Russia, and Venezuela. The ban is expected to affect 63 tankers carrying sanctioned crude, reducing Chinese imports of Iranian oil. The move may lead to higher costs for Iranian crude and create inefficiencies in the refining sector, particularly for independent Chinese refineries.

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