2025.01.16

Oil prices hit multi-month highs on supply concerns and ceasefire deal

Oil prices surged to multi-month highs on Wednesday, with WTI and Brent hitting their highest levels since 2024.(Brent crude settled $82.03 a barrel, U.S. West Texas Intermediate crude (WTI) settled $80.04 a barrel.) This was driven by a significant draw in U.S. crude stocks to their lowest levels since 2022, along with concerns over potential disruptions in Russian oil supply due to new U.S. sanctions. The ceasefire deal between Israel and Hamas also played a role in supporting oil prices. The International Energy Agency warned that the sanctions could impact Russian oil distribution. Despite this, concerns eased with the ceasefire deal reached, and investors are now focused on economic growth and oil demand. OPEC expects global oil demand to increase by 1.43 million barrels per day in 2026, similar to the growth rate in 2025.

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Tanker Rates Surge as Demand Increases and Sanctions Impact Global Supply

Tanker rates have continued to rise due to increasing demand and sanctions affecting global tanker supply. Shell and Shenghong have booked VLCCs to load Middle East crude, with rates increasing significantly. Traders are seeking more tankers to load crude from Saudi Arabia, further driving up freight rates. Additionally, product tanker rates for clean products have also risen by about 10% amid strong demand before the Lunar New Year. However, some skepticism remains about a sustained increase in freight rates, as the impact of sanctions on the tanker fleet may be minimal. Asian refiners are facing squeezed margins due to surging freight costs and spot premiums for Middle East crude.

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IEA Warns of Potential Disruption to Oil Supply Chains from New US Sanctions Against Russia

The IEA has warned that new US sanctions against Russia could significantly disrupt the country's oil supply chains, potentially tightening the global market. Despite the potential impact, the IEA has left its forecasts for Russia and Iran unchanged for now. The price impact of the sanctions, along with cold weather, could be offset by rising supply. The IEA still expects demand to grow slower than supply in 2025. OPEC also rolled out its demand view for 2026, predicting similar growth to 2025. The sanctions cover entities that handle a significant portion of Russian and Iranian crude exports. While oil prices have risen due to the sanctions, the IEA remains cautious about the impact on Russian supply. OPEC forecasts stronger demand growth than the IEA for 2025 and predicts a similar expansion in 2026. The IEA made minor revisions to its demand forecasts, with global demand growth expected to reach 1.05 million bpd in 2025. China's economic challenges and shift to electric vehicles are tempering oil demand prospects. OPEC cut its figure for 2024 demand growth due to the Chinese slowdown, but demand is still above the IEA's estimate. Previous vessel designations targeted by sanctions reduced the activity of designated tankers by 90%. The latest sanctions package aims to limit Russia's oil and gas revenue to push for a peace deal in Ukraine. The IEA expects price gains to be mitigated by strong supply growth and OPEC+ looking to unwind output cuts. Global oil supply growth is expected to reach 1.8 million bpd in 2025, with non-OPEC+ production accounting for the majority. The IEA has not provided an estimate for the market surplus in 2025, but in December, forecasted a surplus of at least 950,000 bpd.

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Colonial Pipeline's Main Gasoline Artery Expected to Remain Closed Until Friday Due to Suspected Leak in Georgia

Colonial Pipeline's main gasoline artery in the U.S. will likely remain closed until Friday due to a suspected leak in Georgia. The shutdown of Line 1, which delivers 1.5 million barrels of gasoline daily, is on par with the duration of a cyberattack last year. However, the impact on gasoline prices is expected to be limited due to high stockpiles and refinery output. Despite the outage, retail gasoline prices in Atlanta, Georgia, have remained steady. Panic buying from consumers could pose challenges, though, as it may lead to low inventory at gas stations. As of now, the East Coast has a significant amount of gasoline in storage, providing more than 20 days of supply.

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Trafigura and Sinokor Maritime Co Rumored to Consider Merger of VLCC Commercial Operations

Market rumors suggest that Trafigura and Sinokor are considering merging their commercial operations on Very Large Crude Carriers (VLCCs), potentially giving them control of over 100 vessels and a 12% share of the market. While Trafigura has declined to comment on the speculation, industry players believe that the merger could have a significant positive impact on the VLCC market. Despite some concerns about compatibility between the two companies' operating models, there is a belief that Sinokor could benefit from Trafigura's expertise in chartering. Sinokor has been expanding its VLCC fleet through chartering deals, while Trafigura has been ordering newbuildings. VLCC rates have been increasing, with spot charter rates surpassing $60,000 per day. This potential merger could signal a more formal collaboration between the two companies in the future.

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VLCC Tanker Artemis III Seized and Headed for Scrapyard Amid Dwindling Trading Options

The shadow fleet VLCC, Artemis III, built in 1996, has been seized and is heading for the scrapyard as trading options for elderly tankers dwindle. The vessel was involved in trading sanctioned oil and was detained by the Malaysian coastguard for an unauthorized ship-to-ship transfer of Iranian oil. sources reported that the ship has been sold for scrap, but the price and destination are not yet available. Tanker scrap prices have decreased, with the Artemis III being the latest in a series of older vessels sold for demolition. The Equasis database shows the ship managed by Breeze Marine Asset Management of Dubai, which could not be reached for comment. The vessel, along with another, Ocean Hermana, loaded Iranian crude oil before authorities intervened in Malaysia. The scrap market is gaining momentum as more aging tankers are being recycled due to sanctions and reduced trading opportunities. The Artemis III is currently anchored off Singapore since 8 December.

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