Oil prices surge on supply concerns, but U.S. tariffs limit gains

Oil prices climbed to a two-week high on Tuesday due to supply concerns from U.S. sanctions on Russian and Iranian oil and rising tensions in the Middle East, with Brent crude settling at $77.00 per barrel and WTI at $73.32, marking their highest levels since January 28. Sanctions have disrupted Russian oil shipments to China and India, while renewed U.S. pressure on Iran further tightened supply. However, gains were restrained by fears that new U.S. tariffs on steel and aluminum could dampen global economic growth and energy demand. The Federal Reserve signaled it may delay rate cuts, further impacting market sentiment. Meanwhile, the U.S. Energy Information Administration (EIA) projected record-high oil production and consumption in 2025 and 2026, with traders awaiting inventory reports to gauge near-term supply trends.

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Saudi crude supply to China drops in March amid price surge

Saudi Arabia’s crude oil exports to China are set to decline in March for the second consecutive month after state oil firm Saudi Aramco raised prices to their highest level in over two years, trade sources said on Tuesday. Aramco will ship approximately 41 million barrels to China in March, down from 43.5 million barrels in February. While PetroChina and private refiner Shenghong Petrochemical will receive increased supply, major Chinese state-owned firm Sinopec and the Aramco-Sinopec Fujian refinery are expected to lift less crude. Last week, Aramco increased its official selling price (OSP) for Arab Light crude by $2.40 to $3.90 per barrel above the Oman/Dubai benchmark, marking the highest level since December 2022. The price hike follows U.S. sanctions that have disrupted Russian energy trade, raising shipping costs and tightening supply. Meanwhile, OPEC+ is expected to maintain production cuts in the first quarter of 2024 before a gradual increase in output from April. China, the world’s largest crude importer, received 78.64 million metric tons (1.57 million barrels per day) of Saudi crude in 2024, reflecting an 8.5% decline from the previous year, according to Chinese customs data. Despite this drop, Saudi Arabia remains China’s second-largest crude supplier after Russia.

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OPEC+ poised to increase output amid US pressure on Iranian oil exports

OPEC+ is expected to move forward with planned production hikes in April if the US "maximum pressure" campaign successfully curtails Iran's oil exports, according to BRS Shipbrokers. The bloc’s decision not to alter its production strategy suggests it aims to offset any supply gaps left by Iran’s potential decline from 1.7 million barrels per day, nearly all of which currently goes to China. If Iranian exports fall, Chinese refiners may turn to other Middle Eastern suppliers, boosting tanker demand and rates. However, despite US sanctions, Iranian exports hit a 10-year high in January, and February shipments to China may even increase. Meanwhile, VLCC rates have softened due to ample vessel supply, though long-term impacts will depend on evolving US trade policies on Iran and Russia.

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Sanctioned Russian oil tanker idles off India amid uncertainty over delivery

An oil tanker carrying crude from recently sanctioned Russian producer Surgutneftegas has been idling off India’s west coast for two days, raising uncertainty over whether it will be allowed to offload its cargo. The Cordelia Moon, which loaded 1 million barrels of Urals crude from Russia’s Novorossiysk port in January, was scheduled to discharge at Vadinar on February 9. This marks the first observed arrival of Surgutneftegas barrels since U.S. sanctions took effect on January 10. At least four more tankers carrying sanctioned Russian oil are expected to arrive soon, with another shipment from Gazprom Neft also en route. India's oil secretary Pankaj Jain stated that cargoes from sanctioned entities wouldn’t be accepted if loaded after the cutoff date but did not comment on the Cordelia Moon specifically. Meanwhile, vessel tracking shows millions of barrels of Russian crude backing up on tankers, signaling potential supply disruptions.

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China National Petroleum resumes oil production in South Sudan after yearlong halt

Dar Petroleum Operating Co., led by China National Petroleum Corp., China Petroleum & Chemical Corp., and Nile Petroleum Corp., has resumed crude production in South Sudan after nearly a year-long shutdown, according to sources familiar with the matter. The reopening includes four batches of wells in Blocks 3 and 7, which account for 75% of South Sudan’s oil output. Operations were halted when Sudan declared force majeure on its pipeline, disrupting exports for 10 months. With the stoppage lifted in January, South Sudan aims to ramp up production to 90,000 barrels per day within six months, though government officials have not yet commented on the restart.

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Uganda delays oil production beyond 2025 amid infrastructure and policy challenges

Uganda has announced it will miss its 2025 target for starting oil production, citing unforeseen challenges. The government has not provided a new timeline for extraction to begin. Uganda discovered significant petroleum reserves in the Albertine Rift Basin nearly two decades ago, but production has faced delays due to disputes with international oil firms, tax issues, and slow infrastructure development. The fields, estimated to hold 6 billion barrels of crude, are being developed by TotalEnergies and CNOOC, alongside a $5 billion export pipeline project with Uganda and Tanzania.