Oil Prices Rise Amid Supply Disruptions and Uncertainty Over Ukraine Peace Talks

Oil prices climbed on Tuesday as traders reacted to supply disruptions caused by drone attacks on the Caspian Pipeline Consortium (CPC) in Russia, impacting Kazakhstan’s exports. Brent crude rose $0.61 to $75.83 per barrel, while WTI increased $1.10 to $71.84 per barrel, catching up after a U.S. holiday. The attack on the CPC pumping station could cut Kazakhstan’s oil exports by 30% for up to two months, removing approximately 380,000 barrels per day from global supply. Additional supply concerns emerged as Russia’s Novorossiysk port halted loadings due to a storm, with planned February exports revised to 590,000 barrels per day. However, oil markets remained cautious due to U.S.-Russia talks in Saudi Arabia aimed at ending the Ukraine war. If a peace deal is reached, sanctions on Russian oil could be lifted, potentially increasing global supply. Analysts, including Mizuho’s Robert Yawger, noted that traders are waiting for clarity on the geopolitical situation before making major moves. On the demand side, upcoming U.S. inventory and trade data could signal lower crude imports, supporting prices. However, expectations of heavy refinery maintenance starting in March may dampen near-term crude demand. Meanwhile, traders are also watching for OPEC+ decisions on whether to proceed with planned supply increases in April. Given Brent’s sharp drop from over $80 per barrel in mid-January, an OPEC+ supply boost could weigh further on prices.

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Drone Attack on Russian Pipeline Cuts Kazakh Oil Exports by 30%

A drone attack on the Caspian Pipeline Consortium (CPC) pumping station in Kropotkinskaya, Russia, has led to a potential 30% reduction in Kazakh oil exports through the Black Sea port of Novorossiysk, according to Russia’s state-controlled Transneft. While CPC has rerouted flows to maintain shipments, it has not disclosed the full extent of the cuts. The 1,500-km CPC pipeline, which handled over 63 million tonnes of oil in 2023, primarily transports Kazakh crude (90% of throughput). The attack, involving explosive-laden drones, did not cause casualties or oil spills, but Russian authorities have launched a criminal case against Ukraine’s secret service and military. The Ukrainian government has not commented, though Kyiv has previously targeted Russian oil facilities in retaliation for missile strikes. The CPC’s ownership includes Chevron (15%), KazMunayGas (19%), and Russia (24%), making an attack on its infrastructure particularly notable. Dmitry Medvedev, Russian vice president, linked the attack to a European and Ukrainian response against Donald Trump’s Ukraine-Russia peace negotiations, though no official confirmation of Ukrainian involvement has been made.

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Diesel East-West Price Spread Hits One-Year High Amid Supply Glut in Asia

The East-West price spread for 10ppm sulphur diesel widened to a one-year high, hitting a $32 per metric ton discount due to oversupply and weak demand in Asia, LSEG data showed. Singapore's distillate stocks exceeded 10.5 million barrels, while cold weather and U.S. exports kept Northwest Europe’s diesel prices firm. More sellers may shift cargoes westward, with India expected to double diesel exports to Northwest Europe in February. However, traders warn the trend may reverse as U.S. refinery maintenance ends, impacting supply dynamics. February diesel exports from Northwest Europe to the U.S. Atlantic coast have already declined.

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US Becomes 5th Largest Oil Supplier to India in January, Russia Maintains Top Position

U.S. oil exports to India surged in January, with shipments rising to 218,400 bpd from 70,600 bpd in December, making the U.S. the fifth-largest oil supplier to India. This rise in imports is part of India’s strategy to increase energy purchases from the U.S. to $25 billion, up from $15 billion last year. Meanwhile, India’s oil imports from Russia, its top supplier, grew by 4.3% in January to 1.58 million bpd. However, India's Russian oil purchases may decrease in the coming months due to U.S. sanctions, as refiners must ensure oil is sourced from non-sanctioned entities. Imports from the Middle East also increased by 6.5% to 2.7 million bpd in January, with Iraq remaining the second-largest supplier, followed by Saudi Arabia and the UAE. Despite sanctions concerns, India’s overall oil imports rose 4.5% in the first 10 months of the fiscal year to an average of 4.8 million bpd.

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China's Private Ports Facilitate Sanctioned Oil Trade Amid Rising Scrutiny

Private terminals in China are increasingly becoming key hubs for handling sanctioned crude oil shipments from Russia and Iran, bypassing larger state-owned port operators facing Western scrutiny. The trend is especially notable in Dongying (Shandong), Yangshan (Shanghai), and Huizhou (Guangdong). In Dongying, now operated by Baogang International, the sanctioned tanker Si He discharged 744,000 barrels of Russian ESPO crude last week. Yangshan, managed by Yangshan Shengang International Oil Logistics Co. Ltd., has also become a hotspot, with the sanctioned vessel Yuri Senkevich delivering 700,000 barrels of Russian Sokol crude on Jan. 28, and two additional blacklisted ships bringing in a total of 1.2 million barrels. Meanwhile, in Huizhou, the privately-run Huaying Petrochemical terminal, controlled by Wintime Energy Group, received nearly 1 million barrels of Iranian crude from the Suezmax tanker Nichola, which had been loaded from the Iran-owned Salina. These privately-run ports allow China’s independent refiners, known as "teapots," to continue purchasing discounted crude while shielding larger state-owned logistics operators from sanctions-related risks. As U.S. restrictions tighten, China's continued engagement with alternative logistics solutions underscores both economic necessity and Beijing’s strategic approach to energy security.

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Is the Dark Fleet’s Dominance Coming to an End?

The tanker market faces potential upheaval due to the reopening of the Red Sea, increased US sanctions on Iran, and a possible Russia-Ukraine peace deal, raising questions about the future of the dark fleet. UK shipbroker Gibson estimates the illicit fleet at over 1,100 ships, with 40% under sanctions, and believes older tankers (over 20 years) may struggle to find employment. The key uncertainty is whether European buyers will return to Russian oil if sanctions are lifted. While US investment bank Stifel expects this, Gibson argues that political opposition from European leaders could slow normalization. European refining throughput is projected to be 500,000 barrels per day lower than in 2022, and competition from the US and other suppliers could limit Russian market recovery. In the products market, tanker tonne-miles surged in 2023 due to Europe's shift away from Russian supplies, creating inefficiencies that benefited shipowners. If Russian products return, European refiners could struggle, reducing long-haul imports and tanker demand. Regarding scrapping, Stifel suggests many dark fleet vessels may shift to opaque trades rather than being scrapped. Consultancy Vortexa estimates that 75% of sanctioned vessels are over 20 years old, but only 10% exceed the 25-year scrapping threshold. Poten & Partners predicts that if all sanctions are lifted within 12 to 18 months, around 60% of the blacklisted fleet will be recycled, while state-owned fleets like Sovcomflot (Russia) and National Iranian Tanker Co (NITC) will re-enter the market. The sale-and-purchase market could also be hit, as secondhand tanker values surged post-Ukraine invasion. If sanctions end, asset prices may decline toward scrap values, with 20-year-old aframaxes currently worth $25 million versus $8 million for scrap. Gibson sees large-scale scrapping as a real possibility, but Stifel warns that expectations of a long-term bull market post-dark fleet may be unrealistic unless market conditions weaken significantly.

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Petrobras to Increase Diesel Production by 120,000 BPD in 2025

Brazilian state-run oil company Petrobras plans to boost diesel production by approximately 120,000 barrels per day (bpd) this year, focusing on expanding low-sulfur diesel (S-10) output at its Abreu e Lima, Replan, and Revap refineries. According to industrial processes chief William Franca, Petrobras currently produces between 600,000 and 700,000 bpd of diesel, a key fuel for heavy industries and agriculture. The increase in domestic output is expected to reduce diesel imports. The company also aims to further expand capacity in the coming years, potentially adding another 100,000 bpd

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Air Liquide and TotalEnergies Invest Over €1 Billion in Green Hydrogen Projects

TotalEnergies and Air Liquide are investing over €1 billion ($1.1 billion) in two green hydrogen projects to decarbonize TotalEnergies’ refineries in the Netherlands and Belgium. These projects will reduce CO2 emissions by up to 450,000 metric tons annually. Using renewable electricity for electrolysis, the hydrogen will serve as a cleaner alternative to fossil fuels. The first project, a 200 MW electrolyser in Rotterdam powered by offshore wind, is set to begin operations by late 2027, with a €600 million investment. Additionally, the companies will launch a 250 MW electrolyser project in Zeeland, Netherlands. The move aligns with Europe's push for hydrogen adoption, though high costs and uncertain demand remain challenges.

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Sonangol Awards Hyundai Heavy Industries Suezmax Tanker Contract in Fleet Expansion Move

Angola’s state-owned oil company Sonangol has signed a letter of intent with HD Hyundai Heavy Industries for the construction of two 158,000-dwt suezmax crude carriers equipped with scrubbers, with the final contract expected by March 2025 and deliveries scheduled for 2027 and 2028. The company is set to pay up to $95 million per ship, bringing the total estimated deal value to $190 million, as part of its fleet renewal strategy, given that its current suezmax fleet consists of 10 vessels, with the oldest being the 158,400-dwt Sonangol Namibe, built in 2007. Sonangol is also in talks with South Korean and Chinese shipyards for three LNG carriers but has yet to finalize any orders. The company holds a 22.8% stake in the 5.2-mtpa Angola LNG project, which operates a fleet of seven LNG carriers, including three steam turbine vessels built in 2011. Meanwhile, Greece’s Pantheon Tankers Management has signed a contract for two conventionally fueled, scrubber-fitted suezmax tankers at HD Hyundai Heavy for approximately $87 million per ship, with deliveries scheduled for late 2026 and early 2027, marking Pantheon’s first newbuilding contract at Hyundai since 2015.