Oil Prices Rise 1% Amid Hopes for Ukraine Ceasefire, Ending the Week Stable

Oil prices rebounded by 1% on Friday, ending the week nearly unchanged, as investors considered the declining prospects for a quick resolution to the Ukraine war that could restore Russian energy supplies to Western markets. Brent crude futures rose 1% to $70.58 a barrel, while U.S. WTI gained 1% to $67.18. Despite these gains, both benchmarks ended the week largely unchanged from the previous Friday. Russian President Vladimir Putin voiced support for a U.S. ceasefire proposal, though the terms suggested an extended conflict. Analysts highlighted potential supply disruptions amid geopolitical tensions and market uncertainty. The International Energy Agency warned that global oil supply could outpace demand, while OPEC+ supply growth and unstable macroeconomic conditions also clouded oil price recovery prospects.

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China’s State Oil Firms Cut Russian Oil Imports Amid U.S. Sanctions, Independent Refiners Step In

Chinese state-owned oil companies are reducing their purchases of Russian oil due to U.S. sanctions imposed on January 10, which targeted Russian producers Gazprom Neft and Surgutneftegaz, as well as insurers and over 100 vessels. Sinopec and Zhenhua Oil have halted March-loading purchases, while PetroChina and CNOOC have scaled back volumes to ensure compliance. The decline in purchases by Chinese state firms has led to a drop in Russian oil prices, reducing Moscow’s revenue, with ESPO blend crude premiums falling from $3 to just above $2 per barrel. Despite this, independent Chinese refiners have stepped in to fill the gap, keeping demand steady and maintaining ESPO premiums at $2.50-$3 per barrel for March cargoes. PetroChina continues to lift 800,000-900,000 bpd of Russian oil via pipelines under a long-term agreement, while Sinopec has been replacing Russian crude with imports from West Africa, the Middle East, and Brazil. Russia remains China’s largest crude supplier, accounting for 20% of total crude imports, with China previously buying 1.3 million bpd of Russian oil—half of which was purchased by state firms and the rest by independent refiners.

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Russia Turns to Cryptocurrencies for Oil Trade Amid Sanctions, Sources Say

Russia is increasingly using cryptocurrencies such as Bitcoin, Ethereum, and Tether in its oil trade with China and India to circumvent Western sanctions, according to sources familiar with the matter. While Russia legalized digital currency payments for international trade last year, its application in oil transactions has not been widely reported. The process involves Chinese buyers paying trading intermediaries in yuan, which is then converted into crypto and transferred to Russia, where it is exchanged for roubles. Some transactions reach tens of millions of dollars per month, though traditional currencies like the UAE dirham still dominate the majority of Russian oil trade. Russia follows a precedent set by sanctioned nations like Iran and Venezuela, which have used cryptocurrencies to bypass U.S. financial restrictions. Although U.S. President Donald Trump has expressed interest in improving U.S.-Russia relations, his stance on sanctions relief remains uncertain. One source suggested that Russia will likely continue using crypto for oil transactions even if sanctions are lifted due to its efficiency. The U.S. and EU have already targeted Russian crypto exchanges such as Garantex, which was sanctioned in 2022 and recently had its services suspended after Tether blocked its wallets.

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Russian Oil Delivery to China Delayed Sevenfold After Sanctions

A two-million-barrel cargo of Russian oil from the Sakhalin 1 project to China has taken seven times longer to deliver due to U.S. sanctions imposed on Moscow in January. The delivery of Sokol crude, typically completed within a week, is now being stretched over more than seven weeks. The oil, delivered by the VLCC "Daban," underwent ship-to-ship transfers off Russia’s Pacific coast before struggling to dock at multiple Chinese ports. While sanctions have caused significant delays, the flow of Russian oil has not stopped, although there have been disruptions, such as tankers in the Baltic Sea waiting a month for unloading. The sanctions, which targeted 161 tankers and key Russian oil companies, have introduced complications in the shipping process, but the market is still observing Russian oil exports being maintained despite the challenges.

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Kazakhstan Increases Oil Exports via BTC Pipeline by 38% in February

Kazakhstan significantly increased its oil exports through the Baku-Tbilisi-Ceyhan (BTC) pipeline in February, with shipments rising 38% from January to 97,300 metric tons (approximately 28,000 barrels per day), according to KazTransOil. The BTC pipeline, which bypasses Russia, serves as an alternative to Kazakhstan’s primary export route via the Caspian Pipeline Consortium (CPC), which transports oil through Russia to Novorossiisk. However, expanding BTC exports remains challenging due to limited tanker capacity for transporting oil across the Caspian Sea and stalled negotiations on a trans-Caspian pipeline. Meanwhile, Kazakhstan’s oil exports to China via the Atasu-Alashankou pipeline declined by 9% in February, totaling 73,685 metric tons.

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Indian Tanker Trips to Europe Rise as Insurance Costs Halve

Indian tankers are increasingly using the Red Sea route to ship fuel to Europe, as insurance costs have significantly decreased, reports UK shipbroker Braemar. Diesel and jet fuel exports are now being routed through the shorter Suez Canal after a cessation in Houthi militia attacks, with the exception of Israeli-linked vessels. Shipments to the Bab el-Mandeb strait have risen, with insurance bills falling from around 0.9% of hull value in November to 0.35% today. These lower insurance costs have encouraged more vessels to use the route. Additionally, Indian exports through the Cape of Good Hope have increased since November. The current decline in war risk insurance is linked to the ceasefire in the region, with the broker expecting rates to remain stable for the next few months unless hostilities resume.

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DIS Boss Faces Dilemma Over Chinese Newbuildings Amid US Port Fee Hike Proposal

The leadership of Italy’s d’Amico International Shipping (DIS) is uncertain about the future of their Chinese-built ships if the US proceeds with proposed port fee increases for such vessels. The US trade representative will announce on March 24 which proposals will be adopted, potentially imposing fees of up to $1.5 million per terminal call for ships built in China. DIS, which has no Chinese-built vessels in its current fleet, has four LR1 tankers ordered from a Chinese shipyard that could face these hefty fees, making them less viable for US trade. CEO Carlos Balestra di Mottola expressed concerns about the inflationary impact of these fees on vital US export industries and hopes that they would apply only to vessels ordered after the new regulation is enacted. He also highlighted that if the proposal is applied to ships already in the water, it could significantly affect the market. Although DIS might take delivery of the ships, the uncertainty surrounding the legislation makes the decision to cancel or sell these vessels a tough one. Di Mottola warned that widespread cancellations could lead to a drop in Chinese vessel prices, boosting prices for ships from other countries.

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Crude Tankers Retreat from Product Trades, Offering Relief for Product Tanker Owners

Crude tankers, which had previously entered the product tanker market to cope with weak demand in their own sector, have mostly returned to their original trades in the first quarter of this year. According to Hafnia's commercial vice president, Soren Skibdal Winther, crude tankers now account for just 1-2% of product cargoes, signaling a return to more typical trading patterns. While new crude tanker builds are still lifting product cargoes on their first voyages, this is not considered "cannibalization" as it is an adjacent trade. Analysts have noted a significant drop in crude tankers lifting product cargoes, with only 4% of long-haul clean product volumes being carried by uncoated ships, compared to 14% at the peak in the third quarter. This shift is providing relief for product tanker owners and investors. Despite the return to normalcy, analysts, including Steem1960's Anders Staubo Nordahl, caution that market conditions could change, with crude tankers potentially returning to the product trade if favorable economics re-emerge later in the year.