Oil Prices Edge Up Amid U.S. Military Actions and Positive Chinese Economic Data

Oil prices rose slightly on Monday, driven by two factors: the U.S. expanding its military operations in the Middle East against Yemen's Houthi rebels, who are backed by Iran, and positive Chinese economic data signaling increased demand. Brent crude rose 0.7% to $71.07 per barrel, while U.S. WTI crude increased by 0.6% to $67.58. President Trump vowed to hold Iran accountable for Houthi attacks on shipping, while Chinese economic data showed a rise in retail sales and crude throughput, although factory output eased. Despite concerns over global economic slowdowns and increased output from OPEC+, market support came from China's economic stimulus and Red Sea tensions.

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China’s Refinery Output Rises 2.1% in Early 2024 Amid Holiday Travel and New Capacity

China's refinery throughput increased by 2.1% in January and February 2024, reaching 119.17 million metric tons (14.74 million barrels per day), driven by holiday travel demand and the addition of new refining capacity. Increased gasoline and jet fuel consumption during the Lunar New Year holidays, higher production at state-owned refineries like Sinopec, and the Shandong Yulong Petrochemical refinery ramping up its 200,000 bpd unit to 90% capacity were key contributors to this growth. However, weak refining margins persisted, and independent "teapot" refiners in Shandong reduced production due to higher crude costs following stricter U.S. sanctions on Russian and Iranian oil. Meanwhile, diesel demand remained weak amid a prolonged property sector downturn. In addition, domestic crude oil production dipped 0.2% to 35.04 million metric tons (4.34 million bpd), while natural gas production rose 3.7% to 43.3 billion cubic meters. With state-owned refinery maintenance season approaching, analysts expect large-scale refiners to sustain strong output, while independent refiners may continue to struggle with high crude costs.

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G7 Calls for Satellite Tracking to Combat Shadow Fleet and Illicit Maritime Activities

The G7 countries have called for enhanced satellite-based vessel tracking to monitor shadow fleet movements and illegal ship-to-ship (STS) oil transfers, particularly targeting vessels transporting Russian oil. They raised concerns over unregulated ships, unsafe practices, and geopolitical issues, including the involvement of China, Iran, and North Korea in maritime activities. The G7 also expressed worries about the manipulation of vessel tracking systems by Russia’s shadow fleet, urging the use of satellite technology to track illicit activities. The group condemned unsafe shipping practices and fraudulent registries and emphasized the need to secure maritime choke points. Additionally, they discussed the issue of the Houthi rebels holding a vessel in Yemen and geopolitical influence over key waterways like the Panama Canal.

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US Federal Maritime Commission Investigates Potential Ban on Ships from Maritime Chokepoint Countries

The U.S. Federal Maritime Commission (FMC) has launched an investigation that could lead to the banning or detention of ships from countries involved in "maritime chokepoints" such as the Malacca Strait, Panama Canal, and the Suez Canal. The probe focuses on whether foreign regulations or practices create unfavorable shipping conditions, including congestion, piracy, geopolitical tensions, and environmental risks. The investigation may lead to measures such as refusing clearance to foreign vessels, detaining ships, imposing hefty port fees (up to $1.5 million), and restricting vessels from certain routes. The move is part of the Trump administration's effort to reduce reliance on foreign-owned cargo ships, particularly those from Panama, which has over 8,000 vessels.

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VLSFO More Profitable for Tankers as Scrubber Premium Shrinks

The premium for tankers using scrubbers to burn high-sulphur fuel oil (HSFO) has dropped to its lowest level in five years, as sanctions on Russian fuel exports have tightened the HSFO market. The gap between HSFO and very low-sulphur fuel oil (VLSFO) has narrowed, with non-eco VLCCs now earning just $400 per day more with scrubbers compared to VLSFO-only vessels. As of Monday, Rotterdam VLSFO was priced at $497 per tonne, while HSFO was $439.50 per tonne. In the product tanker market, spot rates surged, with modern LR2s earning $36,000 per day (up 23%) and LR1s earning $30,000 per day (up 31%) over the past week. Demand for petrochemical feedstock has driven up Asian naphtha prices, tightening tonnage availability in the Middle East Gulf. In the crude tanker segment, VLCC rates rose 3% to just under $48,000 per day, while suezmax rates increased 8% to nearly $44,000 per day. Brokers expect rates to continue firming as tonnage availability in the Atlantic tightens amid steady chartering activity and rising demand for alternative crude supplies.

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Tanker Market Slows as Buyers Await Further Price Drops in 2025

Secondhand tanker buyers are cautious, awaiting further price declines before making significant purchases. Clarksons data shows that 74 tanker deals were made in 2025, totaling just under 8 million deadweight tons (dwt), a pace comparable to 2024 but below 2021/23 levels. Despite a decrease, secondhand tanker prices remain historically high, 16% below the August 2024 peak. Handysizes lead the market with 30 sales, followed by 23 aframaxes, 13 suezmaxes, and 7 VLCC sales. VLCC prices have remained steady, with a one-year-old vessel priced at $47 million, up from $41 million in January. Smaller ships have experienced price declines, with suezmaxes and aframaxes dropping into the low-$30 million and high-$20 million ranges, respectively. Handysizes have fallen to the low-$20 million range, while MRs are priced below $20 million for one and five-year-old vessels.