Oil Prices Rise as U.S. Sanctions Iran and OPEC+ Enforces Production Cuts

Oil prices climbed on Friday, marking their second consecutive weekly gain due to fresh U.S. sanctions on Iran and an OPEC+ plan to curb overproduction. Brent crude rose 0.6% to $72.40 per barrel, while WTI crude gained 0.6% to $68.52 per barrel. Both benchmarks were set to increase by about 2% for the week, their largest gain since early 2025. The U.S. Treasury imposed new sanctions targeting an independent Chinese refiner and multiple entities involved in Iranian crude exports, marking Washington’s fourth round of sanctions since President Trump renewed his "maximum pressure" campaign in February. Analysts predict a potential 1 million barrels per day (bpd) reduction in Iranian crude exports, which were estimated at 1.8 million bpd in February. Meanwhile, OPEC+ announced additional output cuts ranging from 189,000 bpd to 435,000 bpd per month until June 2026 to compensate for previous overproduction. This move offsets a planned 138,000 bpd increase starting in April, maintaining overall supply discipline.

___________________________________

OPEC+ Announces New Oil Output Cuts to Offset Overproduction

OPEC+ unveiled a revised plan on Thursday to implement further oil production cuts to compensate for exceeding agreed output levels. The new schedule includes monthly cuts ranging from 189,000 to 435,000 barrels per day (bpd) until June 2026. These cuts are intended to offset the group’s planned monthly production increase of 138,000 bpd starting in April, following an improvement in market fundamentals. The decision comes after recent overproduction by Kazakhstan, which upset other members and prompted the new cuts. Iraq will contribute the most to the compensation cuts, followed by Kazakhstan and Russia. Saudi Arabia will make smaller cuts of 6,000 to 15,000 bpd over three months. Kazakhstan’s production reached a record 1.767 million bpd in February, exceeding its OPEC+ quota of 1.468 million bpd, partly driven by increased output at the Tengiz oilfield due to Chevron’s expansion.

___________________________________

US Sanctions Chinese Refiners Over Iranian Oil Imports via Shadow Fleet

The US Treasury Department has issued its first sanctions against a Chinese refiner, Shandong Shouguang Luqing Petrochemical, for importing Iranian oil through shadow-fleet tankers. This move expands the Trump administration's "maximum pressure" campaign on Iran, targeting crude shipments linked to Tehran-backed Houthis in Yemen. The company's CEO, Wang Xueqing, has also been blacklisted. Treasury Secretary Scott Bessent stated that these purchases help finance terrorism and Iran’s nuclear program. According to United Against Nuclear Iran (UANI), Shouguang Luqing imported at least five shipments of Iran’s Mal Blend crude, using vessels connected to the Houthis and the Iranian Ministry of Defense. Among these, the 151,000-dwt Mehle (built 1999) was linked to Houthi financier Sa’id al-Jamal, while the 318,700-dwt Kohana (built 2003) allegedly moved over $100 million worth of crude for Iran’s defense ministry. UANI’s Claire Jungman emphasized that sanctions on such refiners were overdue, highlighting Iran’s extensive network for evading sanctions. Additionally, the Office of Foreign Assets Control (OFAC) blacklisted five VLCCs, three aframax tankers, and 11 related companies involved in Iran’s shadow fleet operations.

___________________________________

China’s Fuel Oil Imports Surge Ahead of Tax Policy Changes

China’s fuel oil imports rose by 6.8% in the first two months of 2025 compared to the same period last year, reaching 3.84 million metric tons (about 413,300 barrels per day). This surge in imports came as traders rushed to deliver shipments ahead of an increase in import taxes and a reduction in tax rebates. However, demand for fuel oil is expected to decline throughout the year due to the higher import duties and rising prices for high-sulphur fuel oil in Asia. At the same time, exports of low-sulphur marine fuels increased by 5.5% during January and February 2025. Chinese bunker fuel prices were notably cheaper at key ports like Zhoushan and Shanghai compared to Singapore, leading to a rise in short-term demand.

___________________________________

VLCC Rates Surge 33% in a Week Amid Tight Tanker Market and Rising Cargo Demand

VLCC freight rates have spiked significantly due to an increase in cargo activity, depleting the available tonnage pool. The Baltic Exchange assessed Middle East Gulf-to-Asia rates at $52,100 per day on Wednesday, marking a 20% rise in 24 hours and a 33% increase within a week. Fearnley Securities reported ships loading in the Middle East and West Africa were earning $8,000 more than the previous day. Analysts predict continued strong rates due to high activity and a limited number of available vessels. The forward freight agreements have yet to fully reflect this surge, but adjustments are expected as spot rate momentum continues. Tankers International reported a time-charter equivalent rate of $73,841 per day over 37 days for the 314,000-dwt C Innovator, while the 300,000-dwt Seatriumph failed to secure a deal at $66,000 per day. Fearnley Securities forecasts dividend yields above 10% for VLCC operators like DHT Holdings, Frontline, and Okeanis Eco Tankers, considering them attractively valued. The firm also highlighted strong performances in LR2 and MR freight rates, with Hafnia and Torm generating yields between 10% and 20%.

___________________________________

Trump Administration Considers Extending Chevron's License to Operate in Venezuela

The Trump administration is reportedly considering extending Chevron’s license to operate in Venezuela for at least 60 days, according to two sources familiar with the matter. In February, the U.S. announced it would revoke Chevron’s license by early April, but discussions are now underway to extend the license following a meeting between Chevron CEO Mike Wirth and top U.S. oil executives with Trump at the White House. While the extension could offer temporary relief, sources say the broader decision to end Chevron’s operations in Venezuela remains unchanged. Additionally, new sanctions or tariffs targeting Venezuela’s oil exports to China and other countries could be implemented afterward to apply further pressure on President Nicolás Maduro’s regime.

___________________________________

Guyana's Crude Output Hits 648,000 Bpd in February, Poised for Further Growth

Guyana’s crude oil production rose to 648,000 barrels per day (bpd) in February, up from 620,000 bpd in January, according to the country's Ministry of Natural Resources. This marks a steady increase since 2019, when Exxon Mobil-led consortium began production in the South American nation. Oil output is expected to exceed 900,000 bpd later this year, supported by upgrades and new production facilities. The consortium completed upgrades to expand existing facilities, and a fourth production vessel, recently shipped from Singapore, will further increase capacity once operational later this year. Exxon continues to prioritize investments in Guyana, with plans for more production facilities in the future.

___________________________________

Nigerian Pipeline Resumes Operation After Blasts, Bonny Light Loadings Unaffected

Nigeria’s Trans Niger Pipeline, which carries Bonny Light crude, has resumed operations after being temporarily rerouted following explosions that ruptured the main pipeline on Tuesday. The pipeline's operator, Renaissance, confirmed the quick resolution of the issue, ensuring that production was not significantly disrupted. Despite the incident, force majeure was not declared on the loadings of Bonny Light, and shipments continued from storage. Traders noted that the outage had little impact on the differentials for competing grades, with the swift resolution potentially putting downward pressure on Bonny Light’s pricing. Bonny Light crude for April 23-24 was offered at a discount of $0.50, priced at dated Brent plus $2.00. Meanwhile, Angola’s crude grades saw strong demand for April-loading cargoes, with some early offers for May shipments. Dalia crude for May loading was offered at dated Brent plus $1.80.

___________________________________

South Korean Plastics Industry Struggles as China’s Petrochemical Expansion Intensifies

South Korean chemical giants like LG Chem and Lotte Chemical are scrambling to find new markets after suffering massive losses due to China's growing self-sufficiency in petrochemicals. Once reliant on China’s imports, Korean firms now face plummeting production margins and a global supply glut, with petrochemical exports dropping over 15% in 2023 before a slight recovery last year. China’s rapid expansion in polyethylene and polypropylene production has reduced its dependence on Korean imports and even allowed it to export to other regions. Global chemical production capacity for ethylene and propylene is set to grow at near-record levels in 2024, with China leading the surge, worsening oversupply issues. In response, LG Chem has shut plants in Daesan and Yeosu, exiting the styrene monomer market, while Lotte Chemical is selling its Pakistan unit and suspending its synthetic rubber plant in Malaysia. Both companies are shifting toward specialized products for the renewable energy sector, but China is simultaneously strengthening its capabilities in the same space. Additionally, Chinese refiners benefit from cheaper feedstocks like Russian naphtha and Iranian LPG, which are inaccessible to South Korea due to U.S. sanctions, further widening the cost gap. China’s government is also pushing refiners to reduce fuel production in favor of petrochemicals, aligning with its EV-driven energy transition. With most new Chinese petrochemical plants integrated into refineries and supported by strong government policies, South Korea’s industry faces an uphill battle to remain competitive.

___________________________________

Marinakis Secures Discounted VLCC Trio at Hanwha Ocean Amid Falling Yard Prices

Evangelos Marinakis-controlled Capital Group has secured up to three VLCC newbuildings at Hanwha Ocean in South Korea for a total of $375 million. The letter of intent, reportedly signed through Hanwha Ocean’s Athens office, includes two firm 320,000-dwt scrubber-fitted VLCCs for delivery in 2027, with an option for a third vessel. The vessels are based on a design previously ordered by DHT Holdings, with Capital achieving a $3 million discount per unit, bringing the price down to around $125 million per ship. This follows Capital Group’s earlier order of six dual-fuel LNG VLCCs in China, priced at approximately $140 million each, for delivery between 2026 and 2027. The newbuilding market remains subdued, with downward pricing pressure persisting since early 2024. Industry players cite the "Trump effect"—a proposed US port fee of up to $1.5 million on Chinese-owned and operated vessels—as a factor deterring independent owners from committing to new orders. According to Clarksons’ Shipping Intelligence Network, over 90 VLCC newbuildings are currently on order for delivery through 2028.