Oil Drops 2% as OPEC+ Weighs Output Hike, Hints of US Tariff Relief Limit Losses

Oil prices fell 2% on Wednesday after reports surfaced that OPEC+ may accelerate production increases in June, stoking concerns about market oversupply. Brent crude closed down $1.32 at $66.12 per barrel, while WTI dropped $1.40 to $62.27. Prices had spiked earlier in the day, with Brent hitting $68.65, before the OPEC+ news reversed the rally. Some OPEC+ members, frustrated with quota violations by countries like Kazakhstan, are pushing for faster output hikes. Kazakhstan reaffirmed its commitment to the OPEC+ pact but stressed that national interests would guide its production decisions. The market also found some support from U.S. inventory data showing a surprise rise in crude stockpiles and sharp declines in gasoline and distillate inventories. Additionally, oil prices were cushioned by speculation that President Trump may cut tariffs on Chinese goods, which could ease trade tensions. Hopes for reduced tariffs and stable U.S.-China relations offered a counterbalance to supply fears, helping limit oil’s downside.

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OPEC+ Weighs Another Accelerated Output Increase Amid Quota Disputes

Several OPEC+ nations are pushing for a second consecutive accelerated oil output increase in June, following a surprise 411,000 bpd hike in May that was three times the planned volume. This comes as internal tensions mount over quota compliance, with Saudi Arabia especially frustrated by overproduction from Kazakhstan and Iraq. A meeting of eight OPEC+ countries on May 5 will determine the June output strategy. Kazakhstan has insisted on prioritizing its national interests, citing challenges in limiting output from independent producers. Iraq, despite promising curbs, has continued increasing exports in April. Not all members favor the faster pace, with Russia preferring gradual 135,000 bpd monthly increases to prevent a price crash. Brent crude prices, initially rising, turned negative on Wednesday, falling below $66 a barrel. The output hikes are part of a broader plan to unwind a 2.2 million bpd cut, though OPEC+ still maintains 3.65 million bpd in cuts through next year to support oil markets.

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Kazakhstan Defies OPEC+ Quotas, Prioritizes National Oil Strategy Amid Foreign Control

Kazakhstan’s new energy minister declared the country will prioritize national interests over OPEC+ quotas when setting oil production levels, intensifying tensions with the alliance. The Central Asian nation, which accounts for about 2% of global oil output, often exceeds its quotas, frustrating members like Saudi Arabia. Energy Minister Erlan Akkenzhenov cited the dominance of foreign majors—like Chevron and ExxonMobil—over key projects such as Tengiz, Kashagan, and Karachaganak as limiting the government's control over output. These three fields contribute to 70% of Kazakhstan's oil production, and officials warn that shutting older fields could permanently damage them. Despite overproduction, Kazakhstan has pledged to offset the excess by reducing output through June 2026. The country emphasizes its commitment to global market stability and constructive participation in OPEC+, while also seeking flexibility to support its investment climate. Kazakhstan exports 1.2 million barrels per day via the CPC pipeline through Russia, which will undergo maintenance in May, though stockpiles should prevent disruptions. Additional export capacity through the Druzhba pipeline to Germany is also possible but hinges on Russian approval.

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Sinopec Resumes Russian Oil Purchases After Brief Pause Amid U.S. Sanctions Concerns

Sinopec, Asia's largest refiner, has resumed purchases of Russian oil following a temporary halt to evaluate the implications of new U.S. sanctions, according to trade sources. Its trading arm, Unipec, recently acquired May-loading cargoes of ESPO Blend crude from Russia’s Far East, marking its return after skipping March and April purchases. The volume of purchases is reportedly lower than usual, as Unipec remains cautious amid ongoing sanctions risks. The U.S. had imposed strict sanctions in January targeting Russian producers Gazprom Neft and Surgutneftegaz, insurers, and over 100 vessels to limit Moscow’s oil revenues. These sanctions previously led to a significant decline in Russian oil exports to China and India and prompted Chinese firms like Sinopec and Zhenhua Oil to temporarily suspend purchases. The reasons behind Unipec’s resumption of purchases remain unclear, and Sinopec has not commented. ESPO Blend cargoes for May were trading at about a $2 per barrel premium over ICE Brent on a delivered basis to China. The situation highlights how geopolitical tensions and sanctions continue to influence global oil trade dynamics.

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Chevron Tankers Seek New Contracts as Venezuela Cancels Crude Shipments

Several oil tankers chartered by Chevron to ship Venezuelan crude to the U.S. are now being offered for spot contracts elsewhere after Venezuela’s PDVSA canceled loading permits and demanded the return of cargoes due to payment issues tied to U.S. sanctions. Tankers like Sea Dragon and Andromeda, which had already delivered crude to the U.S., are being marketed for alternative business, signaling Chevron may not fulfill its regular monthly loadings. At least six other Chevron-chartered tankers are stalled in the Caribbean, awaiting instructions or paperwork. One such vessel, Dubai Attraction, remains idle with 300,000 barrels onboard, while Carina Voyager has already returned its cargo to PDVSA. PDVSA also canceled the loading window for the Sea Jaguar, now drifting near Aruba. The disruptions come as Chevron's U.S. license to operate in Venezuela winds down ahead of a May 27 deadline. Venezuela’s Oil Minister noted PDVSA remains committed to Chevron, but blames U.S. sanctions for the breakdown. Meanwhile, tankers chartered by firms like Vitol, Reliance, and Maurel & Prom are continuing operations without interruption.

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Venezuela Launches New "Blend 22" Crude Ahead of U.S. License Expiry

Venezuela has launched exports of a new medium crude grade, called “Blend 22,” to sustain oil revenues ahead of the May 27 expiration of U.S. licenses allowing limited sanctioned trade, according to trading documents. The U.S. revoked several licenses in March for companies like Chevron, Repsol, Eni, and Reliance, prompting PDVSA to reorganize production and export strategies. Blend 22 is sourced from PDVSA’s western oil fields and is being marketed to European and Asian buyers interested in medium sour crude grades. The first two export cargoes of Blend 22 were allocated to France’s Maurel & Prom in exchange for heavy naphtha, under a license granted prior to the recent U.S. revocation. Vitol has chartered vessels to ship these initial Blend 22 cargoes, with the first tanker set to carry 250,000 barrels. PDVSA also aims to boost domestic refining to prevent another fuel crisis amid tightening sanctions. Venezuela’s crude and fuel exports rose 11% in 2024 to 770,000 barrels per day, the highest since U.S. sanctions began in 2019. However, escalating U.S. pressure, including tariffs and political conditions, threatens to derail further export growth.

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Mexico’s Olmeca Refinery Ships First ULSD Export Amid Domestic Distribution Delays

Mexico exported its first ultra-low sulfur diesel (ULSD) cargo from the new Olmeca refinery in early April, using reprocessed fuel from the Madero refinery, due to delays in building the infrastructure needed to distribute it domestically. The 340,000-barrel-per-day Dos Bocas-based refinery, intended to boost energy self-sufficiency, still lacks pipelines, rail routes, and sufficient fuel trucks to move significant volumes within Mexico. A Denmark-flagged tanker, Torm Singapore, loaded 300,000 barrels of ULSD and delivered it to Florida and Puerto Rico. A second tanker, Valleblu, also loaded ULSD at Dos Bocas. The refinery’s fuel output remains limited to unfinished products and byproducts, typical of early-stage operations. Olmeca’s diesel export is a workaround to local logistical constraints, with a single exported cargo equivalent to over 1,300 truckloads. The refinery was inaugurated in 2022 by then-President Lopez Obrador, who emphasized national energy independence, but ballooning costs—now at $16.8 billion—and completion delays push full functionality into President Claudia Sheinbaum’s term. Pemex has not commented on whether further exports are planned.

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US Refiners Face Q1 Profit Slump Despite Better Margins Amid Trade Woes

Top U.S. oil refiners are expected to report first-quarter losses for 2025 despite improved margins, largely due to seasonal maintenance, unplanned outages, and the impact of U.S. tariffs. Marathon Petroleum is forecast to post a loss of 53 cents per share, compared to a $2.58 profit a year ago, marking its first negative earnings since 2021. Valero is expected to report a reduced profit of 42 cents per share, while Phillips 66 is projected to incur a 72-cent loss. Capture rates dropped to 63% from 71% year-on-year, limiting refiners’ ability to capitalize on stronger market conditions. PBF Energy suffered a fire at its Martinez refinery in California and is projected to post a steep $2.91 per-share loss. Rising gasoline and diesel crack spreads offered some relief, along with delays at new global refineries in Nigeria and Mexico. However, ongoing U.S.-China trade tensions have clouded the demand outlook for refined products. Analysts and investors are closely watching how weaker global economic growth and reduced demand forecasts will eventually affect refiners’ margins.

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Indian Oil to Boost Gujarat Refinery Capacity to 360,000 bpd by Mid-2026

Indian Oil Corp (IOC) will increase the capacity of its Gujarat refinery to 360,000 barrels per day by mid-2026, according to executive director Biplob Biswas. The upgrade comes as India expands refining capacity to meet growing domestic fuel demand. The current 274,000 bpd refinery is undergoing a revamp of one of its five crude units to raise capacity by 86,000 bpd. The ₹178.25 billion ($2.09 billion) expansion project will be completed in two phases. The first phase includes a shutdown of the crude unit and select secondary units for upgrades, scheduled to conclude by June or July 2025. IOC will begin installing additional secondary units, such as petrochemical and lubricant production units, early next year. These additions are part of the broader strategy to enhance product diversification and boost value-added outputs. Full-scale operations at the expanded capacity are expected to begin by mid-2026.

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Suezmax Spot Rates Reach 15-Month High, But Challenges Loom in Atlantic Market

Suezmax spot rates hit a 15-month high, driven by strong market sentiment, with the Baltic Exchange reporting a rise to over $60,400 per day. The surge reflects increasing demand, particularly in European and West African markets, where several cargoes are being offered. However, Norwegian shipbroker Fearnleys warned of emerging challenges for the Atlantic market, particularly with larger VLCCs competing for cargoes. Despite strong chartering activity in the first part of May, there are concerns about weaker second-decade demand, as some 32-33 million barrels have already been cleared. Market dynamics on the U.S. Gulf Coast and reduced delays in the Mediterranean are expected to discourage suezmax owners from moving vessels across the Atlantic. Though the outlook for spot rates remains positive, there’s potential for a supply-side build-up and the possibility of charterers holding back if rates for TD20 become too high. Suezmax futures are optimistic, with rates rising in the short term but declining for contracts further out. The market will need to watch if current conditions persist or if supply pressures dampen the bullish sentiment.

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Braemar: Chinese Lessors May Sell MR Tankers After US Port Fee Rules Clarified

Chinese leasing firms may sell medium-range (MR) tankers following new U.S. port fee rules targeting Chinese maritime interests, according to UK shipbroker Braemar. The revised U.S. Trade Representative (USTR) measures focus on Chinese-owned vessels while largely sparing broader U.S. oil flows. Tankers under 55,000 or potentially 80,000 dwt are exempt unless Chinese-controlled, with exemptions also covering shortsea oil shipments under 2,000 nautical miles. Only long-haul crude imports and Chinese-controlled or -built tankers are affected, representing just 3% of tanker voyages last year. Braemar believes replacing this 3% segment will be manageable by the October 14 deadline. The firm predicts Chinese lessors could offload MRs, which rely on U.S. port calls for global trading. While HSBC expects owners to resume ordering at Chinese shipyards, Braemar anticipates hesitation unless prices become irresistible. Potential Chinese retaliation could include targeting U.S.-owned ships or waiting for policy shifts.

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Pirate Attacks on Tankers Raise Concerns Over Global Shipping Security

Pirate gangs have raided tankers in different parts of the world, highlighting growing security concerns for global shipping. On Tuesday, a tanker was attacked at Beira, Mozambique, by eight pirates armed with bladed weapons, who stole items from the vessel’s stores before escaping. No casualties were reported, and local authorities were alerted. This incident follows a pirate raid off Nigeria on Monday, where four attackers targeted a Marshall Islands-flagged tanker, stealing cash and personal belongings before leaving after four hours. This was the first attack in Nigerian waters since 2021. Another attack occurred on Tuesday in Indonesian waters, where four pirates boarded a Marshall Islands-flagged bulker, stealing spare parts from the engine room. Despite the security breaches, no crew members were harmed, and the vessels continued their respective voyages. These incidents underscore the increasing risks faced by shipping companies and the need for heightened security measures.