Oil prices fall $1 per barrel on reports Iran seeks truce with Israel

Oil prices fell on Monday as reports emerged suggesting that Iran is looking to de-escalate tensions with Israel, potentially leading to a truce and reducing concerns about disruptions to crude supplies in the region. Brent crude futures dropped by $1 to $73.23 a barrel, while U.S. West Texas Intermediate crude futures fell by $1.21 to $71.77 per barrel. Iran has reached out to Arab neighbors to urge U.S. President Trump to push for a ceasefire in exchange for flexibility in nuclear talks. Despite airstrikes by both sides, key oil export infrastructure has not been targeted. Concerns about escalating conflict affecting energy flows remain, with electronic interference affecting ships in the Strait of Hormuz. Iran currently produces around 3.3 million bpd and exports over 2 million bpd of oil and fuel, with OPEC+ having spare capacity to offset any disruptions.

___________________________________

OPEC expects solid second-half of 2025 for world economy, trims 2026 supply

OPEC expects global economy to remain resilient, keeping oil demand growth forecasts unchanged. They have reduced the 2026 non-OPEC+ supply growth forecast by 70,000 bpd, anticipating no growth in U.S. shale output next year. Kazakhstan cut its output in May but remains above OPEC+ quota. Monthly report does not mention Israel-Iran conflict. Despite trade concerns, OPEC sees a robust economic outlook and a strong first half of 2025. They anticipate a steady second half with a slight moderation in growth. Oil prices near $80/barrel after Israel-Iran air strikes. OPEC plans to increase output to compete with U.S. shale production. OPEC+ production rose in May by 180,000 bpd, lower than the group's quota increase. Kazakhstan's output fell in May but remains above quota. U.S. tight oil output expected to hold steady in 2026 at 9.05 million bpd. OPEC cites sustained capital discipline, drilling efficiency gains, and weaker momentum in drilling activities for U.S. tight oil forecast.

___________________________________

Middle East conflict slows tanker bookings, lifts rates

Freight rates for tankers moving oil from the Middle East to Asia have increased due to tensions between Israel and Iran, causing ship bookings to slow down. While the MEG-Japan rate for crude remained stable at W55, further rate increases are expected as the conflict escalates. War risk premiums are also anticipated to rise, potentially impacting oil and gas infrastructure in the Middle East. Cargo insurance premiums could increase by $3 to $8 per barrel in the event of further attacks. Clean product freight rates were around $3.3 million to $3.5 million before the conflict, but could rise to $4.5 million. Shipowners are hesitant to offer vessels for routes in the Gulf, creating opportunities for voyages from the Far East and northwest India.

___________________________________

Tanker owners may face diversions and alternative routes,

As tensions escalate between Israel and Iran in the Middle East, brokers believe that pipelines could play a more significant role in mitigating risks for shipowners. Saudi Arabia and the United Arab Emirates could potentially divert crude shipments through alternative pipelines to avoid the strategic chokepoint of the Strait of Hormuz. While a complete closure of the Strait is seen as unlikely, disruptions in Middle East oil flows could lead to increased crude supply from the Atlantic Basin heading towards Asia. This shift in trade flows could potentially benefit the tanker sector by increasing voyage lengths and tonne-mile demand. If Iranian oil is removed from the market due to the conflict, alternative crude grades will need to be sourced from other regions, causing a significant disruption in global trade flows and triggering an increase in freight rates. China, as a major importer of Iranian oil, would strongly oppose any disruption that could impact global energy supplies. The closure of Hormuz, which sees around 20 million barrels per day of crude and products transit through it, would have severe implications on Iran's economy and its ability to fight back. While higher oil prices could benefit producers elsewhere in the world, the tanker market remains in the summer doldrums with the potential for rate increases depending on the conflict's evolution. In the face of escalating tensions, there is a possibility of increased fixing activity as charterers seek additional cargoes and shipowners become more reluctant to enter high-risk areas.

___________________________________

Nigeria's First Privately Developed Crude Export Terminal Marks Milestone in Oil Industry

A tanker controlled by George Economou became the first to export crude from Nigeria's new $400 million terminal facility. The Shell-loaded cargo was shipped on TMS Tankers' suezmax from the Otakikpo outlet, marking Nigeria's first privately developed crude export terminal in over 50 years. The facility, developed by Green Energy International Ltd, has an initial storage capacity of 750,000 barrels with plans to increase to 3 million barrels. The terminal's launch signals a new era for Nigeria's oil logistics and aims to reduce costs by at least 40%. The Otakikpo field is currently producing 10,000 bpd with plans to increase to 30,000 bpd, drawing on reserves estimated at 3 billion barrels of oil equivalent. The terminal can also receive up to 250,000 bpd from other producers. Economou's companies have been involved in pioneering African trades, including lifting Senegal's first Nigerian Bonny Light crude cargo and Sudan's first Dar crude cargo since 2015. This development marks a significant milestone in Nigeria's oil industry and strengthens its position in the global energy market.

___________________________________

China's May refinery throughput at 9-month low on plant overhauls

In May, China's crude oil throughput decreased by 1.8% year-on-year to the lowest level since August, reaching 13.92 million barrels per day. The decline was due to maintenance at both state-owned and independent refineries, with operating rates dropping to their lowest since Q4 of 2022. Despite this, some independent refiners in Shandong saw a modest profit recovery. It is expected that throughput will rebound in June as state-run refineries complete turnarounds. Additionally, China's domestic crude oil production rose by 1.8% in May, with natural gas production increasing by 9.1% year-on-year.