Oil Prices Drop Over 2% as OPEC+ Considers Further Output Hike

Oil prices fell sharply on Wednesday, with Brent crude down 2.31% to $67.54 and WTI down 2.56% to $63.91, ahead of an OPEC+ meeting expected to consider further production increases in October. Another output hike could involve unwinding a second layer of cuts totaling 1.65 million bpd, potentially creating a market surplus through 2026. OPEC+ had already raised production by about 2.2 million bpd from April to September, plus a 300,000 bpd quota increase for the UAE, though actual output has lagged pledged levels due to capacity limits and prior overproduction. Weak economic indicators, including U.S. job openings falling to 7.181 million and six months of manufacturing contraction, added downward pressure on prices. Meanwhile, disruptions at Nigeria’s 650,000-bpd Dangote refinery temporarily reduced supply, though repairs are expected within two weeks.

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OPEC+ Considers Further Output Hike as Brent Holds Near $68

Eight OPEC+ members are set to meet Sunday to discuss further raising oil production, following earlier increases totaling 2.5 million bpd to regain market share. The group’s recent output hikes, including a 547,000 bpd September boost, have failed to significantly lower prices, with Brent crude trading near $68 a barrel, supported by Western sanctions on Russia and Iran. Additional production could involve unwinding a second layer of cuts of 1.65 million bpd, more than a year ahead of schedule. Analysts note there is also a possibility that OPEC+ may pause production increases for October, as no final decision has been made. Historically, OPEC+ had maintained curbs to support prices, but rising U.S. output and market pressures are prompting a strategic pivot toward boosting supply.

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Venezuela’s Oil Exports Reach 9-Month High on U.S. Return

Venezuela’s oil exports rose to 966,485 bpd in August, the highest since November, driven by Chevron receiving a license to resume shipments to the U.S. after a four-month pause. Exports to China remained the largest share at 85%, while the U.S. received about 60,000 bpd and Cuba about 29,000 bpd. Stable production in the Orinoco Belt and uninterrupted operations at upgraders and blending facilities supported higher export volumes. Shipments of oil byproducts and petrochemicals also increased to 275,000 metric tons, the highest since May. Additionally, Venezuela imported 99,000 bpd of light oil and naphtha to dilute its extra-heavy crude, up from 58,000 bpd in July, to maintain exportable crude grades.

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Alberta Oil Output Reaches Record 4.32 Million Barrels per Day in July

Alberta’s oil production hit a record 4.32 million bpd in July, according to the Alberta Energy Regulator. Oil sands output also climbed to a record 3.67 million bpd, the highest since data collection began in 2010. The increase was driven by higher production from wells using steam-assisted methods to extract underground bitumen. Major producers like Cenovus Energy and Canadian Natural Resources boosted output following the 600,000 bpd expansion of the Trans Mountain pipeline, which improved export capacity and local crude prices. Overall, Alberta’s oil production for the first seven months of the year was 154,000 bpd higher than the same period last year.

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Canada Faces 400,000-Barrel Pipeline Surplus Despite Push for New Routes

Since the May 2024 expansion of the Trans Mountain pipeline, Canada’s oil pipeline capacity has exceeded exports by an average of 400,000 bpd, peaking at 574,000 bpd in June, according to the Canada Energy Regulator. The expansion nearly tripled Trans Mountain’s capacity to 890,000 bpd, easing long-standing constraints that once forced Canadian oil to sell at steep discounts to U.S. prices. Despite the current surplus, Alberta Premier Danielle Smith is advocating for a new pipeline to northern British Columbia to diversify markets beyond the U.S. Prime Minister Mark Carney has signaled openness to new projects, appointing former Trans Mountain CEO Dawn Farrell to accelerate infrastructure approvals. Meanwhile, existing operators are planning further expansions, with Trans Mountain aiming for 1.2 million bpd and Enbridge seeking to enlarge its Mainline system.

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Canada’s Trans Mountain Expansion Cuts Global Tanker Demand Despite Rising Exports

The Trans Mountain Pipeline Expansion (TMX), which began operations in May 2024, boosted Canadian West Coast exports by 430,000 barrels per day, opening direct trade to Asia and California. However, Makai Marine Advisors found this shift caused a 0.7% decline in global tanker tonne-miles, as short-haul aframax voyages replaced longer-haul VLCC shipments from the U.S. Gulf Coast and Iraq. Specifically, 130,000 bpd of lost imports into PADD 5 from distant suppliers reduced tonne-miles by 0.6%, while 112,000 bpd of displaced Gulf Coast re-exports cut another 0.9%. Analysts note that while China has become Canada’s second-largest crude buyer via TMX, the crude quality and pricing dynamics limit broader market fit. Overall, despite strengthening Canada’s direct Asian market access, TMX has been a “net negative” for global tanker demand.

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Shell Returns to Angola as Nation Opens New Bidding to Reverse Output Decline

Shell signed an agreement with Angola’s oil regulator for Block 33 in the Congo Basin, marking its return after a 20-year absence and joining partners Chevron and Sonangol. Angola, Africa’s third-largest oil producer, has introduced reforms since 2019 — including improved tax terms and licensing — to attract global energy companies. The country is battling a steep production decline, with output falling below 1 million bpd in July for the first time since leaving OPEC two years ago. Additional deals were signed for Block 24 in the Kwanza Basin, with Sonangol as operator alongside Acrep and Red Sky Energy. Petroleum Minister Diamantino Azevedo also announced a new bidding round for five oil blocks by year-end to help stabilize production and revenues.

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Maersk Ships First US-Bound Petrol Cargo from Nigeria’s Dangote Refinery

A Maersk Tankers vessel, Gemini Pearl, loaded 300,000 barrels of petrol from Nigeria’s Dangote refinery on 26 August, marking the first export of the refinery’s petrol to the U.S.. The refinery has a capacity of 650,000 bpd, with petrol production starting in September last year, and typically serves African, Middle Eastern, and Southeast Asian markets. The Gemini Pearl, a 51,000-dwt MR vessel, is scheduled to arrive in New York on 12 September under a private bilateral deal. With Nigeria’s domestic petrol demand at 300,000 bpd, Dangote aims to produce 210,000 bpd at 85% utilization and expand its reach into new markets, complementing exports to countries like Cameroon, Ghana, Angola, and South Africa.

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Russia to Export Oil to Brunei via Arctic Northern Sea Route for First Time

Russia will deliver oil to Brunei via the Northern Sea Route (NSR) for the first time in September, using the tanker Latur carrying Arctic heavy ARCO oil from Murmansk supplied by Gazprom Neft. Previously, NSR shipments were mostly limited to China, but Moscow is promoting the Arctic route to partners like India and the U.S., as it is shorter and up to 10 days faster than the Suez Canal. Brunei has imported small volumes of Russian crude since Western sanctions in 2022, totaling $15.6 million in 2023, including its first Urals cargo to Pulau Muara Besar refinery. The NSR is navigable in summer and autumn, and over 12 million barrels were shipped to China via the route last year, with about 4 million barrels currently en route. Despite its advantages, NSR shipments face high costs and regulatory hurdles, including approval from Russia’s nuclear agency, Rosatom, which provides icebreaker assistance and navigation services.

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Scrubber-Fitted VLCCs Earn $11.5 Million Extra Since IMO 2020, But Costs Loom

Since the IMO 2020 sulphur cap, scrubber-fitted VLCCs have enjoyed a significant profit advantage, earning an extra $2.3 million per year on average when bunkering in Singapore, totaling $11.5 million over five years. The profit gap is smaller in Rotterdam, averaging below $1.8 million due to lower fuel price spreads, and has been shrinking from nearly $100 per tonne in 2023 to just over $50 this year. Retrofitting a scrubber costs over $1 million per VLCC, and EU regulations, including the Emissions Trading Scheme and FuelEU Maritime, are raising compliance costs for voyages into Europe. For example, carrying a crude cargo on an aframax between Houston and Rotterdam now costs about $150,000 per voyage, projected to rise to $200,000 by 2026. Future IMO Net Zero rules may push the cost for eco VLCCs on long-haul voyages to $1 million by 2035, highlighting growing pressures despite current profits.