Oil Rises $1+ on Geopolitical Tensions, but U.S. Inventory Surge Limits Gains

Brent crude settled up $1.10 (1.7%) at $67.49 per barrel and WTI rose $1.04 (1.7%) to $63.67 after Poland shot down Russian drones and the U.S. pressed for tougher sanctions on Russian oil buyers, following Israel’s attack in Qatar. Despite the geopolitical flare-ups, analysts noted that risk premiums fade quickly without actual supply disruption, and oversupply fears capped gains. U.S. crude inventories unexpectedly rose by 3.9 million barrels last week, against expectations for a 1 million-barrel draw, while gasoline stocks climbed 1.5 million barrels and distillates surged 4.7 million barrels — a bearish supply signal. President Trump urged the EU to impose 100% tariffs on Chinese and Indian Russian oil purchases, though EU officials said such tariffs are unlikely, instead weighing a faster fossil fuel phase-out.

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EU Weighs Accelerated Russian Energy Exit Amid U.S. Pressure

The European Union is considering speeding up its phase-out of Russian oil and gas imports as part of its 19th sanctions package, following U.S. calls for tougher action. EU imports of Russian oil have already fallen by 90% due to a seaborne crude ban, but Hungary and Slovakia still import around 200,000–250,000 bpd via pipeline. Russia’s share of EU gas imports is expected to drop to 13% this year from 45% before the 2022 invasion of Ukraine. Washington has pressed the EU not only to stop buying Russian oil but also to impose up to 100% tariffs on major buyers like China and India, though analysts doubt Europe’s willingness to sanction these countries. The EU is negotiating proposals to fully phase out Russian oil and gas by January 1, 2028, though resistance from Hungary and Slovakia may delay stricter curbs.

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EU Weighs Sanctions on Independent Chinese Refineries in 19th Russia Package

The European Commission is preparing its 19th sanctions package against Russia, which may include independent Chinese refineries suspected of purchasing Russian oil from the sanctioned shadow fleet. The proposal could be introduced as early as Friday following EU-U.S. sanctions coordination talks in Washington. Unlike earlier rounds targeting small shell firms, the EU is now moving against larger, established companies, having already sanctioned two Chinese banks and India’s Nayara Energy refinery in its 18th package. The upcoming proposal is also expected to include banks in two Central Asian countries that assist in sanctions evasion. Passage of the new measures will require unanimous approval from all EU member states.

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U.S.-EU Divide on Russian Oil to India Threatens October Trade Flows

A widening policy rift between the U.S. and EU over Russian oil exports to India is expected to cut India’s October crude imports slightly to about 1.4 million bpd, down from 1.6 million bpd in September. The U.S., under President Trump, has abandoned the G7 price-cap strategy and instead demanded India halt Russian oil purchases, doubling tariffs on Indian exports to the U.S. when New Delhi refused. In contrast, the EU continues to support the price cap, recently lowering it from $60 to $47.60 per barrel to tighten restrictions, though most Russian crude is still sold above that level. Indian buyers are demanding steeper discounts of around $10 per barrel to offset risks, but some Russian sellers are redirecting cargoes to China, where prices are firmer. Analysts warn that diverging U.S.-EU sanctions strategies risk weakening enforcement, creating confusion for traders, and allowing Russia’s shadow fleet and alternative insurance systems to keep oil revenues flowing.

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Atlantic Crude Gains Appeal in Asia as Brent-Dubai Spread Narrows

Crude from the Atlantic basin is increasingly attractive to Asian refiners after the Brent-Dubai futures spread (EFS) narrowed to nearly zero, down from about $4 a barrel in June. This narrower spread makes European, North Sea, Mediterranean, and West African grades more competitive relative to Middle East crudes. The shift is driven by a seasonal lull in European buying, rising U.S. exports, and surplus supplies in the Atlantic region, which can now be directed toward Asia. Meanwhile, Dubai prices are supported by Indian purchases after reduced Russian imports and speculative positioning in derivative contracts, while Brent is pressured by oversupply and slow uptake of North Sea and Kazakhstan crude. Traders note that West African crude is already moving east, with companies like Indian Oil, Hindustan Petroleum, and Pertamina buying multiple cargoes since the start of the month.

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China’s Strategic Petroleum Reserve Supports Global Oil Demand Amid Market Uncertainty

China’s strategic petroleum reserve (SPR) and commercial stockpiles have become a major driver of global oil demand, but the exact pace and scale of purchases remain opaque due to limited government disclosure. Analysts estimate total Chinese inventories reached about 1.195 billion barrels as of early September, roughly 60% of capacity, leaving significant room for further stockpiling. The country is taking advantage of low prices in 2025-2026 to bolster energy security and prepare for expected market tightening from 2027 onward. This sustained inventory build is counterbalancing rising global oil supply from OPEC+ and helping stabilize prices, even as demand growth is challenged by electric vehicle adoption and less commodity-intensive GDP expansion.

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VLCC Market Rally Gains Momentum Amid OPEC Production Hikes

VLCC earnings surged in early September as OPEC continues to lift production, Middle East domestic oil demand declines, and fixing activity picks up, suggesting a potential late-year rally for the largest crude tankers. Rates from the Middle East Gulf to the Far East hit $68,600 per day for the fleet-weighted average, with scrubberless VLCCs earning $60,200 per day, a significant month-on-month increase. Higher fixing activity and constrained tonnage lists allowed owners to maintain upward pressure on freight rates, with US Gulf fixtures roughly double the normal weekly pace. Market drivers include rising Middle East refining capacity turnarounds, European maintenance season exports, and geopolitical factors like US tariffs on Indian Russian oil imports and upcoming EU sanctions on Moscow. Analysts caution that while some near-term softening is possible, the fundamentals for the VLCC market remain strong heading into the fourth quarter.

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Frontline Linked to Four VLCC Newbuilds at Hengli Shipyard in China

John Fredriksen’s Frontline is reportedly set to acquire up to four VLCCs from China’s Hengli Shipbuilding, in a deal valued around $472 million. The contract includes two firm 306,000-dwt vessels and options for two more, priced at roughly $118 million each, potentially marking a resale from Hengli’s own fleet. If confirmed, this order would bring Frontline’s VLCC orderbook to 10 ships, complementing eight other scrubber-fitted newbuilds under construction in Dalian and Tianjin. Analysts note that 18% of the global VLCC fleet is over 20 years old, with another 22% aged 15–20 years, creating strong demand for new vessels to replace aging tankers. The Hengli yard, recently consolidated under Shanghai-listed Songfa Ceramics through a reverse merger, has positioned itself as a major player in VLCC construction, with multiple orders from other international shipping firms this year.

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Record MR Tanker Deliveries in 2026 Could Weigh on Freight Rates

A record 135 MR product tankers are scheduled for delivery in 2026, which could prompt shipowners to delay handover dates if market conditions weakenr. Favorable markets in 2025 and an aging MR fleet (18+ years old) drove the surge in orders, but the influx of new vessels next year may pressure freight rates. The analyst highlighted that geopolitical factors, including sanctions on Russian diesel exports, previously boosted Middle East and Indian diesel flows to Europe. However, increased European crude imports and new domestic refineries are expected to reduce diesel demand, potentially further softening MR rates. Current MR earnings remain high, with Clarksons reporting a week-on-week rise to $35,600 per day at the end of August, well above the year-to-date average of $22,900.

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Sanctions Push China to Lead Vintage VLCC Market, Says Veson

Sanctions on Russian crude have boosted Chinese demand for vintage VLCCs, which now make up 81% of China’s VLCC purchases over the past five years, driving up values of 20- and 25-year-old vessels by 18–32%, compared with minimal gains for younger ships. Older VLCCs are prized because they can access sanctioned trades that modern, compliant vessels cannot, exemplified by the July sale of the 307,300-dwt Eon for $44 million, nearly double historical medians. The sanctions have created a “dark fleet” of 900–1,650 older tankers averaging 18.1 years old, which now command a significant earnings premium over conventional VLCCs. China benefits from policy-backed financing, enabling counter-cyclical acquisitions that expand its crude supply from Russia, helping its imports rise 56% from early 2020 to mid-2025. Veson notes that this strategy leverages sanctions-induced trade flows, turning vintage VLCCs into highly valuable assets and reshaping tanker market dynamics in Asia.

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Dark Fleet Retirement Could Trigger Sharp Drop in Scrap Prices, Says S&P Global

Lila Global’s Faidon Panagiotopoulos warned that scrap prices could fall by up to 35% if a Ukraine peace deal removes the need for Russia’s “dark fleet” of non-compliant tankers. Most vessels in the dark fleet are over 20 years old, poorly maintained, and unlikely to meet charterer or terminal requirements, making recycling the only viable option for the majority. The US sanctions list includes around 600 vessels (77m dwt), 62.5% of which are over 20 years old, underscoring the fleet’s potential impact on the ship recycling market. A mass sale for scrap would flood South Asian recycling yards, but a more gradual phase-out or use as floating storage—especially off India—could limit the price decline to 15–20%. The drop in scrap values would also affect banks and owners of older ships, forcing re-evaluations of vessel collateral and trading strategies.

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Global Natural Gas Demand to Hit New Record of 4,193 bcm in 2025

The 2025 Global Gas Report projects worldwide natural gas demand will rise 1.7% in 2025 to 4,193 billion cubic meters (bcm), after a record 4,122 bcm in 2024. Demand growth will slow slightly from 2024’s 1.9% increase (78 bcm), largely due to softer consumption growth in Asia. Europe and North America are leading early 2025 demand growth, with increases of 6.1% and 1.5% respectively. A key driver of rising energy needs is the U.S.-led boom in artificial intelligence data centers, which consumed 1.5% of global electricity in 2024 and are projected to reach 1.7% in 2025. Global LNG trade also hit a record 555 bcm in 2024, supported by a 12 bcm (23.6%) surge in European imports, with China and India expected to fuel long-term demand growth toward 2030.