Oil Prices Drop Over 1% to Two-Week Lows Amid Growing Glut Concerns

Oil prices fell more than 1%, with Brent crude closing at $63.52 per barrel and WTI at $59.60, reaching their lowest levels in two weeks. The decline followed U.S. data showing a larger-than-expected 5.2 million-barrel rise in crude inventories to 421.2 million barrels, despite strong gasoline demand reflected in a 4.7 million-barrel draw. Analysts cited increased imports and refinery maintenance as factors behind the stock build. Market sentiment was also pressured by Canada’s potential removal of its oil and gas emissions cap, which could increase supply, and OPEC+’s plan to raise output by 137,000 bpd in December. Meanwhile, geopolitical tensions persisted as Ukraine’s drone attacks forced Russia’s Tuapse refinery to halt operations and fuel exports.

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Russian Tuapse Refinery Halts Fuel Exports After Ukrainian Drone Strikes

Fuel exports from Russia’s Tuapse port on the Black Sea have been suspended, and the Rosneft-controlled refinery stopped processing after Ukrainian drone attacks on November 2 damaged port infrastructure. The refinery, with a capacity of 240,000 bpd, exports most of its products, including naphtha, diesel, and fuel oil. Data from LSEG showed that three tankers loading these products during the attack were later moved offshore for safety. Ukrainian officials said the strike was part of efforts to weaken Russia’s war economy by hitting energy infrastructure. Before the attack, Tuapse had planned to increase oil product exports in November, mainly to China, Malaysia, Singapore, and Turkey.

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Kazakhstan’s October Oil Output Falls 10% Amid Tengiz Field Maintenance

Kazakhstan’s crude oil production fell 10% in October to 1.69 million bpd, though still above its OPEC+ quota of 1.556 million bpd, according to industry sources. The decline was mainly due to maintenance at the Tengiz field, operated by Chevron’s Tengizchevroil, which reduced output from 963,830 bpd in September to 725,400 bpd in October. The outage lasted from early October until October 24. Kazakhstan has repeatedly exceeded its OPEC+ limits, reportedly frustrating some member states. Including gas condensate, the country’s total output dropped to 8.016 million metric tons from 8.345 million tons in September.

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Nigeria Considers Selling State Refineries to Compete With Dangote’s Mega Plant

Nigeria is considering selling its four state-owned refineries, which have a combined capacity of 445,000 bpd, to encourage competition against the dominant 650,000-bpd Dangote Refinery. Presidential energy adviser Olu Verheijen said the government is open to finding the “right technical partner with the right capital” for the sale. The facilities, long dependent on subsidies, have processed little crude for decades despite billions of dollars in repairs. The Nigerian National Petroleum Co. (NNPC) is currently seeking equity partners to revive its Warri, Port Harcourt, and Kaduna plants to international standards. The government also aims for a future IPO of NNPC, prioritizing greater transparency and efficiency.

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Western Sanctions Drive Record Offshore Oil Storage, Preventing Market Glut

Western sanctions on Russia and Iran have led to an unprecedented amount of oil being stored on ships, according to Gunvor Group CEO Torbjorn Tornqvist. The sanctions, imposed by the U.S., EU, and U.K., have disrupted trade routes but also prevented a supply glut by keeping surplus oil offshore. Tornqvist noted that if sanctions were lifted, the market would face significant oversupply. Mercuria CEO Marco Dunand estimated that oil supply could exceed demand by 2 million bpd next year but might be limited to 1 million bpd due to the sanctions. Despite currently low inventories, rising “oil on the water” suggests a slow-forming supply glut that could hit markets in the coming months.

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Tanker Owners Switch From Fuel to Crude Amid Soaring Freight Rates

A surge in crude tanker freight rates has driven dozens of vessels to shift from carrying refined products to crude oil, with nine LR2 tankers making the switch in the first four days of November and 35 conversions so far this year, according to Signal Ocean data. The shift reflects increased global crude supply from OPEC+ and non-member producers, as well as disruptions caused by Western sanctions on Russia and Iran. Benchmark earnings for VLCCs have reached multi-year highs, pushing Aframax rates up to $65,500 per day, about 70% higher than comparable LR2 rates. This rate gap has encouraged LR2 owners to “dirty up” their vessels to enter the crude trade for higher profits. However, the conversion process carries costs, as switching back to clean-product service later requires expensive recoating and cleaning.

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Eastern Pacific Returns to VLCC Market With Two Newbuilds at Hengli Shipyard

Eastern Pacific Shipping, led by Idan Ofer, has re-entered the VLCC market with an order for two 306,000-dwt oil tankers at China’s Hengli Shipbuilding, marking its first VLCC newbuilding project. The vessels, scheduled for delivery in the second half of 2027, are expected to cost under $125 million each and will be fitted with scrubbers. The company exited the VLCC sector in 2018 after scrapping its last tanker but decided to return due to strong market fundamentals and an aging VLCC fleet with an orderbook below 12% of the total. Eastern Pacific already has two suezmax tankers and four container ships on order at Hengli, further strengthening ties with the shipyard. The firm, which operates a diversified fleet of over 200 vessels and 125 newbuildings worth $12 billion, sees this as a strategic re-entry into the large tanker segment.