2024.12.06

Oil Prices Slip as OPEC+ Supply Cuts Extend Amid Weak Demand Concerns

Oil prices dipped on Friday, with Brent crude falling 0.1% to $72.03 per barrel and West Texas Intermediate (WTI) steady at $68.29. The declines followed OPEC+’s decision to delay output increases until April 2024 and extend production cuts through 2026, amid ongoing concerns over weak global demand, particularly from China, and rising non-OPEC supply.

Analysts project a surplus in 2025, with Macquarie estimating that even disciplined Saudi production will not prevent an oversupply of over 1 million barrels per day. Despite OPEC+’s restraint, the market remains weighed down by demand uncertainties and fears of oversupply.

Attention is also on the U.S. nonfarm payrolls report, which could influence expectations for a rate cut by the Federal Reserve in December. Clarity on monetary policy is expected to impact oil demand forecasts moving into 2025.

[SLOW] Oil Market

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Russian Oil Flow to Czech Republic Set to Resume After Payment Issues Resolved

Russian oil shipments to the Czech Republic via the Druzhba pipeline are expected to restart after a halt caused by payment issues between Russia and Ukraine. The stoppage, which began on Tuesday, had been linked to payment difficulties, but sources indicate that a workaround has been found.

Czech refiner Unipetrol, which operates the Litvinov refinery using Russian crude, has been relying on reserves, with state reserves approved for use if needed. Both Unipetrol and Czech pipeline operator MERO have yet to confirm the resumption.

The interruption comes as the Czech Republic plans to phase out Russian oil imports by mid-2024, relying on alternative supplies via the TAL pipeline. It also coincides with ongoing EU discussions about extending sanctions exemptions on Russian oil products, which affect neighboring Slovakia's diesel exports to the Czech Republic. While the Czechs are not advocating for an extension, they may agree to a six-month continuation aligned with the planned end of Russian crude imports.

In 2019, the Czech Republic successfully managed a two-month interruption in Druzhba oil supplies without affecting domestic fuel availability.

[SLOW] FLOW_Crude Oil Pipe line

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International Seaways and Sinokor Merchant Marine Close to Tanker Swap Deal

International Seaways is set to swap two older VLCCs, Seaways McKinley and Seaways Kilimanjaro, for three MR product tankers from Sinokor Merchant Marine. This deal is part of Seaways' fleet modernization strategy, which involves selling older vessels and acquiring newer ones. The transaction, which may not involve cash, aligns with Seaways' capital allocation strategy focused on shareholder returns and fleet renewal. Sinokor's fleet includes 14 VLCCs and 21 MRs, with recent aggressive acquisitions in the MR segment.

[SLOW] Flow

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Venezuela Increases Oil Exports Despite US Sanctions

Venezuela's oil exports are nearing 1 million barrels per day, reaching levels not seen since early 2020. In November, Venezuela exported 974,033 bpd, primarily to China, marking a 10% increase from October and a 57% year-on-year rise. Despite US sanctions since 2019, state oil company PDVSA continues to use its fleet and third-party vessels for exports. Sales to Asia and Europe have increased, while shipments to the US have decreased. The incoming Trump administration's stance on Venezuela remains uncertain, potentially impacting future policies.

[SLOW] EIA - Venezuela Crude Oil Outlook

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Deputy Prime Minister expects Russia's crude oil production to decrease slightly this year but increase next year

Russia is expected to produce 518-521 million tons of oil in 2024 and a similar amount in 2025. Deputy Prime Minister Alexander Novak said that Russia's oil production, including gas condensate, was 529.6 million tons in 2023, and that Russia plans to increase its natural gas production in 2024-2025, despite sanctions on Gazprombank, thanks to increased exports to China.

[SLOW] EIA - Russia Crude Oil Outlook