2024.12.09

Oil Prices Decline on Oversupply Concerns Despite OPEC+ Cuts

Oil prices dropped over 1% on Friday, marking weekly losses as market concerns about a supply glut in 2025 persist. Brent crude fell to $71.12 a barrel, down 1.4%, while U.S. WTI crude dropped 1.6% to $67.20. Both benchmarks posted significant weekly declines despite OPEC+'s decision to delay production increases until April 2024 and extend cuts through 2026.

Weak demand projections, especially from China, and an increase in U.S. oil and gas rig counts pressured prices. Analysts forecast a supply surplus, with Bank of America predicting Brent prices could average $65 per barrel in 2025. Despite OPEC+'s production restraint, the group faces challenges from rising U.S. output and sluggish global demand.

Geopolitical stability and a mixed U.S. jobs report further dampened market sentiment, leaving crude prices in a tight range of $70-$75 per barrel, with analysts maintaining a pessimistic medium-term outlook.

[SLOW] Oil Market

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U.S. Diesel Exports to Europe Surge Amid Tight Supply and High Refinery Output

Diesel exports from the U.S. Gulf Coast to the Amsterdam-Rotterdam-Antwerp (ARA) region are expected to surpass 250,000 barrels per day (bpd) in December, a record high, driven by Europe's tight supply and robust U.S. refinery production. This marks a sharp rise from the 28,000 bpd monthly average earlier in the year, according to Seource

Europe, a net diesel importer, has faced reduced shipments from east of Suez due to weaker export margins, leading to increased reliance on transatlantic imports. U.S. refineries, operating at a high utilization rate of 93.3%, are capitalizing on weak domestic diesel demand and favorable export margins to supply Europe's market.

[SLOW] Trade Flow _ From United States To Amsterdam, Rotterdam, Antwerp Monthly Trade Flow (CPP/CHEM)

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India's Fuel Demand Reaches Six-Month High in November

India's fuel consumption surged to 20.43 million metric tons in November, a 9.3% year-on-year increase and the highest level since May 2024, according to the oil ministry. This growth reflects strong economic and travel activity.

Gasoline demand rose 9.6% year-on-year to 3.43 million tons, while diesel consumption increased 8.5% to 8.17 million tons, the highest in six months. Cooking gas (LPG) and naphtha also showed annual increases of 7.5% and 0.5%, respectively.

The rise aligns with robust performance in India's services sector and solid factory activity, despite inflationary pressures. India's exports of jet fuel to Asia also hit multi-year highs, driven by winter demand and reduced Chinese supplies.

[SLOW] Trade Flow _ From India To Asia Monthly Trade Flow (CPP/CHEM)

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Sanctions and Market Shifts Push Older VLCCs Toward Scrapping

The shadow fleet of Very Large Crude Carriers (VLCCs) may face increased scrapping activity as sanctions on Iranian oil exports and declining Chinese demand for sanctioned crude put pressure on older tankers. Shipbroker highlighted that two VLCCs linked to Iranian trade are already being offered for recycling, signaling potential shifts in the market.

The U.S. recently sanctioned 21 additional tankers, bringing the total to 80, or 9% of the global VLCC fleet. This, combined with reduced Chinese imports of Iranian crude due to refining margin declines and competition for discounted grades, is raising costs and diminishing demand for sanctioned oil.

Older VLCCs have been critical to Iranian exports, which surged from 400,000 barrels per day in 2020 to 1.4 million in 2024. However, if sanctions revert exports to 2020 levels, demand for aging tankers could drop drastically, with two-thirds of their current employment disappearing. Shipbroker expects many shadow fleet tankers to shift to storage markets or face demolition as compliance-driven demand favors newer vessels.

[SLOW] Flow - Sanctioned VLCC 

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Venezuelan Oil Exports Rise as Greek Aframax Delivers Licensed Cargo to Italy

The Greek Aframax tanker Green Aura is transporting 600,000 barrels of Venezuelan Merey-grade crude to Italy's Sarroch refinery under a licensed agreement with Italian energy company Eni. This marks the third Venezuelan crude shipment to Italy this year, facilitated by U.S. sanctions exemptions allowing limited exports from Venezuela.

The Green Aura, operated by Aegean Shipping Management, departed Venezuela’s Jose Terminal on November 26 and is expected in Sardinia on December 13. The Sarroch refinery typically processes lighter grades but is accommodating heavy sour Venezuelan crude due to increased shipments.

Venezuela's oil exports have surged to nearly 1 million barrels per day (bpd), the highest since 2020, driven primarily by shipments to China. Despite sanctions imposed since 2019 and challenges from aging infrastructure, Venezuela's export volumes have rebounded significantly, signaling a shift in its oil trade dynamics.

[SLOW] FLow