2024.12.31

Oil Prices Climb Amid Diesel Demand Boost and Cold Weather Forecasts

Oil prices rose on Monday due to anticipated increases in diesel demand driven by cold weather forecasts in the U.S. and Europe. Brent crude settled at $74.39 a barrel, while U.S. West Texas Intermediate (WTI) closed at $70.99. U.S. diesel prices reached their highest in nearly two months, with natural gas futures also surging to levels not seen since January 2023.

The rise in heating degree days, a metric for energy demand, suggests colder weeks ahead, supporting higher diesel consumption as a heating substitute for natural gas. Additionally, U.S. crude stockpiles are expected to have dropped by about 3 million barrels last week, further buoying prices.

Investors are closely monitoring upcoming economic data from China and the U.S., as a weaker Chinese economy could lead to oversupply concerns in oil markets next year. Meanwhile, speculations about potential U.S. sanctions on Iranian crude exports could impact global supply significantly.

------------------------------------------------------------------------------------------------

India's BPCL Shifts to Middle East Crude Amid Russian Oil Shortage

Bharat Petroleum Corp (BPCL), a state-run Indian refiner, is sourcing crude oil from the Middle East to compensate for reduced availability of discounted Russian oil. BPCL typically relies on spot market purchases of Russian oil, which has constituted over a third of its imports. However, recent supply shortages, driven by increased Russian domestic demand and output quotas under OPEC agreements, have forced BPCL to diversify its sources, including its first-ever purchase of Argentinian crude.

BPCL processes about 706,000 barrels per day across its three refineries and plans to secure additional supplies from West Texas Intermediate (WTI) or Middle Eastern crude if Russian availability continues to decline. Additionally, a long-term supply agreement between Russian firm Rosneft and Indian private refiner Reliance is expected to limit Russian oil availability for other buyers.

BPCL plans to invest ₹1.7 trillion ($19.94 billion) by 2028/29, with half funded through debt. Key projects include expanding its Bina refinery, overseas oil and gas development in Mozambique and Brazil, and diversifying crude sources through term deals with Qatar and others.

------------------------------------------------------------------------------------------------

UAE Tanker Owner Challenges Finland’s Seizure Amid Baltic Cable Damage Probe

The UAE-based owner of the oil tanker Eagle S is seeking its release after Finnish authorities seized the vessel on suspicion of damaging an undersea power line and four telecom cables in the Baltic Sea. Finnish investigators allege the tanker dragged its anchor across the seabed, breaking the Estlink 2 power cable and damaging fiber optic lines between Finland and Estonia.

The tanker, part of a "shadow fleet" reportedly used to evade sanctions on Russian oil, was impounded along with its cargo. The ship’s owner, Caravella LLC FZ, has filed a legal challenge, accusing Finland of "hijacking" the vessel and questioning the legality of its seizure. The company’s lawyer claims the crew was interrogated without legal assistance and subjected to poor conditions, allegations denied by Finnish authorities.

The incident has heightened regional security concerns, with NATO increasing its presence in the Baltic Sea following multiple infrastructure disruptions since Russia's invasion of Ukraine in 2022.

------------------------------------------------------------------------------------------------

Nigeria Resumes Operations at Warri Refinery After Nearly a Decade

Nigeria has partially resumed operations at its Warri oil refinery, marking a significant step after nearly a decade of inactivity. The 125,000 barrel-per-day (bpd) refinery, closed since 2015 due to disrepair and crude shortages, is now operating at 60% capacity, according to NNPC head Mele Kyari.

The reopening is part of the government’s broader initiative to revive its four state-owned refineries, which have faced years of neglect and mismanagement. Combined, these refineries have a capacity of 445,000 bpd but have been non-operational for years. Last month, NNPC also restarted the 60,000 bpd Port Harcourt refinery, with plans to revive all four facilities by year-end.

In contrast, Nigeria’s fuel landscape has seen a boost with the commencement of operations at the privately-owned 650,000 bpd Dangote refinery, built by billionaire Aliko Dangote in Lagos. Despite being Africa's largest crude exporter, Nigeria has long relied on fuel imports due to its underperforming refineries.

------------------------------------------------------------------------------------------------

Shadow Fleet Tankers Scrapped Amid Recycling Sales Scrutiny

Three tankers linked to transporting sanctioned crude oil cargoes, including the 300,000-dwt Itaugua, 105,000-dwt Enzo, and 47,000-dwt Rialto, have reportedly been sold for recycling. While not officially sanctioned by the U.S. Treasury or EU, these vessels are on United Against a Nuclear Iran’s (UANI) list of ships allegedly carrying Iranian oil.

The sales follow the scrapping of the Amor, a VLCC allegedly linked to similar activities, marking the first VLCC recycling sale since 2022. However, TankerTrackers has raised concerns that such sales may be a cover, with claims the Amor was recently loading crude in Iran despite being reported as scrap-bound.

These tankers, associated with the "shadow fleet," often display patterns such as multiple flag changes, dubious ownership histories, and operations by transient management companies. The three vessels are said to be heading to India for recycling, with reported prices ranging from $447 to $475 per lightweight ton.

Despite their controversial histories, selling such ships for recycling remains legally permissible if they are not officially sanctioned. However, prominent brokers and buyers often avoid these vessels due to potential legal and reputational risks.

------------------------------------------------------------------------------------------------

CMC Expands Fleet with Former Scorpio Tankers

Chilean shipowner CMC has acquired two MR2 tankers, STI San Antonio and STI Texas City, from Scorpio Tankers for $42.5 million each. Renamed CMC Antillanca and CMC Ancud, the vessels mark CMC’s move into international markets, with operations in the Gulf of Bengal and West Africa.

This purchase is part of Scorpio’s 2024 sale campaign, which raised $450 million through 11 tanker sales to buyers in Indonesia, Greece, the UAE, and more. CMC now owns seven tankers, diversifying its business beyond its traditional Chilean operations.

------------------------------------------------------------------------------------------------