Oil Prices Hit 6-Month Low Amid OPEC+ Output Rise, Tariffs, and Geopolitical Tensions

Oil prices dropped to multi-month lows on Tuesday after OPEC+ confirmed an April output increase and U.S. tariffs on Canada, Mexico, and China took effect, with Beijing retaliating. Brent crude settled 0.8% lower at $71.04 per barrel, while U.S. WTI fell 0.2% to $68.26. The OPEC+ decision to raise output by 138,000 barrels per day in April surprised markets, with analysts suggesting political factors, including U.S. President Trump’s pressure for lower prices, influenced the move. The imposition of tariffs is expected to dampen economic activity and energy demand. Geopolitical tensions eased slightly after Ukrainian President Zelensky expressed regret over his clash with Trump, and news of a U.S.-Ukraine minerals deal emerged. Additionally, the Trump administration ended a Chevron license for Venezuela, further affecting market sentiment.

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OPEC+ Production Hikes Set to Boost VLCC Demand and Tanker Rates by 2026

OPEC+ is set to begin phasing out 2.2 million barrels per day of production cuts in April, with monthly increases of 138,000 bpd until 2026. This move could lead to demand for approximately three VLCCs per month, totaling 62 vessels by September 2026, according to Clarksons Securities. Analysts suggest that OPEC+ may be preparing for tighter sanctions on Iran, positioning the output increase as part of a long-term strategy. The tanker market, benefiting from low fleet growth and rising oil production from non-OPEC members, is expected to see a boost in seaborne volumes. While the production increase was a surprise to some, it could positively impact freight rates, especially as Chinese oil inventories remain low. The VLCC time-charter equivalent assessment rose from $23,995 per day at the start of the year to $39,172 per day.

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Trump’s Crackdown on Chinese Ships Could Create Two-Tier VLCC Market and Impact US Gasoline Prices

The Trump administration's proposal to impose port fees on Chinese-built vessels could significantly impact the VLCC sector, as around 25% of the current VLCC fleet is Chinese-built. This could exclude these vessels from US markets, increasing costs. The US imported an average of 6.27 million barrels per day of crude oil in 2024, with 2 million bpd arriving by sea, typically transported by VLCCs. If the proposed fee of up to $1.5 million per vessel is applied, it would add $0.75 per barrel to the cost of US crude imports. This could reduce the competitiveness of US crude, especially as tariffs on Canadian and Mexican exports are expected to further disrupt supply. A two-tier VLCC market could emerge, with vessels focused on US trade commanding a premium, ultimately leading to higher gasoline prices for consumers.

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Iran Adapts to Sanctions by Using Smaller Tankers for Oil Shipments to China

Iran is increasingly using smaller and more agile tankers, such as Aframax and Suezmax vessels, to bypass U.S. sanctions and continue shipping oil to China. In February, eight such tankers received Iranian crude from supertankers via ship-to-ship transfers, up from only two in previous months. Smaller vessels can access shallower Chinese ports, like Dongying, that are less cautious about handling Iranian oil. U.S. sanctions have led to a crackdown on VLCCs, prompting the use of these smaller ships for more frequent and discrete transfers. Ship-to-ship transfers are now commonly conducted off Malaysia and Fujairah, adding complexity and cost to Iran’s supply chain adjustments. In February, Iranian VLCCs such as Lan Jing and Derya conducted multiple transfers to smaller vessels heading to various Chinese ports.

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Kurdish Oil Export Talks Delayed Over Payment Disputes

Talks to resume oil exports from Iraq’s Kurdistan region have been postponed to Thursday due to disputes over payment guarantees for past and future exports. The Iraq-Turkey pipeline has been shut for two years, and despite Iraqi oil minister Hayan Abdel-Ghani’s assurances, oil companies have yet to receive formal agreements. APIKUR, representing 60% of Kurdistan’s oil production, demands clarity on commercial terms, while Iraq faces U.S. pressure to boost global supply. A Sunday meeting in Baghdad ended without resolution, as companies sought repayment assurances for debts from 2022-2023, while Iraq focused only on future exports. Kurdish officials and oil firms will consult with the Kurdistan Regional Government before responding to Baghdad. Meanwhile, Iraq has filed a legal challenge to deem Kurdish production-sharing contracts illegal, adding further uncertainty to negotiations.

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China Merchants Ports Acquires 70% Stake in Brazil's Only Private VLCC Terminal

China Merchants Ports Holdings has acquired a 70% stake in Brazil’s only private VLCC terminal, Vast Infraestrutura, for $448 million. The terminal, located at the Port of Acu in Rio de Janeiro, is crucial for crude oil transshipment, handling around 30% of Brazil's oil exports. Vast has a licensed capacity of 1.2 million barrels per day and handles an average of 560,000 barrels daily. This acquisition, which will make Vast an indirect subsidiary of China Merchants Ports, expands the company's footprint in Latin America and strengthens its global ports network. The deal also sees investment company Prumo retain a 30% stake in Vast. China Merchants Ports continues to explore growth opportunities in international ports, aiming to boost its global capacity.

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CNOOC Expands Refinery Capacity with $2.7B Upgrade, Boosting Crude Demand

China National Offshore Oil Company (CNOOC) is set to launch an upgraded refinery complex on Daxie Island, Ningbo, in June, following a $2.74 billion (20 billion yuan) expansion project. This move strengthens CNOOC’s position in refining and petrochemicals and is expected to increase the firm's demand for imported crude oil. The expansion increases crude processing capacity at Daxie by 50% from 160,000 barrels per day (bpd) to 240,000 bpd and includes key additions such as a 120,000 bpd crude unit, a 3.2 million metric tons per year (tpy) catalytic cracker, a 2 million tpy hydrocracker, a 2.4 million tpy continuous reformer, and two 450,000 tpy polypropylene units. With this expansion, CNOOC’s total refining capacity in China will rise to approximately 1 million bpd. The Daxie refinery expansion aligns with CNOOC’s receipt of a 3 million metric ton crude import quota. Additionally, CNOOC is constructing a 5 million cubic meter (31.5 million barrels) underground oil storage base at Daxie, expected to be completed by the end of 2027. The company’s largest refining subsidiary in Huizhou (440,000 bpd) operates a joint venture with Shell. This expansion reinforces CNOOC’s presence in China’s refining sector while enhancing domestic energy security and crude storage capacity.

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ADNOC and OMV Merge Petrochemical Units to Form $60 Billion Global Giant

Abu Dhabi National Oil Company (ADNOC) and Austria’s OMV are merging their polyolefin businesses to create Borouge Group International, a chemicals powerhouse valued at $60 billion, making it the fourth-largest polyolefins producer globally after Sinopec, CNPC, and ExxonMobil. The new entity will combine Borealis (75% OMV, 25% ADNOC) and Borouge (54% ADNOC, 36% Borealis). As part of its expansion into North America, the group will acquire Canada’s Nova Chemicals for $13.4 billion, including debt. The deal, which took nearly two years of negotiations due to its complexity, is expected to close in Q1 2026. ADNOC and OMV will each hold 47% of the merged firm, with the remaining shares in free float. Borouge Group aims to raise up to $4 billion in 2026 and could be listed on the Austrian Stock Exchange by 2027. Nova Chemicals contributes 2.6 million metric tons of polyethylene and 4.2 million tons of ethylene annually. The merged firm anticipates $500 million in annual cost savings and will acquire the $7.5 billion Borouge 4 expansion project. ADNOC’s stake in the new company will be transferred to its investment arm, XRG, upon completion.