Oil Prices Rise on Tighter Supply Concerns Amid U.S. Tariff Threats and Inventory Decline

Oil prices rose on Wednesday amid concerns of tighter supply following U.S. President Trump’s threat to impose 25% tariffs on countries buying Venezuelan crude. Brent crude gained 0.3% to $73.27 per barrel, while U.S. WTI rose 0.4% to $69.28. The tariff decision targets countries like China, which is the largest importer of Venezuelan oil. Additionally, the U.S. extended Chevron’s deadline to leave Venezuela, potentially reducing the country’s oil production by 200,000 barrels per day. Oil prices were also supported by a 4.6 million barrel decline in U.S. crude inventories, surpassing expectations. However, recent deals between the U.S., Ukraine, and Russia to pause energy-related attacks capped further price gains.

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U.S. Brokers Truce Deals Between Russia and Ukraine, Pushing for Sanctions Relief

The United States reached separate deals with Russia and Ukraine on Tuesday to pause attacks at sea and on energy facilities, as part of efforts to de-escalate the ongoing conflict. The U.S. also agreed to push for the lifting of certain sanctions on Russian agriculture and fertilizer exports, which Russia has long demanded. However, Moscow indicated that the Black Sea maritime truce would not take effect unless certain Russian banks were reconnected to the international financial system. Ukrainian President Zelenskiy rejected this precondition, calling it an attempt to manipulate the agreements. Both sides expressed skepticism about the other's commitment, with Russia demanding guarantees from Washington and Ukraine threatening to request additional sanctions if the deal is violated. The Black Sea security deal aims to end the naval blockade imposed by Russia, which has disrupted grain exports, while the energy truce addresses missile strikes on each other’s power grids. While the deals offer hope for peace, both parties remain cautious about their enforcement. These agreements represent the first formal commitments since President Trump took office and are seen as a step towards a broader ceasefire, though progress is expected to be slow and fraught with challenges.

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Trading Giants Open to Re-enter Russia if Sanctions are Lifted, but Caution Prevails

The CEOs of some of the world’s largest energy trading firms, including Gunvor Group, Mercuria, Trafigura, and Vitol, have expressed a willingness to return to Russia if sanctions are fully lifted. Gunvor's CEO Torbjörn Törnqvist stated that his company would resume business in Russia if sanctions were eased, calling it their job to do so, but emphasized that they would refrain from any activities in the current "gray zones." The firms, which had significant operations in Russia before the 2022 invasion of Ukraine, have since scaled back operations due to the U.S., EU, and UK sanctions targeting Russian oil, metals, and banks. Mercuria’s CEO Marco Dunand highlighted that his company would return if sanctions were lifted but acknowledged being more cautious. Trafigura’s CEO Richard Holtum pointed out that the involvement of British employees would complicate matters if U.S. sanctions were eased while others remained. Russell Hardy of Vitol noted that the process of lifting sanctions would likely take one or two years, emphasizing the complexity of negotiations. While all trading houses are cautious, they acknowledge the potential for a return to the Russian market should political and regulatory conditions change.

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Russia’s Oil Exports from Western Ports to Rise 5% in April Despite OPEC+ Cuts

Russia’s daily oil exports from its western ports are expected to increase by 5% in April, reaching 1.97 million barrels per day, according to sources cited by Reuters. This rise, amounting to an additional 100,000 bpd from March, is attributed to seasonal refinery maintenance, improved weather conditions, and greater tanker availability. The U.S. imposed sanctions on 183 vessels transporting Russian oil in January, complicating exports, but new non-sanctioned tankers have since joined the trade. Additionally, drone attacks on Russian refineries and revisions in maintenance plans are expected to impact refinery output, further boosting exports. Disruptions in the Caspian Pipeline Consortium (CPC) due to a recent attack in Russia’s Krasnodar region could also lead to rerouted shipments through western ports. Meanwhile, Russia has committed to compensating for oil overproduction under the OPEC+ agreement, gradually increasing its output cuts through June.

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Mexico’s Pemex Seeks Market Diversification Amid U.S. Tariff Uncertainty

Mexican state-owned energy company Pemex is actively working to diversify its crude oil export and motor fuel import markets in response to potential U.S. tariff threats. PMI Chief Executive Officer Margarita Perez emphasized the importance of diversification during a discussion in the Mexican Senate, citing ongoing talks with buyers in Europe and Asia, including China. The move follows U.S. President Donald Trump’s recent executive order imposing a 25% tariff on countries purchasing Venezuelan oil, which has increased market uncertainty and volatility. Pemex aims to secure alternative trade partners to mitigate potential risks from shifting U.S. trade policies.

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US Imposes 25% Tariff on Venezuelan Oil, Shaking Markets and Boosting VLCC Demand

The US has imposed a 25% tariff on countries purchasing Venezuelan oil, aiming to pressure President Nicolás Maduro’s regime while potentially benefiting VLCC markets. The move, signed by President Donald Trump, comes as part of broader sanctions, with Secretary of State Marco Rubio accusing Venezuela of election fraud, corruption, and ties with US adversaries. Analyst Ole-Rikard Hammer notes that this decision could push oil prices higher and serve as a model for future sanctions on Iran. China, a major buyer of Venezuelan crude, condemned the tariffs, calling them an abuse of US power. In February, Venezuela exported 790,000 bpd, with 256,000 bpd going to the US and 372,000 bpd routed to Singapore’s ship-to-ship transfer hub. Historically, China has been Venezuela’s key buyer, importing 277,000 bpd in December and January. The sanctions also order Chevron to exit Venezuela within 30 days. Analysts suggest that alternative crude supplies from Canada, Mexico, Brazil, and Saudi Arabia may replace Venezuelan barrels, benefiting VLCCs operating in the Atlantic. The Baltic Exchange’s VLCC time-charter equivalent rate rose from $37,763 per day on March 10 to $47,834 on March 19 before slightly easing.

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Saudi Arabia’s Oil Strategy Could Shake Markets and Boost Tanker Profits

Saudi Arabia may take aggressive steps to defend its market share, potentially flooding the market with oil and lowering prices, which could significantly benefit tanker markets. Analysts speculate that the kingdom might repeat its 2015 strategy, when it drove oil prices below $40 per barrel to counter US shale production. If such a move happens, oil supply could increase by 3.3 million barrels per day, potentially pushing VLCC rates to $100,000 per day. The Baltic Exchange’s VLCC time-charter equivalent exceeded $60,000 per day during the last price collapse. OPEC+ is already set to gradually unwind production cuts, adding 138,000 barrels per day through late 2026, which could create demand for 62 additional VLCCs. Further market shifts could arise from US sanctions against Iran and Venezuela, with Washington imposing a 25% tariff on Venezuelan oil buyers. These developments suggest a turbulent but potentially profitable period for the tanker industry.

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Older LR1 Product Tankers Shift to Crude Trades, Reshaping Market Dynamics

In a notable shift, approximately 30 ageing LR1 tankers have moved into crude trades, an uncommon transition for this vessel class. Steem1960 Shipbrokers reports that the average age of LR1s now trading dirty petroleum products is 17 years, compared to 14 years for those still in clean trades. Many of these vessels are expected to remain in crude transport until scrapping, with some entering Russian markets and others supporting the panamax crude tanker sector. The trend negates fleet growth, as 31 new LR1s are expected in 2025-2026 while 20 existing ships will reach 20 years by 2026. This shift could also signal similar changes in the LR2 segment. Meanwhile, VLCCs and suezmaxes, which temporarily moved into product trades in 2024, have returned to crude shipping as rates rebounded. BRS Shipbrokers notes that strong product tanker rates in Asia, driven by Middle East refiners, make it unlikely for crude tankers to re-enter product trades. Additionally, the high cost of cleaning crude tankers and the typical use of newbuildings for initial product transport further limit such shifts.

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Crude Tankers Unlikely to Return to Clean Trades Amid Market Shifts, Says BRS

BRS Group asserts that crude tankers will not shift back to clean tanker trades anytime soon, citing two key reasons. First, crude tanker earnings have rebounded from their 2024 slump, making product transport financially unattractive once tank-cleaning costs are factored in. Second, an influx of newbuild VLCCs and suezmaxes is expected, with most lifting clean cargo on their maiden voyages into the Atlantic, which will limit demand for LR tankers on Asia-to-West of Suez routes. The product tanker market has recently seen a rate surge, with MR earnings in the Atlantic up 34% to $28,300 per day and LR2 rates rising 66% to $37,600 per day. However, a growing supply of clean tankers, with 48 new LRs and 85 MRs expected in 2025, may put downward pressure on rates. While supply concerns persist, BRS does not anticipate a severe market downturn. Industry leaders such as BW Group’s Hafnia report that crude tankers now account for only 1%-2% of product cargo transport, with newbuild crude vessels carrying clean products on maiden voyages rather than shifting trades entirely.

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Ecuador’s SOTE Pipeline Rupture Spills 25,116 Barrels of Oil, Impacting Thousands

A rupture in Ecuador’s SOTE crude pipeline earlier this month resulted in the spill of 25,116 barrels of oil, affecting three rivers, nine beaches, and over 5,300 people, according to the country’s national disaster management agency. Petroecuador, the state oil company, confirmed the spill’s magnitude and reported that 30,257 barrels of crude mixed with water had been collected for separation. The rupture, caused by a landslide, shut the pipeline for six days and led Petroecuador to declare force majeure, which remains in effect despite the resumption of Oriente crude exports. The spill contaminated approximately 80 km of land, including 294 hectares of agricultural fields in Esmeraldas province. Petroecuador has allocated $4 million for cleanup efforts, which include deploying containment barriers, conducting aerial and ground monitoring, and providing aid to affected families.