The ramifications of the Biden administration’s sanctions on Russia’s shadow fleet continue to roil oil markets, with the Brent-Dubai spread traded on ICE Futures expanding to its widest since at least 2015.
- The Middle East’s Dubai medium sour benchmark traditionally trades at a discount to Brent, but panic buying from Indian and Chinese refiners sent it to a $2.1 per barrel premium over the global benchmark.
- Asian refiners prefer prompt cargoes that are set to load over the upcoming weeks to avoid any shortfalls in crude deliveries, with frantic purchases putting Dubai’s average daily traded volume this month to 56,000 contracts, the highest on record.
- As Dubai-pegged grades become too expensive, Chinese refiners have almost doubled their purchases of Brazilian crude, buying almost 800,000 b/d for April, whilst India’s spot tenders have seen state-owned refiners like IOC doubling down on West African sweet barrels from Nigeria and Angola.
Market Movers
- US oil major ExxonMobil (NYSE:XOM) started exploratory drilling its Electra prospect in offshore Cyprus, previously describing the area west of the island as ‘highly promising’ despite it being the first ever wildcat in Block 5.
- US oil and gas firm ConocoPhillips (NYSE:COP) has taken over the Kebabangan cluster of fields in offshore Malaysia with an export capacity of 750 MMCf/day, following Petronas’ transfer of operator right.
- Appalachia-focused US oil producer Diversified Energy (NYSE:DEC) agreed to buy private equity-owned Maverick Natural Resources for $1.28 billion, boosting its Permian exposure with some 77,000 boe/d of production.
Tuesday, January 28, 2025
The media frenzy of Donald Trump’s first week in office has not been reflected in oil price movement as ICE Brent continues to trade in a relatively thin bandwidth of $77-79 per barrel.
However, risks are tilted to the downside with ballooning Dubai backwardation, continuously weak Chinese manufacturing numbers, and Trump’s messaging vis-à-vis OPEC. It would take a major disruption – such as a potential shutdown in Libya – to send Brent futures back above $80 per barrel.
Deportation Rows Adds to Trump Risk Premium. Donald Trump’s threats to slap a 25% tariff on Colombia’s imports to the United States have roiled commodity markets, with 41% of Colombian oil exports sold in the US, a move averted by Bogota’s agreeing to take in deported migrants.
Trump Halts All Environmental Litigation. US President Donald Trump has reportedly halted all pending environmental litigation and reassigned four Justice Department attorneys, despite not being political appointees, focused on the issue to the newly created Sanctuary City Working Group.
Protesters Seek to Block Libyan Exports Again. Oil loadings from two key Libyan ports, Es Sider and Ras Lanuf with a combined capacity of some 450,000 b/d, have been brought to a standstill after protesters blocked the sites, demanding that the state oil firm NOC relocate to the country’s east.
Chinese Teapots Halt Runs as Losses Deepen. As market premiums for Middle Eastern grades spiral out of control and import tariffs on fuel oil tripled, at least four Chinese teapot refiners with a combined capacity of 320,000 b/d have halted refinery operations in Shandong province this month.
Chevron Officially Starts Kazakhstan Megaproject. US oil major Chevron (NYSE:CVX) reached first oil from its $48 billion expansion project of the giant Tengiz field in Kazakhstan, hoping to reach peak output of 960,000 b/d by the end of Q2 2025, a 25% increase compared to previous output rates.
Europe Eases Sanctions on Syria. EU foreign ministers have agreed on a roadmap to ease sanctions on Syria following the fall of the Assad regime and the emergence of former al Qaeda commander Mohammad al-Julani as the country’s new leader, seeking to lift energy-related restrictions.
Bangladesh Banks On Louisiana LNG. Privately held LNG developer Argent LNG signed a non-binding agreement with the government of Bangladesh to supply 5 mtpa of liquefied gas from its planned 20 mtpa Port Fourchon facility, expected to start commercial operations in early 2030.
Sudan Civil War Puts an End to Refining. Government forces retook Sudan’s only refinery, the 100,000 b/d Khartoum plant, wresting control from Sudan’s rebel RSF militia that has kept it for two years, but this came at the cost of setting it ablaze with smoke plumes big enough to be captured by satellite imagery.
Miners Applaud Trump’s Policy. Global mining giant Rio Tinto (NYSE:RIO) said it is very optimistic about President Trump finally permitting the long-delayed Resolution copper project in Arizona, the US’ largest untapped deposit containing some 1.8 billion mt of copper, stalled for 12 years.
Fires Decimate Iraqi Oil Production. A fire that broke out over the weekend at Iraq’s largest oil field Rumaila has reduced production by 300,000 b/d and capped output rates could remain in place for several more days, reportedly after crude was reintroduced to a storage tank after maintenance.
Coffee Gets into Pricing Volatility Spiral. Coffee futures soared to an all-time high of $3.555 per pound after Donald Trump threatened to slap tariffs on Colombia, the world’s third-largest exporter of the commodity, adding a new layer of geopolitical risk premium to an already tight market.
BHP Gives Up on Anglo American Dream. According to the Financial Times, Melbourne-headquartered mining major BHP (NYSE:BHP) has given up on its goal to acquire rival miner Anglo American (LON:AAL), claiming the deal has become ‘too expensive’ after Anglo’s stock price rally.
US Power Prices Set to Rise This Year. The EIA expects higher wholesale electricity prices across the United States, with the notable exception of Texas and the Northwest, averaging $40 per MWh over the year, up 7% year-over-year, with California seeing the biggest increases.
