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Sanctioned Russian Fleet Impact

April 5, 2024

As the US tightened sanctions enforcement, major refineries in India announced they have stopped buying Russian crude carried by the Russian fleet mainly owned by Sovcomflot, a trend likely to expand to buyers in the Far East.  Two scenarios could emerge when Asian buyers walk away from Russian oil and/or Russian ships: 1) an increase of “shadow” Aframax fleet for Russia > India+China demand if crude exports remain at similar level (or possibly higher due to drone strikes taking out refinery capacity); 2) a substitute of Russian crude with imports from the Middle East and US Gulf by conventional ...

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US Crude Balances and Exports Update

March 22, 2024

McQuilling has updated our latest forecasts for US Gulf crude balances and exports.  According to our model, US Gulf exports are likely to trend negatively in April and May, a net reduction of 430,000 b/d compared to the Q1 average.  We highlight the rationale below:

1) Near the end of Q1, major refineries in Europe and Far East will enter the seasonal maintenance period which will pull crude demand and imports lower.  These two regions happen to be the main importers of US Gulf crude, therefore, putting downside pressure on crude exports from the US Gulf region.

2 ...

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DPP Export Dynamics in the AG

March 15, 2024

Following on last week’s note highlighting export dynamics in the AG, we discuss the impact for AG voyages for both VLCCs and Suezmaxes.  Regarding the monthly change in VLCC movements ex AG (including KSA, but also Iraq, etc.), we note an uptick in AG VLCC flows in 2024 to both Ain Sukhna (for full discharge) and for partial discharge with continued transit directly to European refineries.  This marks a notable change from the previous 3 months, particularly December 2023, when all VLCCs sailed around the Cape of Good Hope. 

However, we anticipate the VLCC AG>West flow to slow ...

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Crude and Product Import/Export Dynamics

March 8, 2024

Top-line fundamentals show a tightening crude balance in Saudi due to continued voluntary cuts maintaining output at ~9.5mbd; however, a return of refinery utilization in the country of approximately 0.6 mbd between Feb 2024 and May 2024 (likely aided by strengthening distillate cracks during European maintenance season), will convert previous crude exports to product exports, particularly to the European market.  As such, we anticipate lower crude volumes ex AG to Europe in the coming month(s), but instead favor increasing product flows, favoring LR demand - in fact, that trend line continues well into the year, assuming no change ...

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OPEC Production Cut Scenario Analysis

Feb. 23, 2024

As we approach the next OPEC meeting on April 3rd, a survey released Friday (Feb 23rd) by Bloomberg, indicated oil industry participants and analysts are betting OPEC+ will extend production cuts beyond the first quarter of 2024.  Of the 17 traders and analysts surveyed, 14 of them expect that OPEC+ will not make any changes to its current production plans in the coming quarter.  The rationale for keeping production plans stable is that crude production has been above the demand levels since the beginning of this year and OPEC+ has had to keep oil off the market in order to ...

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Brief Red Sea Scenario Analysis

Jan. 26, 2024

The tensions in the Middle East have driven up the risk premium on crude prices.  There is concern that military clashes between Israel and the Palestinian Islamist group, Hamas, could escalate into a broader regional conflict, with markets worried the conflict could expand and disrupt wider Middle Eastern supply.  Given the uncertainty of the situation, we look into a few potential scenarios and discuss changes in tanker demand.

In the scenario where the Red Sea choke point is completely shut down due to continued attacks, our scenario analysis anticipates owners to reroute around the Cape of Good Hope, significantly boosting ...

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Libya’s Force Majeure

Jan. 12, 2024

Protests in Libya continue to keep approximately 300,000 b/d of supply off the market following the shutdown of Libya’s largest oil field last week.  The shutdown could weigh on January Esharara exports from the Zawia terminal.  Prior to the force majeure, Libyan oil fields and terminals have enjoyed a relatively disruption-free 12 months, making last year's crude exports the second-highest since the civil war in 2011.   However political instability has been recurring since the overthrow of Muammar Gadaffi over a decade ago and now threatens the country’s exports headed into 2024.  The recent shutting of ...

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OPEC vs Non-OPEC – The Upcoming Year

Jan. 5, 2024

The new year has the potential to feature a shifting dynamic between OPEC and non-OPEC producers.  OPEC+ garnered much attention with significant production cuts during the course of 2023.  The de-facto leader, Saudi Arabia also extended their voluntary cut of 1 million b/d that had previously been announced in June.  They cited weakness in oil prices driven by financial speculators and also concern over the forward-looking economic outlook as part of the rationale.  This sets the stage for more geopolitical volatility headed into 2024, usually a good omen for tanker owners.  To this effect, the markets will also be ...

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