Shandong Port Group Bans U.S. Sanction vessels: China's Shandong Port Group issued a notice on Monday banning U.S.-sanctioned oil vessels from calling into its ports on the country's east coast, three traders said. The move comes weeks after Washington imposed further sanctions on companies and ships that deal with Iranian oil and could slow shipments to the world's largest oil importing nation, traders say. In a second notice on Tuesday, also reviewed by Reuters, Shandong Port said it expects the shipping ban to have a limited impact on independent refiners as most of the sanctioned oil is being carried on non-sanctioned tankers. A switch to using non-sanctioned ships could drive up costs for refiners in Shandong, which have been struggling with poor margins and sluggish demand, traders said. The price of Iranian crude sold to China hit the highest in years last month as fresh U.S. sanctions tightened shipping capacity and drove up logistics costs.
Global Shipping routes continue to change: The volume of global crude exports in 2024 declined 2%, the first fall since the COVID-19 pandemic, shipping data showed, due to weak demand growth and as refinery and pipeline changes reshuffled trade routes. Global crude flows have been roiled for a second year by war in Ukraine and the Middle East, with tanker shipments rerouted and suppliers and buyers split into regions. Middle East oil exports to Europe declined and more U.S. oil and South American oil went to Europe. Russian oil that formerly went to Europe has been redirected to India and China. These shifts have become more pronounced as oil refineries have shut in Europe amid continued attacks on Red Sea shipping. Middle Eastern crude exports to Europe tumbled 22% in 2024, ship tracking data from researcher Kpler showed. The U.S. with its surging shale production has been a winner in the global oil trade. The country exports 4 million barrels per day, boosting its share of global oil trade to 9.5%, behind Saudi Arabia and Russia. (More below)
Uncertainty in Canada: Canadian Prime Minister Justin Trudeau’s resignation on Monday signals the extent of the unpopularity facing the country’s progressive Liberal Party, which has dominated its politics for decades, heading into elections later this year. Why did Trudeau resign? The rising cost of living, increasing anti-immigrant sentiment and concerns over President-elect Trump’s economic threats to Canada have all contributed to growing disillusionment with Trudeau’s leadership. Having lost key allies in the Liberal Party and facing a likely vote of no confidence by the opposition Conservatives and New Democratic Party, Trudeau called for the Canadian Parliament to be put into prorogue until March 24.
Market Overview: Energy is starting the day higher again with the support coming from fears of tighter sanctions on Russian and Iranian supply due to the tension both areas are causing. Support is also coming short term due to the cold weather coming through the United States along with Europe. Coastal states still use diesel as a primary source to heat homes. Economic data may be a headwind for rising energy as higher inflation in Germany suggests that the ECB may not be able to cut rates as fast across the Eurozone along with in the United States manufactured goods fell in November. One report that is coming out Friday is the United States Non-farm payrolls reports which will give insight on interest rate policies and a possible oil demand outlook.
Global Shipping routes continue to change (continued) Europe's refiners initially cut Russian imports and increased both U.S. and Middle Eastern oil purchases after Russia invaded Ukraine. Attacks on ships in the Red Sea following Israel's war on Gaza pushed up the cost of shipping from the Middle East. Refiners stepped up imports from the U.S. and Guyana to record highs. Escalating Middle East conflict around late September and fears of more sanctions from U.S. President-elect Donald Trump led to tighter supply and higher prices of Iranian oil. This prompted Chinese refiners to look at oil from West Africa and Brazil.
In Canada, the expanded Trans Mountain pipeline can now ship an extra 590,000 bpd to the Pacific Coast, lifting the nation's waterborne exports to a record 550,000 bpd in 2024. This has had a ripple effect: With increased Canadian crude flowing to the U.S. West Coast, refineries in the region bought less Saudi Arabian and Latin American crude, while direct shipments from Canada to Asian countries have cut re-exports from the U.S. Gulf Coast.
The shift in oil flows "is creating opportunistic alliances," said Adi Imsirovic, an energy consultant and former oil trader, citing closer relationships between Russia and India, China and Iran that are reshaping oil trade. "Oil is no longer flowing along the least cost curve, and the first consequence is tight shipping, which raises freight prices and eventually cuts into refining margins," said Imsirovic.
Oil prices continue to end higher, driven by sanctions imposed on Russia and Iran. There is still optimism over Chinas stimulus plans which would increase demand, plus continued cold weather in the U.S and Europe which are boosting Heating oil demand. When you look at technical market, we are entering overbought territory which tends to have sellers take advantage of the strength.
