Commodities
Analysis-Russian oil flows through Red Sea still face lower risks
© Reuters. FILE PHOTO: A tanker crosses the Gulf of Suez towards the Red Sea before entering the Suez Canal, in El Ain El Sokhna in Suez, Egypt, September 25, 2020. REUTERS/Amr Abdallah Dalsh/File Photo
By Natalie Grover, Robert Harvey and Ahmad Ghaddar
LONDON (Reuters) – Tankers carrying Russian oil have continued sailing through the Red Sea largely uninterrupted by Houthi attacks on shipping and face lower risks than competitors, according to shipping executives, analysts and flows data.
Russia has become more dependent on trade through the Suez Canal and the Red Sea since it invaded Ukraine, which led to Europe imposing sanctions on Russian imports and forced Moscow to export most of its crude to China and India. Before the war, Russia exported more to Europe.
The number of Russian ships passing through the Red Sea has registered a slight decline since December, according to oil analytics firm Vortexa, but traffic last week was still around 20% higher than on average in 2023.
That contrasted to more extensive disruptions overall to oil tanker sailings through the Red Sea in the past two weeks.
Shipments of diesel and jet fuel from the Middle East and Asia to Europe – one of the major east-to-west oil trade routes – nearly came to a halt in the days following the first round of U.S.-led retaliatory strikes on Yemen on Jan. 11, Vortexa data show.
Russia has close ties to Iran, which backs the Houthis, and that may have helped prevent attacks.
Ships carrying Russian oil for the most part have no links to Israel, the United States or Britain. The Houthis have said they are targeting ships connected to those countries in attacks to show solidarity with Palestinians in Gaza.
G7 sanctions on Russia’s oil trade over the Ukraine war contributed to rapid growth in the shadow fleet of vessels transporting sanctioned crude and fuel. Those vessels are leased by companies typically registered outside countries that have imposed sanctions on Russia. They also use maritime services and insurance from countries that do not impose sanctions.
With fewer clear connections to Western companies, those vessels are less likely to be a target.
“Most Russian crude and fuel is transported by the shadow fleet, so its unlikely going to be in the crosshairs of Houthi attacks,” said veteran oil trader Adi Imsirovic.
“The Houthis are targeting ships linked to certain countries.”
Many vessels carrying Russian cargoes are indicating they are not tied to Israel via signals from automatic identification systems (AIS) – which publicly broadcast information including a vessel’s position and destination, Vortexa analyst Mary Melton said.
Russia, a partner to key Arab powers like Saudi Arabia and the United Arab Emirates in addition to its ties with Iran, has condemned what it called the ‘irresponsible’ strikes.
Chinese officials have put pressure on Iran to rein in attacks on ships in the Red Sea and ensure those attacks do not hurt Chinese interests, Iranian sources and a diplomat told Reuters last week.
ATTACK
A Houthi attack late last week on a tanker carrying fuel which originally loaded in Russia was unlikely to impact wider Russian trade flows as that specific vessel was targeted because it had ties to British and American companies, Vortexa’s Melton said.
“The tanker had ties to both US and UK based corporate entities, so other vessels carrying Russian cargoes without these ties do not face a similar risk,” she said.
The attacked tanker Marlin Luanda is owned by Oceonix Services, a company registered in the UK to a London address, according to data from another tracking firm Kpler.
Global commodities trader Trafigura, which owned the cargo, said it was assessing the security risks of further Red Sea voyages.
Four tankers carrying Russian Urals crude passed through the Bab-el-Mandab strait with another three heading south through the Red Sea since the attack on the Trafigura vessel on Jan. 26, Kpler data show.
The flow of Russian oil should continue provided it makes economic sense and insurance cover can be procured given the level of demand from India and China, Ian Wilkinson, VP of sales excellence at Inchcape (OTC:) Shipping Services told Reuters.
Western tankers, however, will likely re-route away from the Red Sea and sail around the Cape of Good Hope, said Shefali Shokeen, a lead shipping analyst with a Dubai-based shipowner.
Either way, shippers are facing higher costs. In the Red Sea, shipowners are charging higher freight rates and crew fees, and war risk insurance premiums have surged.
Crew fees have doubled, while war risk premiums now amount to around 1% of the value of a ship, versus 0.5% about 10 days ago, excluding discounts, according to industry sources.
For instance, costs to charter 1 million barrel-capacity Suezmax ships to send Iraqi oil to Mediterranean refineries have climbed by $2.50-$3.50 a barrel for freight, while insurance has roughly tripled to between 10 and 15 cents a barrel, according to a trader with a European refiner.
The alternative route via the Cape of Good Hope adds two to three weeks to sailing time and an extra 3,300 nautical miles in fuel consumption, in addition to emissions taxes for those owned by or calling at EU states.
By Scott DiSavino
(Reuters) – U.S. energy firms this week cut the number of oil and rigs operating for a third week in a row to the lowest since December 2021, energy services firm Baker Hughes (NASDAQ:) said in its closely followed report on Friday.
The oil and gas rig count, an early indicator of future output, fell by four to 576 in the week to Jan. 24.
Baker Hughes said this week’s decline puts the total rig count down 45, or 7% below this time last year.
Baker Hughes said oil rigs fell by six to 472 this week, their lowest since December 2021, while gas rigs rose by one to 99.
In the Permian Basin in West Texas and eastern New Mexico, the nation’s biggest oil-producing shale basin, the rig count fell by six in the week to 298, the lowest since February 2022.
That six-rig decline in the Permian was the biggest weekly drop since August 2023.
The oil and gas rig count declined by about 5% in 2024 and 20% in 2023 as lower U.S. oil and gas prices over the past couple of years prompted energy firms to focus more on paying down debt and boosting shareholder returns rather than raising output.
Even though analysts forecast U.S. spot crude prices could decline for a third year in a row in 2025, the U.S. Energy Information Administration (EIA) projected crude output would rise from a record 13.2 million barrels per day (bpd) in 2024 to around 13.6 million bpd in 2025.
On the gas side, the EIA projected a 43% increase in spot gas prices in 2025 would prompt producers to boost drilling activity this year after a 14% price drop in 2024 caused several energy firms to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020. [NGAS/POLL]
The EIA projected gas output would rise to 104.5 billion cubic feet per day (bcfd) in 2025, up from 103.1 bcfd in 2024 and a record 103.6 bcfd in 2023.
By Georgina McCartney
HOUSTON (Reuters) -Oil prices settled slightly higher on Friday but posted a weekly decline, ending four straight weeks of gains, after U.S. President Donald Trump announced sweeping plans to boost domestic production while demanding that OPEC move to lower crude prices.
futures settled up 21 cents, or 0.27%, to $78.50 a barrel. U.S. West Texas Intermediate crude (WTI) settled up 4 cents, or 0.05%, to $74.66.
Brent has lost 2.8% this week while WTI was down 4.1%.
Trump on Friday reiterated his call for the Organization of the Petroleum Exporting Countries to cut oil prices to hurt oil-rich Russia’s finances and help bring an end to the war in Ukraine.
“One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil … that war will stop right away,” Trump said as he landed in North Carolina to view storm damage.
The threat of harsh U.S. sanctions on Russia and Iran, which are key oil producers, could undermine Trump’s goal of lowering energy costs, StoneX analyst Alex Hodes said in a note on Friday.
“Trump knows this and has leaned on OPEC to cover the void that these will create,” Hodes said.
On Thursday, Trump told the World Economic Forum he would demand that OPEC and its de facto leader, Saudi Arabia, bring down crude prices.
OPEC+, which includes Russia, has yet to react, with delegates from the group pointing to a plan already in place to start raising oil output from April.
“I don’t really expect OPEC will change policy unless there is a change in fundamentals,” UBS commodities analyst Giovanni Staunovo said. “Markets will be relatively muted until we get more clarity on sanctions policy and tariffs.”
TARIFFS
Chevron (NYSE:) said on Friday it had started production at a $48 billion expansion of the giant Tengiz oilfield, which will bring its output to around 1% of global crude supply, and could further pressure OPEC’s efforts in the last few years to limit production.
Trump declared a national energy emergency on Monday, rolling back environmental restrictions on energy infrastructure as part of his plans to maximize domestic oil and gas production.
These rollbacks could support oil demand but have the potential to exacerbate oversupply, said Nikos Tzabouras, senior market specialist at trading platform Tradu.
Trump’s policies so far have largely followed predictions on the supply side, including cutting red tape to promote domestic supply growth, according to StoneX’s Hodes. However “the lower hanging fruit for growth has already been picked.”
The U.S. president vowed on Wednesday to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. He also said his administration was considering a 10% punitive duty on China.
As attention shifts to a possible February timeline for new tariffs, caution is likely to persist in the market, given potential negative implications for global growth and oil demand prospects, said Yeap Jun Rong, a market strategist at IG. Traders expect oil prices to range between $76.50 and $78 a barrel, he added.
While bullish catalysts such as a significant drawdown in stocks are providing temporary positive swings, an over-supplied global market and projections of ailing Chinese demand continue to weigh on crude futures, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
U.S. crude inventories last week hit their lowest level since March 2022, the U.S. Energy Information Administration said. [EIA/S]
LONDON (Reuters) – Oil prices edged up on Friday but remained on track for a weekly decline after U.S. President Donald Trump announced sweeping plans to boost U.S. production and demanded that OPEC move to lower crude prices.
futures gained 25 cents, or 0.3%, to $78.54 a barrel by 1147 GMT while U.S. West Texas Intermediate crude (WTI) was up 22 cents, or 0.3%, at $74.84.
Over the week Brent has lost nearly 3% while WTI is down close to 4%.
“After a week of Trump being in office, the various executive orders are not being disruptive to oil supplies. Most of what he has done has been with an inward domestic focus,” said Harry Tchilinguiran at Onyx Capital Group.
“We were looking for pronouncements around tariffs, around Iran, Venezuela and Russia.”
Ahead of Trump’s inauguration the market had built up a net long position in oil futures to hedge against price gains arising from supply disruption, but this has now started to unwind, Tchilinguiran said.
Trump told the World Economic Forum on Thursday that he would demand that the Organization of the Petroleum Exporting Countries and its de facto leader, Saudi Arabia, bring down the crude prices.
He also said he would ask Riyadh to increase a U.S. investment package to $1 trillion, up from $600 billion reported earlier by the Saudi state news agency.
“I don’t really expect OPEC will change policy unless there is a change in fundamentals,” said UBS commodities analyst Giovanni Staunovo. “Markets will be relatively muted until we get more clarity on sanctions policy and tariffs.”
Trump declared a national energy emergency on Monday, rolling back environmental restrictions on energy infrastructure as part of plans to maximise domestic oil and gas production.
On Wednesday he vowed to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. He also said his administration was considering a 10% punitive duty on China.
As attention shifts to a possible February timeline for new tariffs, caution is likely to persist in the market, given potential negative implications for global growth and oil demand prospects, said IG market strategist Yeap Jun Rong.
Traders expect oil prices to range between $76.50 and $78 a barrel, Yeap added.
While bullish catalysts such as a significant drawdown in stocks are providing temporary positive swings, an over-supplied global market and projections of ailing Chinese demand continue to weigh on crude futures, said Priyanka Sachdeva at brokerage Phillip Nova.
U.S. crude inventories last week hit their lowest since March 2022, a U.S. Energy Information Administration report said.
The report, issued a day late because of a U.S. holiday on Monday, said crude stockpiles fell by 1 million barrels to 411.7 million barrels in the week to Jan. 17 for a ninth consecutive weekly decline. [EIA/S] (This story has been corrected to fix the spelling of ‘price’ in paragraph 6)
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