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Crude oil prices continue their upward climb with no signs of slowing down

Crude oil prices continue their upward climb with no signs of slowing down. The rally that began in early February shows impressive strength, with WTI crude futures currently hovering near $86/barrel. This represents a significant increase of about 20% since the price fell to $72.2/barrel on February 2nd, 2024, which forced the Biden administration to reverse course on its plan to buy oil for refilling the Strategic Petroleum Reserve. Several key factors are driving this price surge, including escalating geopolitical tensions in oil-producing regions, production curbs implemented by OPEC+, and a robust outlook for energy demand. The ongoing conflict in Ukraine is a major contributor to market jitters. Strikes on Russian oil refineries, believed to be carried out by Ukrainian drones, have potentially disrupted over 15% of their capacity. The Russian Ministry of Energy responded by suspending fuel production at several refineries while seeking solutions to address the issue. This is not the only geopolitical front impacting oil trade. West African coastal states, responsible for nearly 500,000 barrels per day of oil and refined products, face destabilization due to rising insecurity and extremism. These countries, including Benin, Cote d'Ivoire, Ghana, and Togo, have seen a recent uptick in violence along their northern borders from insurgents originating in neighbouring Burkina Faso, Mali, and Nigeria. Nearly 400 attacks have been reported in the past year, raising concerns about potential disruptions to oil exports from the region. While both Russia and Saudi Arabia, the two largest OPEC+ producers, adhered to their quotas in February, the organization's overall production exceeded quotas by roughly 170,000 barrels/day. Russia has recently agreed to transition from voluntary cuts to mandated production cuts, aligning its output with Saudi Arabia's by June. Despite this move, smaller but significant producers like Iraq, the UAE, Kuwait, and Kazakhstan continue to exceed their quotas. This, coupled with the rising non-OPEC supply, particularly in the Americas, will likely compel OPEC+ to extend production cuts into the second half of the year in order to maintain price support for crude oil.

During Q1 2024, a total of 1.77 million DWT of bulk carriers and tankers were demolished. This is increased compared to Q4 of 2023, when a mere 1.16 million DWT were scrapped. More specifically, within the first 3-month period of 2024 around 0.5 million DWT of tankers and almost 1.27 million DWT of bulk carriers (examining the vessels >=10,000 DWT) were scrapped. In the dry market, the subdued activity in the recycling market started in January 2021, with the monthly recycling activity being below 1.5 million DWT since then. From January 2021 to March 2024, a total of 16.22 million DWT carrying capacity has gone for demo, almost 163% down compared to the dry bulk vessels demolished during the previous 3-year period of 2017-2020. The subdued recycling activity of the past years has resulted in ageing of the bulk carrier fleet. Currently, the average age of the bulk carrier fleet is around 12.4 years old, which is almost 2 years older than the 10.5-year-old average observed in January 2021. In the tanker market, the low demolition activity begun in May 2022. It is evident that the utilisation of tankers after 2022 when the Russia-Ukraine ongoing conflict commenced, was maximized and from May 2022 up to March 2024, a mere 2.81 million DWT of tankers were scrapped. The low scrap activity in the tanker market has also affected in ageing of the tanker fleet, as currently the average age of tankers (>= 10,000 DWT) is 13.3 years old, the oldest average age in the past 20 years.

S&P activity:

Dry:

The buying appetite on the dry bulk sector remains high across all segments, with 14 vessels finding new owners this week.On the Capesize sector, the Scrubber fitted and Electronic M/E "Hl Harmony"- 180K/2015 Dalian was sold for USD 43 mills to clients of JPM basis TC attached till October 2026- January 2027 at USD 24K/day. Chinese buyers acquired the mini-Capesize "Spring Samcheonpo" - 120K/2009 Sanoyas for USD 18.4 mills. Moving down the sizes, the Post-Panamax "Federico II"- 92K/2009 Oshima was sold for USD 19.6 mills to Chinese buyers, while the Kamsarmax "Scarlet Island" - 82K/2014 Tsuneishi Cebu is now committed at region USD 29mills to Greek buyers. The Ultramax "Aries Sumire" - 64K/2020 Shin Kurushima found new owners for USD 36.3 mills, whilst the Electronic M/E "Kmarin Genoa" - 63K/2014 Jiangsu New Hantong changed hands for USD 20 mills basis TC attached at USD 10.1K/day till Sep 2024/Mar 2025. On the Supramax sector, the Electronic M/E "Rui Fu An" - 57K/2013 Jiangsu New Hantong was sold for mid/high USD 17 mills. Last but not least, clients of Dadaydillar acquired the Handysize "FW Excursionist"- 34K/2019 Hakodate for USD 27 mills, while on the same sector, the 13-year-old "Morges" - 36K/2011 Shinan found new owners for mid USD 14 mills.

Tanker:

It was one of the busiest weeks of the tanker S&P activity for this year, with 13 transactions reported. The Aframax "Calypso" - 112K/2021 Sumitomo was sold for USD 79 mills to Libyan buyers. Clients of Thenamaris acquired 2x MR2, the "Jiangsu Newyangzi Yzj2023-1515" - 50K/2025 JNS and the "Jiangsu Newyangzi Yzj2023-1516"- 50K/2025 JNS for USD 53 mills each. On the same sector, the "Stolt Facto" - 46K/2010 SLS changed hands for USD 28 mills, while the 20-year-old "Jag Pahel"- 46K/2004 Hanjin found new owners for USD 14.5 mills basis delivery by end of June 2024. Finally, on the Chemical sector, the StSt "Chem Bulldog" - 21K/2010 Asakawa was sold for USD 23 mills, while on the same sector, Turkish buyers acquired the Ice Class 1A "Patagonia" - 17K/2006 Qiuxin and the "Paterna" - 17K/2006 Qiuxin for USD 11.3 mills each.

Xclusiv Shipbrokers Inc.