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Recent developments in global energy markets

Recent developments in global energy markets highlight significant shifts in production strategies, diplomatic relations, and potential geopolitical risks that could reshape energy trade patterns in 2025 and beyond.Russia's Gazprom is adapting its investment strategy, announcing a 7% reduction in its 2025 budget to Rb1.52 trillion ($14 billion). This adjustment reflects Moscow's strategic pivot toward Asian markets, particularly China, as its primary export destination. The Power of Siberia pipeline is set to reach its full capacity of 38 Bcm/year by 2025, with additional projects like the Far Eastern route expected to add 10 Bcm/year by 2027. This eastward shift underscores Russia's efforts to diversify away from traditional European markets, though European gas prices recently hit fresh highs with the Dutch TTF benchmark reaching Eur48.58/MWh.

Meanwhile, OPEC+ faces its own challenges, postponing its ministerial meeting to the 5th of December amid internal tensions over production quotas. The delay follows discussions between Saudi, Russian, and other key members, highlighting the complexity of managing global oil supply amid concerns about weak demand growth and overproduction by certain members. The group must decide how to handle the planned reintroduction of 2.2 million b/d of voluntary cuts starting January 2025, while maintaining existing groupwide cuts of 3.6 million b/d.

Perhaps the most significant potential disruption looms in Iraq, OPEC's second-largest producer. Reports suggest that a potential Trump administration might implement sanctions targeting Iraq's energy sector, particularly focusing on its ties with Iran. Such measures could impact Iraq's 4 million b/d production and 3.6 million b/d exports, with far-reaching implications for major buyers like China and India, which account for 41% and 28% of Iraqi seaborne crude exports respectively. The proposed sanctions could severely affect Iraq's economy, which derives 95% of its government revenue from oil exports. Additionally, Iraq's dependence on Iranian gas for power generation – recently highlighted by Iran's reduction of gas exports from 25 million to 7 million cu m/day – creates further vulnerability. The situation is complicated by China's growing influence in Iraq's energy sector, where Chinese companies control 7.27% of current and future licensed oil and gas projects, compared to U.S. companies' 1.82% share.

The interconnected developments in global energy markets create a complex outlook for seaborne energy trade. Gazprom's reduced investment budget and pivot to China underline the eastward shift in energy flows since 2022, with increased Russian pipeline capacity potentially reducing China's reliance on seaborne LNG imports and affecting LNG carrier demand. Meanwhile, delays in the OPEC+ meeting and tensions over quota compliance add uncertainty to crude tanker markets. If OPEC+ implements the planned 2.2 million b/d production cuts in 2025, it may lower tanker demand, though current overproduction by Russia, Iraq, and Kazakhstan has buoyed demand, particularly in shadow fleet operations. However, the most disruptive factor could be potential U.S. sanctions on Iraq. With Iraq exporting 3.6 million b/d—primarily to Asia—sanctions could upend traditional Iraq-Asia trade routes and necessitate alternative sourcing, increasing ton-mile demand if Asian buyers turn to distant suppliers. Additionally, sanctions may spur the emergence of a shadow fleet for Iraqi crude, reducing effective fleet capacity and driving up freight rates.

Sale and Purchase

Dry:

Another active week on the dry S&P market, with significant activity observed in the Capesize and Handysize sectors. The Scrubber fitted "K. Confidence" - 181K/2013 Sasebo was sold for USD 34.5 mills to clients of Chinaland, while the one-year older Scrubber fitted "K. Victory" - 182K/2012 Sasebo found new owners for USD 33.5 mills. Greek buyers acquired the "Cape Dream" - 179K/2011 HHI for USD 28 mills, while the 3-year-older "Otsl Artemis" - 178K/2008 Shanghai Jiangnan was also sold to Greek buyers for USD 24.5 mills. On the Kamsarmax sector, the "Hellenic C" - 82K/2014 Jiangsu Eastern was sold for USD 21 mills to European buyers. The Supramax "Lista" - 56K/2011 IHI was sold for mid USD 16 mills to clients of VOSCO. The OHBS Handysize "Global Aglaia" - 33K/2016 Shin Kurushima was sold for mid/high USD 19 mills to Japanese buyers. The "Uni Challenge" - 29K/2012 Yangzhou Nakanishi and the "Victoria Harbour" - 29K/2011 build were sold enbloc for USD 21.5 mills. Clients of Zhejiang Gaoxin Shipping acquired the "Li Da Sheng" - 35K/2010 Yangzhou Ryuwa for USD 8.3 mills. The "Four Nabucco" - 34K/2010 SPP found new home for USD 11.8 mills, while the 2-year-older OHBS "Aegean Spire" - 33K/2008 Shin Kochi changed hands for USD 11.8 mills.

Wet:

Tanker S&P activity was subdued this week, with only 2 sales taking place. The scrubber fitted VLCC "Maran Aries"- 321K/2006 Daewoo was sold for USD 45 mills to Chinese buyers, while the Suezmax "Evagoras"- 165K/2003 Hyundai Samho changed hands for USD 25 mills basis prompt delivery.

Xclusiv Shipbrokers Inc.