- Ongoing geopolitical risks like the Ukraine war and sanctions on Russia, Iran, and Venezuela are impacting energy markets.
- New sanctions could drive up oil prices, though Trump’s stance on energy remains uncertain.
- Trump aims to boost U.S. oil production, reduce renewable energy mandates, and refill the SPR.
- Potential tariffs on energy imports from Mexico, Canada, and the EU could disrupt trade.
- The shipping market is experiencing mixed trends due to geopolitical risks, holiday disruptions, and varying cargo volumes.
Following the impactful end of the Biden era, expectations for Trump’s second term in the White House have focused on continuity in energy and shipping markets. Despite a flurry of unrelated executive orders, immediate effects on these markets have been minimal, though some clues have emerged regarding Trump’s potential energy policies, according to Gibson Shipbrokers.
The war in Ukraine remains a pivotal event for tanker markets. Although Trump claimed he could end the war “in a day,” his administration has prioritized sanctions and tariffs against Russia over immediate conflict resolution. This indicates that Biden’s sanctions and the oil price cap will likely remain in place. Buyers of Russian crude, such as India, face continued uncertainty.
Increased sanctions on Iran and Venezuela have also been hinted at, but policy specifics remain vague. For Venezuela, further sanctions could halt U.S. imports, impacting the 235kbd exported to the U.S. last year and other exports under license to Europe and India.
Domestic Energy Policies and Oil Prices
Trump has pledged to remove barriers to domestic oil and gas production, including lifting the offshore drilling ban and opening the Alaskan wilderness for exploration. His plans to refill the SPR with 300 million barrels could strain the domestic oil market, potentially driving up prices.
However, balancing oil prices under stricter sanctions will require collaboration with OPEC. Trump’s request for higher OPEC production contrasts with the complexities of Russia’s role within OPEC+. Additionally, tariffs on Mexican and Canadian energy imports remain a possibility, which could have seismic implications for trade flows and refinery operations.
Tanker Market Performance
East: VLCC activity dropped after a strong previous week, with AG/China at WS50 and AG/USG at WS30. Suezmax and Aframax markets showed limited movement due to slow chartering and holiday disruptions.
West Africa: VLCC sentiment declined as cargoes dwindled, with WAF/East at WS57. Suezmax markets softened, with TD20 expected to drop to WS75.
Mediterranean: Suezmax and Aframax rates started strong but faced declines later in the week due to reduced cargo volumes and replenished tonnage.
US Gulf/Latin America: The VLCC market experienced downward corrections, with USG/China at $8.75m and Brazil/China at WS56. Aframax rates in the USG also softened due to controlled chartering and oversupply.
North Sea: Aframax markets remained steady at WS110, with limited activity expected to continue.
Clean Products Market: LR2 and LR1 markets in the East saw weak pre-Chinese New Year activity, with rates under pressure. MRs East of Suez also faced declining inquiries.
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Source: Gibson Shipbrokers
