Recent weeks have seen significant geopolitical developments that have created volatility and uncertainty in the energy and shipping markets, according to Poten & Partners.
Geopolitical Changes
One of the key developments that created significant uncertainty in the oil markets was the election of Donald Trump and his “America First” agenda. His strong support for the widespread use of tariffs unsettled many trading partners worldwide. Neighboring countries such as Canada and Mexico were mentioned by Mr. Trump as targets and since they are important energy suppliers to the United States, the introduction of across-the-board tariffs could have major implications on oil and product flows in and around the North American continent.
Mr. Trump has also made comments about the Panama Canal and will likely impose more sanctions on Iran and possibly Venezuela as part of a “maximum pressure” campaign. The impact of higher tariffs on China and the global economy is uncertain but needs to be considered as well. To add further tension to the U.S.- China relationship, the Pentagon blacklisted Chinese shipping giant COSCO and two Chinese shipbuilders, due to alleged ties to the Chinese military. President-elect. Trump will be inaugurated on Monday, January 20, and we expect to find out very quickly which of his policies will be prioritized.
The first development that triggered a market reaction was the announcement in early January by the Shandong Port Group Co. Ltd., one of the leading port companies in China, that they would block tankers that are on the U.S. sanctions list from using its port facilities. The Shandong Port Group serves many of the so-called “teapot” refiners in China, which import significant volumes of both Iranian and Russian oil. When this policy was announced, only 39 were sanctioned by the U.S. Office of Foreign Asset Control (OFAC), in addition to 73 tankers sanctioned by the UK and 69 by the EU. Because there is some overlap between the vessels targeted by the sanctioning bodies, the total number of sanctioned tankers was 135.
Sanctions Imposed
The recent US sanctions on Russian oil went beyond targeting tankers, encompassing major oil producers, traders, and marine insurance providers. These sanctions, known for their significant impact, immediately affected the market.
The sanctions targeted 39 tankers, responsible for transporting 1.6 Mb/d of Russian oil in 2024, significantly impacting their ability to trade internationally.
With China and India indicating restrictions on sanctioned vessels, Russia may be compelled to sell its oil below the price cap to attract mainstream owners back into the trade. This could lead to increased tanker utilization and higher freight rates.
Furthermore, the sanctions are expected to drive a shift towards VLCCs and Suezmaxes as alternative tonnage for Russian oil shipments.
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Source: Poten & Partners
