While the world watches the unhinged actions of the new Trump administration—playing Geopolitics 101 for Dummies—leaving Europe’s security in shambles and pushing risks and fear back into the market, oil and gas analysts are more concerned about oil prices. Current sentiment suggests lower oil prices as part of an expected peace dividend from a potential U.S.-Russia Ukraine deal, reports Oil Price.
Oil Market Conundrum
The global crude oil markets are anticipating a scenario quite different from the one observed in the VLCC sector.
Norway’s Domestic Wealth Fund and ADNOC L&S (Abu Dhabi-based) have already made significant investments in the VLCC sector, indicating a positive outlook.
U.S.-based investment bank Jefferies forecasts a robust bull market for VLCCs.
Jefferies’ report highlights the increasing impact of U.S. sanctions on Russia, leading to the removal of a considerable number of VLCCs from the market.
Simultaneously, global demand for VLCCs remains strong as oil markets continue an upward demand cycle.
Sanctioned volumes, particularly from Russia’s “dark fleet” and Iran, are being removed from circulation, forcing other producers to seek alternative transportation solutions.
Jefferies also anticipates increased production from non-sanctioned producers, especially non-OPEC nations.
Furthermore, if OPEC statements hold, additional volumes are expected to enter the market from Saudi Arabia, the UAE, and other Gulf producers.
Attractive Investment Opportunity
The global seaborne crude oil trade currently stands at approximately 40 million barrels per day (bpd), with VLCCs transporting roughly 22 million bpd of this volume. The “dark fleet,” believed to be involved in transporting around 2 million bpd of these volumes, is expected to face further disruption due to increasing sanctions.
Jefferies predicts that overall VLCC fleet utilization will reach around 90% in 2025, with approximately 10% of ships currently sanctioned. If all Office of Foreign Assets Control (OFAC) measures are implemented, this figure could rise to 15%, effectively removing an additional 45 VLCCs from the market.
Given this promising outlook, recent statements from ADNOC Logistics & Services (L&S) CFO Nick Gleeson are unsurprising. Gleeson emphasized that VLCCs currently represent a highly attractive investment opportunity. ADNOC L&S has been actively expanding its presence in the maritime logistics sector within the GCC, with ambitions to become a global leader. The recent acquisition of Navig8, finalized last month, added 32 tankers to its fleet. Since its listing in 2023, ADNOC L&S has embarked on an aggressive $6 billion expansion drive. Gleeson further stated that post-IPO spending is just the beginning. With strong backing from ADNOC and other key stakeholders, the company is poised for global expansion, with further acquisitions in the VLCC market anticipated.
ADNOC L&S reaffirmed its commitment to long-term growth and strategic expansion in its FY2024 financial report, released last week. The company anticipates an additional $3 billion+ in value-accretive organic investment by 2029, beyond already announced projects, adhering to the same investment return criteria.
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Source: Oil Price
