The National Oil Corporation of Libya declared force majeure at the Zawia Refinery following a fire caused by militia clashes. This is the first such incident since September, and it could disrupt Libya’s oil exports, which have recently recovered to around 1.25 million barrels per day, reports Breakwave Advisors.
VLCC Rates Remain Low
Despite increased Chinese crude imports, driven by rising demand from independent refiners and higher import quotas, VLCC rates have not yet recovered from recent lows. This is partly due to a narrowing price premium for unsanctioned crude compared to Iranian barrels, which has reduced the incentive for using shadow fleets. The import patterns have also undergone a shift.
- Chinese crude imports from Iran declined in November to 1.15 million barrels per day (bpd) from 1.4 million bpd in October.
- Conversely, imports from other Middle Eastern Gulf countries surged to 4.95 million bpd in November.
- West African crude imports are also on track to reach their highest level since August in December.
Tougher Sanctions
Tougher sanctions on Iran have already shrunk the country’s exports. Iran’s total crude exports fell from 1.62m b/d in September to 1.55m b/d in October and 1.23m b/d in November, according to Vortexa data. This trend appears to be continuing this month. In the first 15 days of December, Iran’s crude oil exports were 1.2m b/d, according to TankerTrackers, compared to a running average of 1.7m b/d for the first 15 days during the previous three months.
Surprisingly weak Chinese oil demand in the second half of this year is the main reason for a lackluster fourth quarter for VLCCs. Chinese oil firms slashed crude imports in October. Imports of unsanctioned grades, particularly those from the Mideast Gulf, fell most steeply because of their relatively high cost. November and December have seen a reversal of this trend but with little benefit for compliant VLCC rates.
Mideast Gulf to China VLCC freight (TD3c) sank to its lowest this year last week. TD3c was $17,598/day on 13 December, compared to $36,750/day at that time last year. It recovered slightly to $18,821/day on 18 December with the start of bookings for January loading in the Mideast Gulf before dipping again on 19 December to $18,726/day.
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Source: Breakwave Advisors
