OPEC (Organization of the Petroleum Exporting Countries) and its allies (OPEC+) have decided to extend their production cuts of 2.2 million barrels per day (bpd) until September, before gradually reducing them to from October. The move comes as the price of crude oil fell from $80.18 per barrel in late May to $76.05 in early June, its lowest level since January.
Price Fluctuations and Market Reactions
Despite the reduction in global supply, crude oil prices have fallen, which could paradoxically boost demand for crude carriers, particularly VLCCs (Very Large Crude Carriers). Analysts at BRS Shipbrokers expect demand for these tankers to increase in the fourth quarter, particularly in Asia. However, this increase could be marginal. A more substantial increase in OPEC+ production would be necessary to truly boost this segment of the market in 2025, according to the same analysts.
Impact of OPEC+ Decisions in the Long Term
The gradual increase in OPEC+ production by almost 2.5 million b/d between October 2024 and September 2025 could cause oil prices to fall to levels as low as $60 per barrel next year. Jim Burkhard of Commodity Insights believes that while this fall is not the base case scenario, it is still possible. Brent crude futures for August are valued at $77.58 per barrel, falling to $76.78 in November, according to Platts.
Sources of Growth Outside OPEC+
Production growth among non-OPEC producers like the United States, Canada and Guyana could offset the reduction in OPEC+ supply, increasing long-term exports to Asia and boosting tariffs. freight. Since the start of the second quarter of 2024, requests for crude loadings on VLCC in the Atlantic basin have exceeded 70 per month, a sign of the growing contribution of non-OPEC producers to global supply.
Growing Demand in Asia and China’s Role
In April and May, about half of VLCC shipments were destined for China, indicating strong demand from Chinese refiners following the spring maintenance season. The round trip from the Atlantic Basin to China, taking approximately 120 days, generates substantial demand for the VLCC sector.
Influence of Refining Activities in West Africa
Increasing refining activities in West Africa, notably at the Dangote refinery in Nigeria, are creating new trade routes. Dangote has secured 300,000 b/d of crude from NNPC (Nigerian National Petroleum Corporation) and plans to supplement this with other light grades, including imports from the United States. Since the start of the year, at least four VLCCs and one Suezmax have been chartered to import American crude to Dangote. In May, VLCC route rates from the U.S. Gulf Coast reached a three-month high. The rate to transport a 270,000-ton cargo of crude on the USGC-China route increased from $8.9 million to $9.8 million in May, according to Platts. Platts pegged that rate at $8.7 million in early June, compared to a five-year average of $7.5 million.
This dynamic shows that OPEC+ production adjustments and the response of other producers influence global energy and shipping markets in complex ways.
