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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! The oil markets have broadly remained sanguine about the shipping interruptions in the Red Sea caused by attacks by Yemen’s Houthi group – but that doesn’t mean all is well in the crude market. That said, there are still plenty of concerns in the markets about demand to keep prices somewhat subdued. Here’s what’s happening now… 

Today’s top headlines:

• Sunoco to buy NuStar Energy in $7.3 bln deal
• Exxon files lawsuit against investors’ climate proposal
• Oil up as global political concerns outweigh demand worries

A crude oil terminal in Zhejiang province. Reuters/Stringer 

Russia is now the biggest seller of crude oil to China, having passed Saudi Arabia in 2023 even as Western sanctions have worked to try to restrict Russian oil trade following its invasion of Ukraine in 2023, as Reuters reports here. The nation sold about 2.14 million barrels per day (bpd), according to Chinese customs data, surpassing other major oil exporters such as Saudi Arabia and Iraq. 

Russian oil has been trading at a severe discount to other sellers as a result of the sanctions, which has restricted Russian revenues somewhat, but where it used to sell heavily to Europe, most of Russia’s exports are now headed to China and India. Among the other nations that bumped up exports to China are Malaysia, Brazil and the U.S., which saw its sales to China rise to roughly 285,000 bpd.  

That’s a pump jack in Dewitt County, Texas. Because when you write about oil, you have these kinds of pictures around. Reuters/Anna Driver

The broader oil market hasn’t shifted all that much since the uptick in attacks by Yemen’s Houthis on shipping vessels in the Red Sea – but look under the hood, and things look a bit dicier, as Reuters reports here. That’s because a futures market structure suggests that people see tighter supply in coming months.  

What they’re doing as a result is buying nearer-term oil contracts, a signal that buyers want to lock in supply now as competition heats up over supply. Right now, the Brent contract that expires in one month is at a $2.15-per-barrel premium to the six-month contract, indicating pressure on near-term supply. U.S. crude futures are also shifting, but much more slowly, because U.S. supply isn’t affected as much by what’s happening in the Red Sea. 

“Brent is the most impacted futures contract when it comes to Red Sea/Suez Canal disruptions,” said Viktor Katona, lead crude analyst at Kpler. “So who suffers the most on the physical front? Undoubtedly, it’s European refiners.” 

How is this pie going to be divided? 

The first bids for an auction of Citgo shares are expected Monday – and on Friday, a U.S. court approved claims by 17 Venezuela-linked creditors, including ConocoPhillips, Rusoro Mining and Koch Industries, to get proceeds from the auction of the parent of Venezuela-owned oil refiner Citgo Petroleum. The auction is being done to satisfy claims for expropriations and debt defaults, as Reuters reports here.  

Creditors have run to a U.S. court in Delaware to press claims that are nearly double Citgo’s $11 billion to $13 billion value, but the final decision on the winners is still months away, as the awards have to be approved by the U.S. Treasury Department, which has protected Citgo from creditors since 2019. 

Firefighters work to extinguish fire at the Novatek terminal in the port of Ust-Luga, Russia (Leningrad Region’s Governor Alexander Drozdenko Telegram channel via Reuters)

Russian energy company Novatek has been forced to suspend some operations at a huge Baltic Sea fuel export terminal after a fire that Ukrainian media said was a drone attack, as Reuters reports here.  

The big complex is known as Ust-Luga complex, located on the Gulf of Finland about 170 km (110 miles) west of St. Petersburg, is used to export oil and gas products. The Interfax-Ukraine news agency said Ukrainian security services struck the plant with drones – but Russia didn’t confirm this. It is unclear just how long the terminal’s operations will be affected by the fire. 

“January is going to be a very bad month for production.”  

Lynn Helms, director of North Dakota’s Department of Mineral Resources, after a deep freeze cut output by more than half. 

QatarEnergy could sign a long-term deal to provide liquefied natural gas (LNG) to Indian buyers for cheaper, more flexible terms, Reuters reports here, as India looks to increase its use of LNG. The Indian companies could sign the contract by the end of this month or early in February, one source said, a boon for Qatar, one of the world’s largest LNG producers. 

Right now, India’s energy use is about 6% natural gas – and Prime Minister Narendra Modi wants to boost that to 15% by 2030. Qatar is slowly increasing its liquefaction capacity to 126 million tonnes per annum (MTPA) by 2027 from a current 77 MTPA. It faces ongoing competition from Australia and a growing rival in the U.S. for export of the super-cooled fuel. 

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