The conflation of US tariffs, OPEC+ supply growth, ongoing sanctions, and Chinese economic output all weighed on oil prices this week. The market sustained more than a 6% decline through the first half of the week before rallying again on Friday. For Australian commercial fuel buyers, the outlook this coming week should generally deliver lower prices, despite a major step up in shipping costs.?
With the disruption to shipping through Brisbane resulting from Cyclone Alfred, the major consideration for the local fuel market is how quickly the backlog of cargo vessels can be cleared.?For IOR customers, we can confirm that IOR received a c.50 million litre diesel shipment into its Lytton Fuel Import Terminal shortly before the cyclone emerged. As such, IOR has more than sufficient inventory levels to support our customers’ ongoing needs and do not expect any impact to normal operations going forward. Any necessary localised closures at our 24/7 unmanned diesel stops (e.g., due to flooding) will be communicated to impacted customers directly.
- International wholesale prices: Diesel fell to US$86 per barrel, down 3.3% from last Friday. Jet Fuel decreased by 4.4%, whereas Gasoline declined by 6.7%.
- Australian dollar: The AUD strengthened by 1.5% this week, closing at US$0.6306.
- Shipping costs: Fuel freight costs to Australia significantly increased by 13.9%, with rates at approximately 2.4x the ‘standard’ rates.?
International industry news:
- Oil price: Brent crude closed the week at US$70 per barrel, down 3.8%.
- OPEC+ supply: OPEC+ confirmed this week a modest 138,000 barrel per day increase in supply for April. While this is the long-awaited start to the OPEC+ ramp-up – the first supply increase since 2022 – Russia has already hinted that this may be reversed quickly in order to support prices.
- US tariffs: The rollercoaster ride of US tariffs took another turn this week following the introduction of tariffs on Chinese, Canadian and Mexican goods on Tuesday. Within 48 hours, the US administration announced a one-month reprieve for Canadian and Mexican goods compliant with the North American (USMCA) trade pact. This covers about one-third of Canadian exports and one-half of Mexican exports to the US. The USMCA is not a comprehensive energy trade agreement, and only a subset of oil exports are USMCA-compliant and receive the tariff exemption. Canada and Mexico's remaining oil exports to the US are now subject to a separate 10% energy tariff.
- Sanctions on Iran: The US is said to be considering requiring its allies to stop and inspect all Iranian tankers passing through key checkpoints, in an effort to further ramp-up the adherence to sanctions. This should be expected to have some impact on oil supply as well as the cost of shipping.
- Chinese demand: Chinese oil imports have fallen 5% year-on-year in January and February 2025, as sanctions on Russian crude have significantly impacted the operations of independent refiners in the Shandong province. China recently re-affirmed its 5% p.a. economic growth targets, however this will be a more difficult proposition given the emerging tariff wars with the US, and will be reliant on stimulating domestic demand. Among various measures to boost local spending, Beijing has committed to issuing c.US$179 billion in special treasury bonds, increasing the borrowing capacity of local governments by 13%, and creating more than 12 million jobs particularly in high-tech industries.
As always, please contact your IOR account manager should you have any questions about the implications for your business. If you're not a customer yet, contact us at 1300 457 467 or [email protected] to find out what we can do to support your business.
IOR customers can access account details, transaction history and more, by logging onto the IOR portal at customer.ior.com.au.
