By Clyde Russell, Asia Commodities and Energy Columnist

Hello Power Up readers! Crude oil prices are rising for a second day after a larger-than-expected drop in U.S. inventories added to supply concerns stoked by U.S. sanctions against Russia’s exports. Brent futures rose 0.4% in early Asian trade to $82.33 a barrel, their highest since July last year. The main question is whether the new U.S. measures against Russia’s so-called “dark fleet” of tankers are indeed a game changer, or if the current rally is temporary. More on this below...

An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS/File Photo

Crude oil prices have surged by almost 7% since the administration of outgoing U.S. President Joe Biden announced fresh measures targeting Russia’s exports. The moves to ban more than 160 tankers that ship Russian crude as part of the “shadow fleet” is expected to cut exports to China and India, the two biggest buyers of Russian oil.

The broader question is whether the rally in prices is sustainable, or whether the oil market will once again prove that it’s adept at adapting to new circumstances. Among the myriad of ways around sanctions, it’s possible that the sanctioned tankers can be switched to new owners, or engage in ship-to-ship transfers. But even if the sanctions prove effective, there is also the possibility that Moscow will accept to sell crude at the $60-a-barrel price cap imposed by Western nations. A further possibility is that China trims its imports and dips into its plentiful inventories, a tactic the world’s biggest crude importer has used effectively in the past when it deems prices have risen too high, or too quickly.

Another factor worth considering is that even if Russian barrels are kept from the market, there is still likely enough supply to keep the global oil market in surplus this year. The International Energy Agency said in its latest report that it expects supply growth in 2025 from non-OPEC+ countries to exceed subdued demand growth.

The Organization of the Petroleum Exporting Countries is somewhat more optimistic than the IEA, with its January monthly report that global demand would lift by 1.45 million barrels per day this year, which is higher than the IEA’s estimate of 1.05 million bpd. Still, the OPEC figure is still below its 2024 figure of 1.5 million bpd, which was also less than the exporter group had expected during the year, with a forecast of 2.25 million bpd in July’s report.

Asia has widened its renewable energy capacity lead over all other regions, adding a record 450,000 megawatts (MW) of new renewable capacity in 2024, according to data compiled by LSEG. That capacity addition dwarfs the roughly 109,000 MW added in Europe and the 93,000 MW added in North America last year.

Chris Wright, President-elect Donald Trump's pick to head the U.S. Energy Department, told senators in his confirmation hearing that his first priority is expanding domestic energy production including liquefied natural gas and nuclear power, saying he believes fossil fuels are the key to ending world poverty.

The safety risks posed by unregulated oil tankers are rising, and the so-called shadow fleet is a threat to both the maritime environment and seafarers, the head of the United Nations' shipping agency said, referring to hundreds of ships used by Russia to move oil, in violation of international restrictions imposed on it over the Ukraine war.

Sweden has started building a final storage facility for spent nuclear fuel, only the second such site in the world, where highly radioactive waste will be stored for 100,000 years. How to store deadly radioactive waste until it is safe is a question that has dogged the nuclear industry since commercial reactors began operating in the 1950s.

Tokyo Gas has identified assets, including from its vast real estate portfolio, to be sold to fund growth investments, its president said, as the company faces pressure from U.S. activist investor Elliott Management.

Power Up is sent twice weekly. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this email? Unsubscribe here. To manage which newsletters you're signed up for, click here.

Terms & Conditions and Privacy Statement