Market Report Week 18 - 29.04.2025

There is speculation that OPEC+ will again add more oil than expected in June. On May 5, 2025, eight key OPEC+ member countries, including Saudi Arabia, Russia, Kazakhstan, and Iraq, will convene to determine June oil production levels. 
This meeting follows their April decision to increase output by 411,000 barrels per day in May, a move that exceeded initial plans to gradually unwind previous production cuts.
Tensions within the alliance flared again last week after Kazakhstan openly stated that “national interests” would take precedence over OPEC+ quota compliance. 
The country’s oil minister emphasised that international oil majors handle a large share of Kazakhstan’s production — companies the government cannot legally force to reduce output. Kazakhstan has consistently failed to meet its targets and has offered so-called compensation cuts over the past year, but there’s little sign these are being implemented. The May production increase was three times larger than initially planned, a move widely interpreted as an attempt to pressure overproducing members, particularly Kazakhstan and Iraq. Now, several members have leaked to the media that a similar acceleration in output is being considered for June.
These developments underscore how fragile the OPEC+ alliance has become. The bloc’s efforts to enforce discipline have largely failed, and the power struggle, especially between Saudi Arabia and Kazakhstan, is escalating. The situation now bears a striking resemblance to the lead-up to Angola’s exit in 2023. It would no longer be surprising if Kazakhstan were next to walk away.
On the geopolitical front, a possible peace deal between Ukraine and Russia, combined with US signals about easing sanctions, could pave the way for more Russian oil, even within the framework of OPEC+ membership. 
We have seen the first data indicating that the risk of a US recession is rising sharply. The Philly Fed Business Outlook Survey showed a significant drop in new orders and overall activity and a decline in industrial employment. Models such as the Atlanta Fed’s GDP tracker, which is based on real-time data, now point to negative US growth in the first quarter. You simply cannot shut down all trade between the US and China without the US seeing higher inflation and slower growth.
The  IEA, EIA, and OPEC released updated oil demand forecasts mid April. All three revised their expectations downward. The IEA and EIA now expect oil demand growth of less than 1 million barrels per day in 2025, while OPEC expects growth of 1.3 million barrels per day.
Finally, there may be progress in talks between Iran and the US, which could delay the sanctions the market currently anticipates, and possibly even lead to some easing of existing sanctions.

Starting 1 May 2025, the Mediterranean Sea will officially become a Sulphur Emission Control Area (SECA) under MARPOL Annexe VI. This designation mandates that ships operating within the region must use marine fuels with a Sulphur content not exceeding 0.10%, a significant reduction from the current global limit of 0.50%.
Alternatively, vessels can employ scrubbers to achieve equivalent emission reductions.
The upcoming SECA zone will, all else being equal, mean less demand for 0.5% VLSFO and more demand for 0.1% MGO, notably in the Med. The incentive to install scrubbers will also boost demand for HSFO.  
The SECA zone is visible in the paper market for gas oil. We have seen that 0.1% Med CIF Cargo Gasoil has traded with a positive diff to the benchmark ICE Gasoil. The same has the 0.1% gas oil (CIF NWE Cargo). Below we are using the April 2025 swap. We expect this diff to normalize over the coming months.  The SECA zone also impacts the marine fuel oil market. We continue to see strong support for HSFO ahead of the summer peak-demand season, and VLSFO remain under pressure. The charts below show the cracks for HSFO and VLSFO in Rotterdam and the HI-5/scrubber spread in Rotterdam and Singapore.