The gap between OPEC+ production targets and actual output continues to widen, reaching 3.6 million b/d in August, a whopping 0.7 million b/d month-on-month increase amidst worsening compliance from Russia and Nigeria, OilPrice reported. 

One would be tempted to think that news of ever-increasing OPEC+ underproduction or further Nigerian and Kazakh production outages would have a sizable impact on oil prices, however, over the past 4-5 trading sessions ICE Brent has been immune to the wild volatility seen for most of this year. The reason is that supply/demand no longer dictates the main pricing trends, macro data does, hence all eyes are firmly fixed at the Fed’s upcoming policy meeting this Wednesday. 

Kazakhstan supply woes seem to never end.Producing at reduced rates since early August, the supergiant Kazakh field Kashagan will not return to full production capacity until at least October, according to the country’s energy minister, struggling to contain an earlier gas leak.Nigerian oil output forecast remains dire. Just as Nigeria’s oil production dropped to a multi-decade low of 1.18 million b/d last month amidst sabotage and oil theft, output is set to drop even lower as the 225,000 b/d Bonga field will be shut for maintenance in October. 

The major shifts in oil trade flows seems to be triggering a new form of upheaval, with tanker freight rates ballooning on low vessel availability amid increasingly longer supply routes. Following the recent Aframax and Suezmax freight surges, chartering demand has shifted to VLCCs, pushing freight rates to the highest level since May 2020, with daily earnings above $45,000 in all trading regions. 

According to Platts, monthly VLCC shipments are set to surge 26% in Q3 to 135 loadings as conducive arbitrage is beckoning US, Middle Eastern and Western African exporters alike to target Asia. For a U.S.-to-China VLCC delivery the lumpsum prices have soared to $10.7-10.8 million, equivalent to $5.1-5.2 per barrel, yet even at this level it is still more profitable than chartering a Suezmax.