Into The Shadows. The Energy Report 12/01/2025

Ukrainian drone attacks on Russian shadow fleet as well as a commitment by OPEC to maintain current production levels has the market in an optimistic state this comes as global oil demand continues to rise despite the negativity that we continue to hear on the demand side of the equation.

According to Rystad Energy, The Wall Street Journal reports that OEC+’s choice to keep oil production unchanged was driven by geopolitical uncertainties related to major members Russia and Venezuela.

OPEC is closely observing ongoing negotiations to resolve the conflict in Ukraine, as well as rising tensions between the United States and Venezuela, both of which present potential risks to global supply. According to analysts at the firm, “the group acknowledges that market sentiment remains delicate; even minor missteps could prompt significant price movements.” By maintaining flexibility rather than committing to a revised production strategy, OPEC+ retains the ability to respond swiftly should circumstances deteriorate or geopolitical developments unexpectedly constrain supply.

The Journal also reports that OPEC+’s decision to evaluate the maximum sustainable production capacity of its members may generate tensions within the group, according to ING analysts. At its most recent meeting on Sunday, OPEC+ adopted a mechanism to assess production capacity with the aim of establishing output baselines for 2027 and informing future production targets. ING analysts note that this approach has the potential to cause disagreements among members, as countries may seek to secure higher baselines.

In the Black Sea, the oil tankers Kairos and Virat, flying the flags of Gambia and Benin, were heading to Russia’s Novorossiysk port as part of the “shadow fleet.” These ships, carrying no cargo at the time, are part of a group of over a thousand vessels that help Russia move oil while avoiding Western sanctions. Each ship can transport oil worth tens of millions of euros, supporting Russia’s economy and war efforts.

Ukrainian naval drones targeted two tankers, Kairos and Virat, near Ukraine’s coast. The Sea Baby drone hit the Kairos, causing engine damage and a fire that led to crew evacuation by Turkish rescuers. The Virat, previously sanctioned, had its rudder and propulsion system damaged and was towed to Turkey. Both ships were left unusable, with no injuries reported. Russia’s oil operations lost an estimated €60 million due to these attacks, highlighting Ukraine’s advanced drone tactics and the disruption to Russia’s shadow fleet.

Bloomberg reports that an oil tanker carrying diesel was hit by four explosions near Dakar, Senegal, marking the third Russian-linked vessel struck in recent days. The incidents involve ships transporting Russian petroleum; Ukraine’s security service claimed responsibility for two attacks in the Black Sea, though not all have been attributed. Reuters adds that Chevron confirmed crude oil loadings at Novorossiysk continue despite a Ukrainian naval drone attack damaging key equipment.

The attack on the Caspian Pipeline Consortium (CPC), which handles more than 1% of global oil, came as Ukraine stepped up its military operations in the Black Sea and h it two oil tankers, which were heading to Novorossiysk.

These attacks on the Russian oil fleet most likely by Ukraine maybe one of the reasons why there seems to be some more progress between Russia and Ukraine in the ceasefire  talks . Fox News is reporting that Steve Witkoff, the U.S. special envoy to the Middle East, will travel to Moscow on Monday, a U.S. official tells Fox News.

Peace talks between Ukraine and Russia are progressing, with the White House promoting a plan to end the conflict. On Sunday, Witkoff joined Secretary of State Marco Rubio and Jared Kushner in Florida to meet Ukrainian negotiators; Rubio called the meeting “very productive” and emphasized that ending the war is just one objective.

The energy markets are also looking to the weather. Fox Weather is reporting that an Arctic blast ushers in freezing, potentially record cold for 235 million Americans to kick off La Niña winter

Monday is set to be the coldest day of the arctic air outbreak, where temperatures will be subzero across Montana, the Dakotas, Wyoming, Minnesota and Wisconsin. By Friday, the cold will expand from the Midwest all the way to the I-95 corridor, causing record low temperatures in the morning, affecting Pittsburgh, New York, Indianapolis, and Baltimore.

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Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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