Energies are trading higher this morning and sanctions leading to diminished crude supply is the main driver. Earlier this week, the European Union ambassadors agreed to a 15th package of sanctions on Russia targeting its shadow tanker fleet. The sanctions package is likely to be formally adopted at a meeting on Monday and will target close to 30 entities, over 50 individuals, and 45 tankers. The U.S. followed closely with the report they may look to add sanctions on Russian crude exports. Additionally, Britain, France, and Germany told the UN Security Council they are ready -if necessary – to trigger additional sanctions on Iran to prevent the country from acquiring a nuclear weapon (Reuters). According to Bloomberg, Canada is considering export taxes on various commodities to the U.S. in response to incoming President Trump’s proposed tariffs. The commodities being considered include uranium, oil, and potash.
Barring a sharp decline, energies are set to close the week higher for the first time in three weeks. Despite the recent rally, a crude supply surplus is expected in 2025 and demand is forecasted to remain soft. Keep your diesel and gasoline tanks full as basis values remain weak. Look to layer in diesel length for spring and fall of next year with physical contracts or by purchasing futures. If you are satisfied with current contract prices but your end users are not yet ready to purchase, buy a fixed forward contract for physical delivery and sell futures for downside protection until you sell to the end user.
Crude
- Intra-day WTI crude futures reached the highest level this morning since November 25.
- WTI crude futures moved through the 50-day moving average, setting a new level of support at $70.26.
- Spot crude futures prices are $3.16 above the five-year seasonal average.
- The Brent-WTI spread is sitting at $3.31 this morning, a significant reduction from the $4.94 spread on November 29.
- The UAE reduced crude allocations to Asian customers by 230K bpd for January through February. (BBG)
- Saudi Aramco will provide 46 million barrels of contractual supplies in January to China, compared to 36 million in December. (BBG)
- Crude call options were at a premium to puts for the first time since mid-November, with implied volatility also increasing. (BBG)
- As of 9:10 am CST: Brent crude oil is up $0.53 to $73.94, the US dollar index is up $0.071 to 107.030 while the nearby e-mini S&P 500 futures contract is up 9.50 at 6070.25.
Diesel
- Diesel futures are trading higher for the fifth straight day and have gained over 12 cents or 6% on the week.
- Diesel futures traded through the 100-day moving average setting a new level of support at $2.2381.
- Spot diesel futures prices are 10 cents below the five-year seasonal average.
Gasoline
- Gasoline futures are trading higher for the fifth straight day and have gained over 9 cents or 5% on the week.
- Gasoline futures traded through the 20-day moving average establishing a support level at $1.9810.
- Spot gasoline futures prices are 4 cents above the five-year seasonal average.
Propane
- Conway is trading at .7300 while Belvieu is trading at .7750.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7434.
- Conway propane is trading at 44% to WTI.
Natural Gas
- Overnight weather runs came in net bullish, adding 8 HDDs to the two-week forecasts, equivalent to a 6 Bcf increase in net implied demand. (GS)
- The EIA reported a 190 Bcf draw from U.S. natural gas storage, higher than the Platts’ forecast of 165 Bcf.
- Spot natural gas prices closed at the highest level since November 2023.
Spot natural gas futures: Spot natural gas futures settled yesterday at the highest level since November 3, 2023. Despite the price increase of almost 40 cents this week, spot natural gas futures are still 44 cents below the five-year seasonal average.
