Outlook: Energies are hot out of the gate again here this morning as the market continues to digest the magnitude of the recent Russian sanctions. Goldman Sachs sees that 25% of Russia’s total crude exports will be under sanction relative to 2024 data. While OPEC+ has spare capacity, they aren’t scheduled to increase production until March which could allow for a window of tightness. Growing compliance from both China and India will be a key dynamic in the overall effectiveness of these new measures. Energies remain mostly in overbought territory across the board while the US dollar surpassed 110 which could provide a headwind from here. A delayed Commitment of Traders report released later today should give perspective to the managed money view through last Tuesday which will encompass the weather driven rally during that period.
Crude
- On Friday, the US Office of Foreign Assets Control (OFAC) imposed sanctions on over 300 entities, vessels, and individuals engaging in Russian oil movements.
- Goldman Sachs estimates that vessels targeted by the new round of sanctions transported 1.7 mbpd of oil in 2024, or 25% of Russia’s total exports.
- Compliance between India and China will be a key factor in the effectiveness of these new sanctions.
- OPEC+ is currently cutting 5.86 mbpd of oil production from the market.
- Last Friday, US treasury yields rallied with the 30-year bond yield trading above 5% for the first time in over a year.
- The US dollar is trading above 110.000 for the first time since November 2022.
- Baker Hughes reported net oil rig counts fell be 2 to 480.
- The Commitment of Traders report will be released today. The WTI long/short ratio prior to the report is ~3.88/1.
- As of 8:02 am CST: Brent crude oil up $1.10 to $80.86, US dollar index up $0.200 to 109.850 while the nearby e-mini S&P 500 futures contract down 42.25 to 5824.00.
Diesel
- An aggressive upside target for HO could be $2.66 if cold weather continues to provide support.
- Backwardation in the futures continues to expand with the bullish rally.
- Basis values continue to trend lower with Chicago diesel basis falling over 7 cents on Friday.
- Feb-Jun HO is Backwardated ~17 cents.
- Continuous HO is trading above its upper Bollinger band with a 14-day RSI value of 79. A value above 70 is considered overbought.
Gasoline
- Feb RBOB closed above its 200-day moving average on Friday.
- Continuous RBOB is trading up against its upper Bollinger band with a 14-day RSI value of 66.
Propane
- Prompt Conway futures are trading at .8775 while Belvieu is trading at .8800.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7950.
- Conway propane is trading at 46% to WTI.
Natural Gas
- Weekend weather runs added 9 HDDs through the two week forecast.
- China’s coal imports rose by 14.4% in 2024 to a record high 542.7 mmt.
- Baker Hughes reported natural gas rigs fell by 3 to 100 last week.
Russian Oil Sanctions:
