Energies prices are lower this morning but continue to trade near five-month highs following the announcement of U.S. sanctions on Russia’s energy industry. According to analysts, the sanctions could remove 700,000-800,000 bpd of Russian crude from the market. The supply constraint concerns have driven prompt prices considerably higher than values down the curve. The prompt WTI contract was trading at a premium of 63 cents to the second month to start the year. Once the sanctions news broke, the premium jumped to as high as $1.52 between the two contracts amid tightening crude balance expectations. If Russian sanctions do move forward for a significant time after the Administration change next week, that opens the door for OPEC to start adding back some of the 5.86 million bpd it’s currently holding from the market. There could be a few months of tight supply initially before the cuts begin to unwind. However, the inauguration next week could change the geopolitical landscape surrounding Russia moving forward and will be something to watch closely. Expect some volatility in the coming weeks as traders anticipate how the Administration change will impact markets in 2025 and beyond.
Crude
- YoY December PPI data was reported at 3.3%, below estimates of 3.5%.
- YoY December Core PPI data was reported at 3.5%, below estimates of 3.8%.
- Oil tanker rates surged yesterday, rising by about 39%, the largest increase since August 2023 due to sanctions on hundreds of vessels.
- Chinese refineries are reportedly sending out “urgent inquiries to buy crude for prompt delivery” to get ahead of tightening crude supply from sanctions. (BBG)
- India reported plans to reject sanctioned tankers but would continue to accept delivery of all cargoes booked ahead of the restrictions and delivered before March 12. (BBG)
- Alberta Premier Danielle Smith after meeting with President-elect Donald Trump stated that Canada needs to prepare for 25% tariffs from the US, with no exemptions for oil.
- Before new US sanctions were brought forth against Russia last Friday, Russian refineries posted a new lowest level of crude refining throughput since mid-November. (BBG)
- The Commitment of traders showed NYMEX WTI crude net length increased by 50.8k lots through last Thursday, driven by an increase in long positions of 40K lots, and a decrease in short positions by 10.8K lots.
- Hamas has accepted a draft agreement for a Gaza ceasefire and the release of hostages. (AP)
- Reuters estimates US crude stocks fell by 3.5 million barrels last week.
- As of 9:20 am CST: Brent crude oil is down $1.00 to $80.01, the US dollar index is down $0.522 to 109.290 while the nearby e-mini S&P 500 futures contract is up 18.00 at 5892.50.
Diesel
- The commitment of traders showed NYMEX heating oil net length increased by 2.8k lots with an increase of 1.446k long positions and a decrease of 1.308k short positions.
- Reuters estimates US distillate stock fell by 1 million barrels last week.
- Diesel basis values in the Group market of -.3550 are well below the five-year average of -.1800 for this time of year.
- Diesel basis values in the Chicago market of -.4100 are well below the five-year average of -.2200 for this time of year.
Gasoline
- The Commitment of traders showed NYMEX gasoline net length increased by only 28 lots with an increase of 3,023 long positions and a reduction of 2,995 short positions.
- Reuters estimates US gasoline stock rose by 2.67 million barrels last week.
- Group and Chicago gasoline basis values are right in line with five-year seasonal averages.
Propane
- Conway is trading at .9450 while Belvieu is trading at .9075.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.7988.
- Conway propane is trading at 49% to WTI.
Natural Gas
- Overnight weather runs came in net bearish, removing over 8 HDDs from the two-week forecast (GS)
- US natural gas production has fallen by 4.2 Bcf/d since late December, with Appalachia accounting for 1.5 Bcf/d of the fall in output. (GS)
- January has been exceptionally cold with residential-commercial gas demand averaging 52 Bcf/d, a six-year high and 10 Bcf/d above the five-year average. (Platts)
