Energies prices are higher this morning as Russian sanctions remain the main catalyst. According to Bloomberg, Russia’s crude customers in Asia were reported to be approaching OPEC+ counterparts in the Middle East, requesting additional barrels to prepare for a potential supply gap due to US sanctions. Conversely, Russian tankers are running into challenges offloading their cargoes around the world. The International Energy Agency (IEA) released its monthly report this morning and alluded to how the full potential of the sanctions remains uncertain but could significantly disrupt oil supply chains. However, the IEA still suggests the global crude market will be in surplus this year with supply growth led by non-OPEC+ countries. The IEA also made minor revisions to its forecasts, reducing its 2025 global oil demand growth from 1.1 million bpd to 1.05 million bpd. The agency also lowered its 2024 demand growth to 940K bpd.
In addition to the IEA report this morning, the EIA released its January Short-Term Energy Outlook yesterday and OPEC released its monthly report this morning. Key takeaways from the EIA report include downward pressure on global oil prices over the next two years as production will outpace demand, due to OPEC+ unwinding production cuts and strong production from non-OPEC+ countries. Global production of liquid fuels is expected to increase by 1.8 million bpd in 2025 and 1.5 million bpd in 2026, while global consumption is expected to grow by 1.3 million bpd in 2025 and 1.1 million bpd in 2026. WTI prices are expected to average $70 per barrel in 2025 and $62 per barrel in 2026. OPEC remains more bullish and projects global crude growth of 1.45 million bpd in 2025, and 1.43 million bpd in 2026.
CPI data released this morning was in line with expectations, while core CPI data was below expectations. Upon release, equity futures markets moved significantly higher, and the dollar fell quickly. These reactions led the way for energy prices to move higher.
Strength in gasoline futures can be attributed to the Colonial Pipeline shutting its main gasoline artery, which moves gasoline from the U.S. Gulf Coast to the East Coast. The pipeline has been shut since Monday night due to a potential spill in Paulding County, Georgia. Line 1 moves around 1.5 million barrels of gasoline daily from Houston, Texas to storage tanks in Greensboro, North Carolina, from where it is distributed locally or pumped to Northeastern markets to New York Harbor. No timeline has been announced for when Line 1 will restart but a major gasoline supply disruption is not expected.
Crude
- Sources citing the API reported a crude draw of 2.6 million barrels.
- Sources citing the API reported a Cushing crude build of 573,000 barrels.
- YoY December CPI data was reported at 2.9%, in line with expectations of 2.9%.
- YoY December Core CPI data was reported at 3.2%, below expectations of 3.3%.
- As of 9:00 am CST: Brent crude oil is up $1.08 to $81.00, the US dollar index is down $0.550 to 108.550 while the nearby e-mini S&P 500 futures contract is up 101.00 at 5983.25.
Diesel
- Sources citing the API reported a diesel build of 4.88 million barrels.
- The heat crack spread exceeded $29 this morning for the first time since April.
- The EIA expects US retail on-road diesel prices to average 3.66 in 2025 and 3.64 in 2026.
Gasoline
- Sources citing the API reported a gasoline build of 5.39 million barrels.
- The gas crack spread is around $11.30 this morning, still near the lowest level since October of last year.
- The EIA expects US retail gasoline prices to average 3.20 in 2025 and 3.00 in 2026.
Propane
- Conway is trading at .9575 while Belvieu is trading at .9350.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.8028.
- Conway propane is trading at 49% to WTI.
Natural Gas
- Overnight weather runs came in net bullish, adding almost 7 HDDs from the two-week forecast, equivalent to a 7 Bcf increase in net implied demand. (GS)
- The EIA’s Short-Term Energy Outlook forecasted natural gas supply and demand will rise to record highs in 2025.
- Russia launched a series of missiles and drones at natural gas infrastructure and other energy facilities in Ukraine, but no outages were reported. (Reuters)
