Monday trading hours in observance of the Martin Luther King Jr. holiday.
Energy markets trade from Sunday at 5:00 pm CT through Monday at 1:30 pm CT with a halt, then resume Monday at 5:00 pm CT.
Energy prices are mixed this morning with crude and gasoline lower and diesel trading higher. A ceasefire deal between Israel and Hamas to pause the war in Gaza, and release hostages was made yesterday. The three-phase agreement is set to begin Sunday, but many details and the timeline are still unclear. The ceasefire has already had its first hiccup just hours after it was agreed to. Israel has since delayed a cabinet vote blaming Hamas for defaulting on parts of the agreement and initiated airstrikes in Gaza. The ceasefire deal could add stability to the Middle East between Israel and Hamas and hopefully Iran.
Diesel prices remain the strongest in the complex, as an arctic blast is forecast to surge through all 48 states in the coming days, which should increase heating oil demand. Temperatures will be as low as -20 to -30F, with wind chills as low as 40 below. The cold snap is expected to reach as far south as the Gulf Coast, with low temperatures in Houston in the 20s, meaning a hard freeze is possible. Any reduction in refinery output in the Gulf Coast could strengthen basis prices in the Group region.
Canada has drafted a list of U.S. goods worth $105 billion that it could tax with tariffs if the U.S. imposes tariffs on Canada. 12 of 13 Premiers of Canadian Provinces agreed to a statement saying they would “work together on a full range of measures to ensure a robust response to possible US tariffs.” Alberta Premier Daniella Smith stated she would not agree to the idea of taxing or reducing energy exports.
Crude
- Yesterday’s crude settlement was the highest since August 12.
- The 3:2:1 crack spread is currently just above $17 and has been rangebound between $15-$20 since late August.
- US crude inventories are currently 6% below the seasonal five-year average.
- The premium to ship Russian ESPO crude to China has more than tripled this week to $5-$5.5mn, compared to 1.5mn before US sanctions.
- In their monthly report, OPEC+ left its 2025 crude demand forecast unchanged at 1.45 million bpd and released its 2026 crude demand growth forecast of 1.43 million bpd.
- OPEC+ production fell by 1.2 million bpd year-over-year in 2024 to 40.8 million bpd.
- As of 8:55 am CST: Brent crude oil is down $0.43 to $81.60, the US dollar index is up 0.154 to 109.070 while the nearby e-mini S&P 500 futures contract is down 4.00 at 5985.00.
Diesel
- Diesel demand is currently 3.5% above the five-year seasonal average.
- Diesel inventory is currently 4% below the five-year seasonal average.
- The heat crack spread continues to strengthen and has moved above $30 for the first time since March.
Gasoline
- Gasoline demand is currently 5% above the five-year seasonal average.
- Gasoline inventory is in line with the five-year seasonal average.
- The gas crack spread slipped below $10 earlier this week and is sitting just below $10.50 this morning.
- Line 1 of the Colonial Pipeline is expected to resume service tomorrow.
Propane
- Conway is trading at .9875 while Belvieu is trading at .9725.
- Conway Swap Q4-Q1 25/26 strip indicative midpoint ~.8155.
- Conway propane is trading at 52% to WTI.
Natural Gas
- Overnight weather runs came in relatively unchanged, removing ~1 HDD from the two-week forecast. (GS)
- The EIA is expected to report a 251 Bcf draw from storage for the week ended January 10th, which would be larger than the 128 Bcf historical five-year average withdrawal for this week. (Platts)
- Prompt natural gas futures settled yesterday at the highest level since January 4, 2023.
Prompt Conway OPIS Swaps: Prompt Conway propane prices are trading at the highest level since September 2022. Expect prices to continue to strengthen as frigid temperatures will boost propane demand over the next week. Terminal allocations, outages, and significant wet barrel premiums are not out of the ordinary during cold snaps like the one expected.
