Outlook: It’s looking to be another strong week for the energy complex with oil prices on track for a fourth consecutive weekly gain. Energies have shown resistance to any type of corrective move through two rallies this month and that trend looks to continue. A ceasefire deal in the Middle East and a pause in Houthi attacks in the Red Sea has caused a reason for pause today but convincing selling pressure remains absent. President-elect Donald Trump’s advisors are reported to be crafting a sanction strategy to facilitate a Russia-Ukraine diplomatic accord in the coming months to add to the theme of de-escalation. Monday is inauguration day which has been an event cited by many to remain on the sidelines and reduce exposure. Next week could be susceptible to heightened volatility as talk gets put into action and that action gets weighed against expectations.
Crude
- Oil prices are on pace for a fourth consecutive week of gains.
- US Secretary of State Antony Blinken said he expects a ceasefire deal to come into force starting Sunday January 19th.
- Yemen’s Houthi militia is expected to halt attacks on ships in the Red Sea ahead of the ceasefire deal.
- China and India have requested as much as 750,000 bpd of extra crude supply from Saudi Aramco as they search for alternatives to Russian oil.
- China’s refinery throughput fell by 1.6% in 2024, which was the first decline in over two decades.
- China reported they hit their 5% growth target for 2024 with real GDP rising 5.4% y/y.
- Baker Hughes will report rig counts at 12:00 pm CT.
- As of 9:12 am CST: Brent crude oil down $0.17 to $81.12, US dollar index up $0.083 to 109.039 while the nearby e-mini S&P 500 futures contract up 53.25 to 6029.00.
Diesel
- Cold continues to provide premium to diesel with another wave moving through next week. Warmer revisions have developed in the extended forecast, however.
- Group basis has risen ~10 cents over the last few days to -34c. Futures backwardation is holding strong with Feb-Jun trading around +21.50c
- The July high of $2.6595 remains an upside target.
Gasoline
- Summer RBOB-HO spreads have remained relatively resilient despite prompt disparity. The July RB-HO is trading near -6c, which is down around 2 cents on the month.
Propane
- Prompt Conway futures are trading at .9675 while Belvieu is trading at .9700.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8150.
- Conway propane is trading at 52% to WTI.
Natural Gas
- Weekend weather runs added 1 HDDs through the two week forecast.
- The EIA reported natural gas stocks fell by 258 Bcf last week.
- Inventories remain above the 10-year average by 151 Bcf, which is down from 634 Bcf in March. Stocks are now at a deficit to last year’s levels.
Feb-Jun HO: The backwardation in this 5-month spread has more than doubled since the start of January. Backwardation disincentivizes storing product however steeper Contango in basis values are overpowering the futures structure.
