Outlook: The energy complex is chopping around again this morning and has already traded both sides. The market is either settling in after a two week stretch of elevated volatility or is reluctant to find direction given the uncertainty with tariffs this weekend. Trump has made it clear that border security is a driver behind the proposed tariffs which may leave an opportunity for collaboration to delay or lessen the severity. If the tariffs come to fruition, it’s reasonable to expect higher prices with refiners experiencing some level of higher costs, especially in the Midwest which relies of heavy crude processing. While Canada is the focus because of how much oil we import from them, we also import around 400,000 bpd of oil from Mexico which shouldn’t be discounted. President Trump is expected to announce another round of executive orders today around 2:00 pm. OPEC+ is scheduled to meet on Monday and will discuss the shifting fundamentals with the Trump presidency among other topics.
Crude
- President Trump’s commerce pick said Mexico and Canada can avoid tariffs by securing their borders before February 1st.
- The WCS-WTI spread narrowed to $13.75 from a low of $15 earlier in the day.
- Shell reported a fourth-quarter profit of $3.66 billion, missing estimates, on lower refining margins and lower LNG trading.
- OPEC is scheduled to meet on February 3rd and will discuss Trump’s goal of increasing domestic production.
- The EIA reported crude stocks rose 3.5 million barrels last week.
- US crude production fell 237,000 bpd last week to 13.2 mbpd.
- Refinery run rates are at a deficit to the 5-year average at 83.5% as of last week.
- The Fed left interest unchanged as expected yesterday.
- Q4 GDP was reported at 2.3% vs 2.5% est.
- The ECB cut rates by 25 bps today.
- As of 9:06 am CST: Brent crude oil up $0.31 to $76.89, US dollar index down $0.223 to 107.777 while the nearby e-mini S&P 500 futures contract up 16.25 to 6084.00.
Diesel
- The EIA reported diesel stocks fell 4.9 million barrels last week vs -2.3mb est.
- US diesel demand rose to nearly a 5-year seasonal high last week at 4.5 million bpd.
- Friday is LTD for February HO.
Gasoline
- The EIA reported gasoline stocks rose 2.9 million barrels last week vs +1.3mb est.
- The prompt RBOB crack is up over a dollar this week with a high of $14.
- Friday is LTD for February RBOB.
Propane
- Prompt Conway Swaps are indicated at .8825 while Belvieu is trading at .8975.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.7925.
- Conway propane is trading at 51% to WTI.
- OPIS estimates propane stocks fell 4.4 million barrels last week.
Natural Gas
- Overnight weather runs removed 6 HDD through the two-week forecast.
- From the weekend through today, 49 HDDs have been removed from the two week forecast.
- Reuters estimates nat gas stocks fell between 308 and 332 bcf last week.
- Continuous NG gapped lower with the expiration of the February contract yesterday.
Continuous Daily WTI:
