Outlook: The energy complex is on track for its third consecutive weekly decline barring a sharp move higher today. Crude futures have fallen below several key moving averages this week but didn’t quite have the bearish fuel to test $70. Refined product charts look more supportive but could be at risk of a breakdown if weakness persists next week. Tariff decisions were a key driver this week. Mexico and Canada saw tariffs be pushed back a month after making commitments to strengthen border security. China, however, did see tariffs imposed and offered retaliatory tariffs back toward the US. While China isn’t a key contributor to US energy trade, they are a key global oil demand driver and a trade war could provide economic headwinds. Iran was thrown into the mix this week with the Trump Administration reintroducing its maximum pressure campaign which could result in a heavy blow to Iranian crude exports. The first round of sanctions announced yesterday were light, but expect these measures to ramp up, especially if oil prices remain subdued.
Crude
- The US Treasury said yesterday it was imposing new sanctions on individuals and tankers helping ship Iranian crude to China.
- Iran’s Supreme leader Khamenei said last night that talks with the US on a new nuclear deal would be unwise and dishonorable following the sanctions. (BBG)
- Oil tanker costs to carry Russian Urals to Asia have risen nearly 50% since the US imposed another round of sanctions on January 10th. 265 tankers are now blacklisted by the US, EU, and UK.
- The prompt crude spread has fallen over 30 cents this week with last trade around 25 cents.
- US January nonfarm payrolls were reported at 143k vs 170k est.
- As of 8:34 am CST: Brent crude oil up $0.61 to $74.90, US dollar index up $0.105 to 107.794 while the nearby e-mini S&P 500 futures contract up 4.25 to 6109.00.
Diesel
- The prompt diesel crack has risen over $2 this week as it settles in above $30.
- Rack basis discounts continue to trend favorably for storing product ahead of demand season. Group spot basis is trading around -22 cents.
- Prompt HO spread is trading around +5.5 cents.
Gasoline
- The prompt RBOB crack has risen nearly $2.50 this week with last trade around $16.33.
- The March-April RBOB spread, which captures the RVP change, is trading around -22.5c today.
Propane
- Prompt Conway futures are indicated at .8925 while Belvieu is trading at .9175.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8150.
- Conway propane is trading at 54% to WTI.
- Weather models have shifted colder this week which could support propane demand throughout the Midwest though the end of the month.
- The Dakotas and west are expected to experience colder than average weather with models normalizing to the East.
Natural Gas
- Overnight weather runs added 9 HDDs through the two week forecast.
- Europe is expected to receive LNG from Australia for the first time since November 2022. (BBG)
- The EIA reported natural gas stocks fell 174 Bcf last week. Natural gas stocks are 4.5% below 5-year average levels.
Continuous Daily HO: The 50 DMA has crossed above the 200 DMA which is known as a Golden Cross technical pattern and is viewed as a bullish indication.
