Outlook: Energies have quickly erased the gains established in the first two sessions of the week with sentiment quickly turning bearish again. Both macroeconomic and geopolitical developments in the latter half of the week have been bearish with inflation running hot and the US and Russia engaging in talks to end the war in Ukraine. The Producer Price Index for January was released this morning and followed yesterday’s CPI print with a higher-than-expected reading. The PPI provides a measure of the prices paid to US producers of goods and services and is used as an indicator for wholesale inflation. The CPI index is a measure of prices paid by consumers. In geopolitics, President Trump spoke with both Russia and Ukraine, expressing optimism that both sides are looking for peace. This narrative caused energies to slide yesterday and may again be impacting prices today. On the other side of geopolitical sentiment, the clock is ticking for the release of Israeli hostages by Hamas. Israel has said the ceasefire agreement will end if hostages aren’t released. Another round of sanctions from the US is expected to be announced around noon today which could provide additional influence.
Crude
- President Trump spoke with President Putin and President Zelenskiy this week with efforts beginning to end the war. (BBG)
- President Trump is expected to announce reciprocal tariffs today, but it remains unclear which countries will be targeted and what exemptions will be given. (BBG)
- The IEA released its monthly report today which lowered their expected supply surplus for 2025 to 450,000 bpd. This is 50% lower than their forecast 2 months ago.
- The IEA increased its 2025 global oil demand forecast by 100,000 bpd to 1.1 mbpd.
- The IEA sees Russia’s oil out flat at 9.3 mbpd in 2025 despite ongoing sanctions.
- The WTI prompt spread traded to a low of 5 cents. The market hasn’t traded in Contango since November.
- The EIA reported crude stocks rose 4 million barrels last week vs +2.4 mb est.
- US January PPI followed the CPI with higher than expected readings this morning. Headline PPI rose 3.5% y/y vs 3.3% est. while core PPI rose 3.6% vs 3.3% est.
- As of 8:00 am CST: Brent crude oil down $0.89 to $74.28, US dollar index down $0.161 to 107.777 while the nearby e-mini S&P 500 futures contract up 10.25 to 6083.00.
Diesel
- The EIA reported diesel stocks rose 135,000 barrels last week vs -900 kb est.
- 4-week average diesel demand fell just 1% despite a near 20% decline in weekly demand.
- Prompt HO spread traded to a low of 5.42 cents this morning.
- Group 3 basis +1.75 to -21c.
- Chicago diesel basis flat at -20c.
Gasoline
- The EIA reported gasoline stocks fell 3 million barrels last week vs +1.4 mb est.
- Both weekly and 4-week average gasoline demand rose last week.
- The API survey showed gasoline stocks fell 2.5 million barrels last week.
Propane
- Prompt Conway futures are indicated at .9175 while Belvieu is trading at .9250.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8300.
- Conway propane is trading at 54% to WTI.
- The EIA reported propane stocks fell 2.5 million barrels last week vs -2.9 mb est.
Natural Gas
- Overnight weather runs added 13 HDDs through the two-week forecast.
- HDD’s have been added for four consecutive days.
- Dutch TTF is finding pressure as talks between the US and Russia develop.
- Reuters estimates natural gas stocks fell between 91 and 107 Bcf last week.
- The EIA will report inventories tomorrow morning at 9:30 am CT.
Continuous Daily WTI Prompt Spread: The difference between the front two crude contracts is converging on parity this week. A shift back to Contango would be a bearish fundamental development.
