Daily Energy Market Update 2-25-2025

Crude is down 58 cents????? April RB is down 0.38 cents?????? April ULSD is up 6 ticks

Overview

The following Platts headline says it best :" Crude wavers amid uncertain impact of geopolitics." Crude oil is lower now after attempting to rally overnight on the back of sanctions against Russia and Iran imposed by the EU and the U.S.? The rally in crude may be stifled by the talks between the U.S. and Russia aimed at halting the Ukraine war and the possible return of some Iraqi supply.

The EU has confirmed sanctions on some of Russia's largest oil ports and announced a full ban on Russian oil storage at EU ports on the third anniversary of Russia’s invasion of Ukraine. Separately, the EU has banned the storage of Russian crude oil and petroleum products in EU ports under all circumstances, according to the bloc. Such storage was allowed then the oil was sold within the price cap and shipped to non-EU countries later. (Platts)

Washington has imposed new sanctions on oil brokers, ships and people it said were linked to illicit shipments of Iranian crude. The new sanctions target the United Arab Emirates and Hong Kong, tanker operators and managers in India and China, the head of Iran's National Iranian Oil Company, and the Iranian Oil Terminals Company, Treasury said.? China does not recognize U.S. sanctions and Chinese firms buy the most Iranian oil. China and Iran have built a trading system that uses mostly Chinese yuan and a network of middlemen, avoiding the dollar and exposure to U.S. regulators.

The IEA? believes Saudi Arabia, the United Arab Emirates and other OPEC members have spare capacity to make up for any lost exports from Iran. (Reuters) This morning, an Iranian official,? in a press conference,? said that they would not have direct negotiations with the U.S. on nuclear issues. Bloomberg commentary adds: "A refusal to have discussions with the US could embolden the Trump administrations push for a maximum pressure campaign and clamp down on Iranian oil flows."

On the production side, Iraq has said it will submit an updated OPEC+ compensation plan as exports through the long-halted Iraq-Turkey pipeline in the semi-autonomous Iraqi Kurdistan region are expected to resume soon. Momentum to reopen the pipeline has gathered steam after the US reportedly ordered Iraq to resume exports or risk the threat of sanctions as US President Donald Trump looks to resume his "maximum pressure" campaign on Iran. A resumption of Kurdish crude exports could potentially help offset any loss of Iranian barrels and prevent a price spike.? (Platts)

President Trump has doubled down on the 25% tariffs against Canadian and Mexican imports, asserting that they would come into effect after their monthlong suspension ends March 3. (Platts) This is seen as possibly supporting U.S. crude prices as domestic U.S. crude would be needed if imports are lost due to tariffs.

A Reuters analyst has detailed the money managers positions in WTI and Brent and sees a stark difference. "Investors have become exceptionally bearish about WTI even as they remain broadly bullish about Brent, after the tariff conflict foreclosed the option of delivering U.S. origin crude to refiners in China. Funds have cut their net long position to an extremely bearish 72 million barrels (4th percentile) in WTI compared with a still bullish 265 million (67th percentile) in Brent."

Technicals

Momentum for the WTI on the DC chart and the RB on the April daily chart are negative, while that for the ULSD on its April chart is neutral.

WTI spot futures see support at 69.33-69.36 and then at 68.42-68.44. The lower bollinger band on the DC chart lies above the chart support. The band intersects at 69.67. Resistance comes in at 71.44-71.51 and then at 72.02-72.07.

April RB support is seen at 2.2317-2.2322. There is currently a double bottom from yesterday/today at 2.2508/2.2493. The lower bollinger band on the April chart intersects at 2.2478. Resistance is seen at 2.2833-2.2851 and then at 2.3001-2.3009.

The April ULSD chart looks the most supportive of the energies seeing as prices remain well above recent lows, while the WTI and RB are trading the past 2 days at their lowest values in weeks. April ULSD sees support at 2.3463-2.3472. Resistance comes in at 2.4210-2.4218.?

Natural Gas-- April NG is up 4.2 cents

NG prices are a little higher today, but the contract is having an inside trading day versus yesterday's price range. The market is likely being torn in both directions. Supportive is the continued widening of the storage deficit expected over the coming weeks, which is offset by the warmer weather forecast for early March seen over the weekend and the peak winter demand now behind us. One analyst quoted in WSJ commentary today says : "Some opportunistic buying overnight and profit-taking by short sellers have us up slightly this morning,".

Today is the last trading day for the March LN/NG options. Open interest data from the CME shows a number of options strikes with more than 10,000 contracts. These are the $3.75, $3.80, $4.00 and $4.25 calls. On the put side, the $3.75, $3.90 and $4.00 strikes have more than 10,000 contracts in open interest. Combined puts and calls, the $3.75 strike has nearly 30,000 contracts of open interest, while the $4.00 strike has over 37,000 contracts of open interest.?

Large trades were seen yesterday in the May call options. The $6.90/$6.95 and $6.90/$7.00 call spread traded 5,000 contracts each at a price of 0.1 and 0.2 cents. Today, the May $6.00/$6.05 and $6.70/$6.75 call spreads have traded in size at respective prices of 0.1 and 0.2 cents.

?In a bullish longer-term factor for natural gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. (Nasdaq.com)

Global demand for liquefied natural gas is estimated to rise by around 60% by 2040, driven largely by economic growth in Asia, AI impact and efforts to cut emissions in heavy industries and transportation, Shell said in an annual report on Tuesday. Shell raised their LNG demand outlook for 2040 by 0.8 to 4.8% from last year's forecast. "Upgraded forecasts show that the world will need more gas for power generation, heating and cooling, industry and transport to meet development and decarbonisation goals,” Shell adds in the report. (Reuters)

The Henry Hub (HH) next day cash price has retreated dramatically from that seen late last week. The Hub price is quoted today $3.90 bid versus an offer at $3.95. This is down significantly from the values of $6 to $8 seen last week. Thus, the cash premium over the futures of over $1.50 to $3.50 has fallen to a discount with March and April futures printing near $4.02/ $4.03 against the current HH quote.??

LSEG forecast average gas demand in the Lower 48 states, including exports, will fall from 127.5 BCF/d this week to 119.5 BCF/d next week. These forecasts are down a total of 3.8 BCF/d from those seen Friday. The estimate for next week is down 3.4 BCF/d from Friday.

Yesterday we failed to mention the following when giving the CFTC data re money managers' positioning. A Reuters analyst says : " Investors have amassed the largest net long position in U.S. gas futures and options for almost eight years. Funds have purchased gas in 13 of the most recent 15 weeks. Bullish long positions outnumbered bearish short ones by a ratio of more than 3.3:1, the highest for almost four years, confirming the strong bullish sentiment."

Technically, there is still the gap to fill on the DC chart from 4.090 up to 4.148. April's momentum is negative. Support lies at the overnight low at 3.931-3.935 and then at 3.875. Resistance comes in at 4.075-4.076 and then at 4.163-4.165.

Disclaimer

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