Daily Energy Market Update 2-7-2025

Crude is up 37 cents???? RB is up 0.27 cents????? ULSD is up 0.32 cents

Overview

The energies are higher today as new sanctions are being imposed on Iran by the Trump administration.

The U.S. Treasury said on Thursday it was imposing new sanctions on a few individuals and tankers helping to ship millions of barrels of Iranian crude oil. The U.S. is saying that an illicit international network is facilitating the shipment of millions of barrels of crude to China. The sanctions target entities and individuals in China, India and the UAE, as well as several vessels, according to the Treasury Department. The French bank Societe Generale projects that Iranian oil exports are set to halve, while RBC market analysis says that any impact from the latest US sanctions on Iran is likely to be lagged and not have much initial bite.

Iranian crude oil exports currently stand at about 1.5 MMBPD with the majority going to China. The loss of such a volume, equal to about 1.4 percent of the total world supply, would be significant for markets, as per Al Jazeera reporting. But, analysts also said that any successful U.S. policy to slash Tehran's oil revenues to zero, as threatened, would need support from the wider OPEC group, which is by no means guaranteed.(Reuters/Dow Jones/Quantum Commodities)

The Russian Urals prices has fallen below the $60/bbl price cap for the first time since December, Bloomberg said, with Argus data showing discounts as high as $16/bbl following US sanctions announced in January. The gap hasn’t been that wide since May. With buyers in India and China wary about dealing with the ships, that’s supported rates for the vessels still willing to move Moscow’s oil — effectively adding to delivery costs, Bloomberg adds. Below-$60-a-barrel prices — conforming with the cap set by Group of Seven nations — will in theory enable Russian exporters to use western services like tankers and insurance, provided traders vouch for the barrels having been purchased below that threshold.

Already about 720 MBPD of refinery capacity is offline in northwest Europe, according to data compiled by Bloomberg. Permanent plant closures in the region, including in Scotland and Germany, are also looming. This has contributed to some of the price weakness seen in physical light crude in Northwest Europe , as per the Bloomberg report. Production of Kazakh crude is expected to gain by 300 MBPD after the completion of expansion at the Tengiz field, led by Chevron Corp. Meanwhile, Norwegian oil giant Equinor ASA’s new field Johan Castberg will start pumping soon, potentially adding another 100 MBPD or more. The nearest Brent futures contract is registering its smallest premium to the next month in five weeks, a sign of a softer outlook, as per Bloomberg.

The Non Farm Payroll data issued this morning showed 143,000 new jobs added in January. This was less than the forecasts for a number showing 169,000/170,000 new jobs added. But revisions to December and November's data added 100,000 jobs to the figures released previously. CNBC commentary adds : "Recent indicators show that while hiring has leveled off, layoffs aren’t increasing and workers aren’t quitting, though job openings are on the decline." WTI prices have not reacted to the NFP data.

Growth in oil output from the U.S. Permian basin, the country’s top oilfield, is expected to slow by at least 25% this year despite President Donald Trump’s vow to maximize production, energy executives forecast on Thursday. At a conference in Houston, they said production is expected to rise in 2025 by about 250 MBPD to 300 MBPD from the shale formation spread across Texas and New Mexico, down from last year’s 380 MBPD increase. That forecast aligns with the U.S. Energy Information Administration’s projection of a 300 MBPD rise. In particular, Chevron raised its Permian basin crude oil production by 14% year over year , they said in their 4th quarter earnings report. But, "We are predicting closer to 9-10% over the next couple of years, continuing to grow our production there but not necessarily at the same rate that we have done in the past,", as per a Chevron crude supply executive. Chevron CEO Mike Wirth said he believes Permian operators will keep capital spending modest and grow within their means, unlike the 2010s shale boom when their focus was to pump more. Producers are focusing on keeping capital spending under control and achieving higher prices for their oil and gas. They have prioritized returning cash to shareholders after a pricing rout in the last decade hurt profits and share prices.? (Reuters)

Technicals

Momentum for the WTI on the DC chart basis is oversold. RB momentum is positive. ULSD momentum looks to be trying to turn positive from a near oversold condition.

WTI March futures support comes in at the double bottom of yesterday/today at 70.43/70.47. Below that support lies at 69.96-70.00. Resistance comes in at 71.81-71.85 and then at 72.93-72.97. The WTI spot futures have fallen below the 100 day moving average on the DC chart this week. That average lies today at 71.45.?

RB March futures see support at the lows of yesterday and Tuesday at 2.0428-2.0429 and then at 2.0283-2.0289. Resistance lies at 2.0970-2.0980 and then at 2.1107-2.1115.

March ULSD futures see support at 2.3792-2.3809 and then at the recent low at 2.3669. Resistance lies at 2.4421-2.4441.

Natural Gas - NG is down 1.5 cents

NG spot futures are down a few ticks.? Weather forecasts for later this month are showing lower temperatures, which are likely to drive up demand.

Yesterday's EIA storage data came in slightly bullish as the draw of 174 BCF was about 4-6 BCF better than forecasts. Total storage fell to 2.397 TCF. This leaves the current storage level 208 BCF/ 7.98% below last year's level and 111 BCF/4.48% below the 5 year average. This week's draw was the 12th weekly draw in a row and dropped inventories to their lowest level since last April. (Quantum Commodities) Early estimates for next week's storage number are calling for a draw of 90 to 106 BCF. Last year saw a draw of 60 BCF for the period and the 5 year average draw is 144 BCF.

European TTF prices have again today risen to their highest level since late October 2023. European natural gas prices are set to record nearly 3% in weekly gains due to concerns over future supplies and an expected cold snap that could further reduce reserves. As of Wednesday, the EU's gas storage was 50.6% full, a situation that could make replenishing supplies difficult before the onset of next winter. Investment funds maintaining their bullish positions and Europe's growing demand for liquefied natural gas volumes are also contributing to the price support, as per Investing.com reporting. DNB Markets noted, "The market is desperately trying to attract sufficient LNG cargoes."? Bloomberg added news today that Russian missile attacks have forced Ukraine to buy gas from the EU. Ukraine was known for years to be the supplier of Russian gas to the EU on the back of transit agreements.

Technically, on the NG futures chart, there is a double top from yesterday/today at 3.434/3.435. Next upside resistance lies at 3.461-3.470 and then at 3.559-3.563. Support comes in at 3.303/3.313 and then at 3.230-3.237.?

Disclaimer

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