Daily Energy Market Update 1-6-2025

Crude is up 62 cents???? RB is up 1.30????? ULSD is up 3.04 cents

Overview

Crude oil prices are at their highest since mid-October as colder weather in the U.S. and Europe spurred buying while further support came from expectations of tighter sanctions on Iranian and Russian oil exports, as per Reuters commentary this morning. The notion of sanctions tightening markets is reflected in the Saudis raising their OSP's. The colder weather is helping propel the ULSD as the best performer today.

Saudi Arabia raised its OSP to Asia for the first time in 3 months, reflecting the strength seen in the last month in Mideast regional crudes. The price of Iranian crude sold to China has risen to the highest in years as fresh U.S. sanctions have tightened shipping capacity and driven up logistics costs. In India, state refiners such as Bharat Petroleum Corp are buying more Middle East crude to make up for lower supply of cheaper Russian oil.? The price for the flagship Saudi A-Light crude to Asia was raised by 60 cents for February loadings. The Medium crude OSP was raised by 50 cents and the Heavy grade by 40 cents for Asian customers. Prices for all grades to the Med and NW Europe were raised by $1.30. Prices for crude to the U.S. were dropped by 30 -40 cents.

The Biden administration is set to impose more sanctions against Russia, mostly targeting shipping.? "It's a very substantial package. Two Russian oil companies, more than 100 tankers, oil traders, Russian insurance companies etc.", as per one Reuters source. There are also concerns that the Trump administration will impose sanctions against Iran.

China's state-owned oil refiners cut their crude oil throughput to the lowest in over two years last month amid sluggish seasonal demand and a lack of refined product export quotas towards the end of the year. (Quantum Commodities) The country’s independent refiners’ feedstock imports fell by 6.5% year over year to 192.2 million mt (3.85 million b/d) in 2024 from a record high of 205.63 million mt (4.13 million b/d) in 2023, data from S&P Global Commodity Insights showed. The reduction is likely to continue, analysts and market sources said.

Goldman Sachs on Friday predicted a modest decrease in Iranian crude oil production as a result of expected policy changes and tighter sanctions from the administration of incoming U.S. President Donald Trump. The investment bank’s base case anticipates a 300 MBPD drop in Iran’s crude supply to 3.25 MMBPD by the second quarter of 2025. Iranian crude oil floating storage has built to a 12-month high of 20 MMBBL and the Iranian export fleet is relatively stretched with high exports per vessel, historically associated with subsequent declines in Iran’s crude exports, Goldman Sachs said. (Reuters)

On Friday, data showed diesel and gasoil stocks in the Amsterdam-Rotterdam-Antwerp hub surged 13% to 2.507 million metric tons (mt) in the week ended Jan. 2, amid high US diesel inflows to Europe, as per Insights Global data. This puts stock levels up 40% on the year, as the market remains well supplied against weak domestic demand, as per Platts commentary. "The arbitrage from the US seems to be reopening as well, so we should see a little bit more volume coming in in January, and with that, the stock should rebuild so everything should be coming down," said one European diesel trader. The US remains the largest supplier, already scheduled to send around 1.20 million mt of diesel and gasoil in January. In comparison, the US sent about 1.40 million mt in all of December. (Platts)

The White House on Monday said President Joe Biden is moving to ban most new oil and natural-gas drilling in coastal waters. "Drilling off these coasts could cause irreversible damage to places we hold dear and is unnecessary to meet our nation's energy needs. It is not worth the risks," Biden said in a statement. (MarketWatch) The announcement comes as Trump has pledged to reverse Biden's conservation and climate change policies when he takes office later this month. But the Lands Act, which allows presidents to withdraw areas from mineral leasing and drilling, does not grant them the legal authority to overturn prior bans, according to a 2019 court ruling.? (Reuters)

The CFTC COT report will be released today due to last week's New Year's holiday.

Technicals

WTI spot futures are at their best level since October 14, while ULSD is at its best spot futures since Oct. 8. But, momentum, although positive basis the DC charts, is getting near overbought for WTI & ULSD.

WTI spot futures have resistance above at 75.03-75.08. Support comes in at 72.69-72.70. The high DC chart bollinger band intersects at 74.66.

The ULSD DC chart shows the 200 day moving average being tested. That value lies at 2.3637. Resistance above comes in at 2.3773-2.3778, which is just above the overnight high of 2.3770.? Above that resistance comes in at 2.4020-2.4030. Support lies at 2.3326-2.3344 and then at 2.3070.

RB spot futures see the 100 day moving average in the DC chart at 2.0320. Resistance lies at 2.0719-2.0729, which is just above the overnight high of 2.0770. Next resistance lies at 2.0926. Support comes in at 2.0336-2.0341 and then at 2.0073-2.0088.

Natural Gas- NG is up 35.4 cents

NG prices are up sharply as cold weather invades much of the US.? Some 250 million people will feel frigid air across 40 states in the next week, according to meteorologists at AccuWeather.

Over the weekend, the near-term temperature outlook has largely stabilized with at or above-average GWDDs expected for the next 2 weeks. There remains a threat of another arctic shot by days 15-20, but this remains uncertain, as per Celsius Energy commentary.

Sunday's storage withdrawal on a daily basis was seen at -25 BCF, which Celsius Energy says is 6 BCF better than the 5 year average for the day. Also supportive is the data from Celsius Energy showing production for Sunday was 103.7 BCF/d, down 0.5 BCF/d from year ago level. As heating demand picks up, LSEG projects total U.S. gas use, including exports, could reach 156.4 BCF/d on Jan. 9.? Thus, later this week , the daily withdrawal from storage could be near 50 BCF/d.

The EIA storage data seen Friday disappointed with a draw of 116 BCF, which was 11 to 18 BCF below estimates. Total storage fell to 3.413 TCF. This is -67 BCF/-1.98% versus last year's level. Versus the 5 year average, storage is +154 BCF/+4.72%.? The storage data miss contributed to the weakness in NG futures seen Friday.

Dry gas production topped out at about 106 BCF/d in the closing days of December, the highest levels since February, according to Wood Mackenzie. The firm’s latest numbers shaved off roughly 0.4 BCF/d from earlier estimates, though the readings still held above year-ago levels. (NGI)?? Yet, Celsius Energy says that since the New Year, gas production has trended from 106 BCF/d back closer to 104 BCF/d, tracking close to year-ago levels. This is likely due to the combination of the typical seasonal decline as well as some minor freeze-offs, Celsius Energy adds.?

The natural gas powerburn has been very soft over the past week due to strong wind generation & gas-to-coal switching, averaging -6.4 BCF/d over the past week. The gas share of the powerstack is averaging just 35% over the past week, down -7.4% vs 2023, the greatest decline of any fuel, according to Celsius Energy.?

European TTF gas prices have retreated from the high seen last Thursday. The high was supported by concerns due to the end of the transit agreement for Russian gas thru Ukraine, as well as by low wind power and Norwegian production outages in December, Goldman analysts say in a note. Last week there was an outage at a large Norwegian offshore export terminal that was seen lasting through January 9. (NGI) At the moment, storage is a little more than 70% full, well below the 85% seen at the same stage last year and also below the five-year average of around 76%. (ING)? If the cold weather forecasts materialize without other offsets, there are risks gas prices could rally toward the 63-84 euros a megawatt hour range in the coming months, Goldman says. (WSJ) ING offers the following commentary: "Adding further support to European gas is the forecast for colder-than-usual weather over the next two weeks, which could see storage falling at a quicker-than-expected pace. Storage levels should still mean that Europe gets through this winter comfortably, however, the refilling of storage through the injection season will be a bigger job than last year, which should provide some support to summer prices. This is well reflected in the TTF forward curve with summer 2025 prices trading at a premium to 2025/26 winter prices."

Technically, though, TTF spot futures prices are seeing momentum having turned negative with the fall back from the high of 51 Euro/Mwh seen last Thursday. Support below lies at 46.50 Euro/Mwh. Currently prices are printing 48.155 Euro/Mwh.

Technically, February NG bounced off the test of the 200 day moving average on the daily chart seen Friday. That average lies today at 3.401. Resistance lies at 3.733-3.735 and then at 3.796/3.801, with the latter being the high seen Thursday. Support below the overnight low of 3.502 lies at 3.454-3.455. While momentum is negative, it looks as if it is poised to turn neutral.

Disclaimer

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