Did Joe Biden just have the last political laugh?

A bizarre week to say the least starting 2025 with ICE Brent prices closing at their highest level in 3 months.?As we’ve said in recent weekly’s it’s not unusual for oil prices to push higher during the holiday season between late December and early January, but this time around we went a step further!?This oddity during the year end break is often a feature of investors with muscle taking their opportunities, clicking into gear, and buying commodities in a market liquidity gap created by investors who just took time away from the markets for a couple of weeks to wind down.

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Strangely, little came to light in the actual oil space this week that could account for the eventual wild numbers we saw by Friday afternoon, but it’s fair to say by then that the market already had a mood on, driving along under a waft of warm sentiment created by many newsy things other than oil.?Much of it was stimulated by a spat between Elon Musk and a couple of European countries, Donald Trump teased the World by repeating his words of five years ago when he made it clear the USA should buy the World’s biggest island… Greenland….add to the mix some very cold weather in Europe and the U.S.A (despite parts of Los Angeles being razed to the ground !), and a persistent niggling story that distillate inventories were depleting at pace!

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One or two of the stories and ideas seem more akin to what would be read in a 1960’s comic, but the distillate story was at least related to oil,?left this writer puzzled about its validity as a genuine price driver. Nevertheless, the market believed it—hype prevailed, and it seemed everyone went along for the ride!

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The story was all the stranger given American distillate inventories increased by 6.1 million barrels during the previous 7 days, the previous week those same distillate stocks had already risen by 6.4 million barrels. During the whole fortnight gasoline stocks in America also rose …. by 14 million barrels too due to slow demand! A 14 million barrels increase in road fuel inventories inside two weeks doesn’t sound very bullish to this writer, but maybe everyone was stuck in the snow….apologies to the distillate bulls for raising these points but call me old fashioned and a?party pooper and let’s move on !?

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Somehow, if you are bullish and shout loud enough investors will invest and that seemed the long and short of it!?For commodity investors Crude oil is apparently the only game in town, the convenience being to ignore the refined product balances made from the distillation of it, however, just to mention during those same 14 days U.S. crude inventories fell by just 2.2 million barrels!

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Europe’s ARA hub also found itself well supplied too, whilst Gas oil?stocks fell?for the 1st?time in four weeks, down?by 35k tons or 1.4%,?inventories are now averaging 2.5 million tons. Seasonally, stocks are close to their 5-year high.?Also note Gasoline stocks rose?for the 2nd?week in a row, up?by 8.5% or 120k tons w/w, stocks are now averaging?1.53mtons.?Seasonally, stocks are way above their 5-year high.

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However, moving away from the inventory discussion, just as many thought the week’s rally would run out of steam a touch by Friday, Joe Biden popped up to not only consolidate the new higher numbers but send them flying higher as he announced new and tougher oil sanctions against Russia on Friday evening. Suddenly, the fox was loose in the hen coop and oil prices kicked up. Now the bulls had something solid to raise a charge and take numbers higher.

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It remains bizarre that just 10 days before he moves into history, Joe Biden is still swishing sanctions into the World like a fisherman casting his favourite dry fly along a well fished salmon river. Yet, cast them he does.?The details of the new U.S. sanctions against Russia are multiple, shipping, banking, insurance are all impacted as well as Russian crude oil exports.

Most agencies and media teams report similar stories, outlining those?new sanctions against “the Kremlin’s largest and most important sources of revenue” with the intention of hitting multiple targets, including two of Russia’s largest oil companies: Public Joint Stock Company GazpromNeft and Surgutneftegas.

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The sanctions also target nearly 200 oil tankers accused of being part of the so called “shadow fleet “whose job it is to evade sanctions, energy officials, banks, and oil traders. The intention goes further in that Biden’s latest sanctions want to capture Russia’s LNG exports. “We expect our actions to cost Russia upwards of billions of dollars a month “a senior U.S. administration official said.?The sanctions are designed to bolster Ukraine’s negotiating position when the time comes to attempt to end the war. The Biden administration also announced its?final tranche of military aid (500 million usd roughly) to Ukraine on Thursday. The Pentagon said on Friday that there will be “just under $4 billion” in funding from the Presidential draw down fund that will roll over to the Trump administration to manage the handed over Ukrainian position. On Thursday, Donald Trump had already reiterated his desire to end the war in Ukraine saying that “Putin wants to meet and we’re setting it up”.

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Reuters also added a story to Donald’s “to do” list as they report Iran was holding air defence exercises on Saturday as reported by Iranian state media. The country is bracing itself for more friction with arch enemy Israel and the United States as Donald returns to the throne. It seems likely the U.S. will give Benjamin Netanyahu’s government more rope in the coming weeks and months to limit Iran’s nuclear capability. Whatever the Biden plan is now, in the end, Donald Trump will have the final say on who does what, when and with whom.

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Meanwhile in other news, Bloomberg reports Nigeria’s Dangote Refinery intends to build additional oil storage tanks to store imported foreign crude oil should local supplies become low. According to “The Africa Report”, the 650,000 barrels per day refinery has plans to build 6.3 million barrels of capacity to store that crude oil. The Paris based publication sites Devakumar Edwin, VP for oil at Dangote Industries Ltd as the source of the information.?Bloomberg tank tracking suggests the refinery ran 358,000 barrels per day last month of Nigerian crude oil ( up from 308,000 in November)and is on course to increase throughputs as and when funds and supplies will allow.?

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The bulls really ran this week trampling the bears underfoot, although a final glance at closing price levels doesn’t feel as bullish as all the hype that went with it and carried the numbers higher. Until Joe Biden announced more severe sanctions than those already in place against Russia late on a European Friday evening the reasons for the price strength, we experienced during the week seemed little to do directly with a major reduction in oil supplies except for the falling inventory story. Either way, we must wonder if Joe’s upgraded sanctions plan was more of a political attempt to steal Donald’s thunder allowing himself the last political laugh before handing over the Presidency to his old foe.

Finally, from oil’s technical viewpoint the Relative Strength Index indicators aren’t suggesting the current levels to be an obvious buy, if anything, the markets look a touch overbought. There’s much to play out during the balance of January amidst a background of ever-changing market price drivers and uncertainty, but one thing is for sure, we can expect a very rocky ride!

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This week’s closing guide prices:

ICE Brent 79.76 (+3.52)

WTI 76.57 (+3.74)

ICE gas oil 730.75 (+28.75)

Euro Mogas swaps 716.50 (+11.50)

Euro naphtha swaps 648.50 (-0.75)

Nymex gasoline 2.0749 (+3.11)

LPG swaps 585.00 (-2.00)

Opec basket 76.13

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