Crude Approaching Upper End of Trading Range

CRUDE OIL 

February Crude Oil is higher this morning and has already taken out the December high and is approaching the upper end of a 2 ½ month trading range. A bigger than expected draw in US stocks last week, new pressure against Russia’s shadow fleet, and a slight improvement in attitudes towards China’s economy is offering some support. Friday’s EIA report was bullish against expectations for crude oil but not for the products. Crude oil stocks fell more than expected and distillate stocks fell less than expected. Gasoline stocks increased rather than decreasing as expected. US crude oil stocks at 416.8 million barrels are the lowest for this point in the season in at least six years and the lowest overall since September. Cushing, OK stocks are 22.7 million, also the lowest in six years. Last year 34.0 m, lowest since October 2023. NATO said on Friday that it would boost its presence in the Baltic Sea after a ship, believed to be part of Russia’s “shadow fleet” of tankers that are carrying Russian oil despite western sanctions, damaged an undersea power line serving Finland. Indian state-run refiner Bharat Petroleum says it is buying Middle Eastern crude to make up for less supply of cheaper Russian oil. Russian exports have fallen as domestic demand has risen and Russia has had to meet output quotas under OPEC+ agreements. World Bank revised their forecast for Chinese economic growth up slightly last week, but 2025 growth still expected to be lower than 2024. China PMI factory survey is out tomorrow and US ISM for December on Friday. The Baker Hughes rig count showed US oil rigs in operation were unchanged at 483 rigs last week. This was down from 500 rigs a year ago and below the five-year average of 508.4. This week’s EIA stocks report will be released on Thursday at 10:00 CST due to the holiday on Wednesday.

 

 

NATURAL GAS

March Natural Gas was sharply higher overnight, gapping above the 200-day moving average and reaching its highest level since June. EIA gas storage last week showed a smaller than expected draw, but seasonably cold weather finally appears to be arriving, actually colder than normal. The 6-10 and 8-14 day forecasts show below and much below normal temperatures dominating the eastern two-thirds of the lower 48 states, which should allow for more significant draws from storage. Friday’s storage report for the week ending December 20 was -93 bcf from the previous week. This was at the bearish end of trade expectations of -111 to -94. Storage was up 1.1% from a year ago and 5.1% above the five-year average versus +1.3% and +3.7% the previous week. This was the smallest surplus to year ago levels since January 2023. The Baker Hughes rig count showed US natural gas rigs in operation were unchanged at 102 rigs last week but down from 120 rigs a year ago and below the five-year average of 118. This week’s EIA gas storage report will be released on Friday at 9:30 CST due to the holiday on Wednesday. Last week, Russian President Putin said that there was no time left this year to sign a new transit deal for delivering Russian natural gas to Europe via Ukraine. Ukraine has said that they would only agree to a deal if payments to Russia would be postponed until after the war was over.

 

PRODUCT MARKETS

The products are following crude oil’s move overnight by pushing towards the upper end (if not above) the recent trading range. ULSD appears to be getting a boost from the arrival of seasonably cold (or colder) weather to the eastern two-thirds of the US.

 

 

 

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