Market Continued to Draw Support From US Sanctions

CRUDE OIL 

March Crude Oil was higher overnight but was also confined to Monday’s range, as the market continued to draw support from the US sanctions on Russian crude oil. The API report yesterday afternoon showed US crude oil stocks -2.6 million barrels for the week ending January 10 versus trade expectations calling for -1.0 million. Gasoline stocks were +5.4 million barrels versus +2.0 million expected, and distillates +4.9 million versus +800,000 expected. On the surface, this report looks bullish for crude and bearish for the products, but the trade awaits EIA report this morning. Refinery runs are expected to be -0.9% to 92.4%. In their Short Term Energy Outlook ,released yesterday, EIA forecast global oil demand to increase by 1.3 million barrels per day in 2025 and 1.1 million in 2026. This was down slightly from previous forecasts, and the expected rate of growth is below pre-pandemic levels of +1.5 mbpd. Much of the growth is expected to occur in Asia, particularly India. EIA expects global production to increase by 1.8 mbpd in 2025 versus +0.5 million in 2024; most of the increase due to a relaxation of OPEC+ cuts but also from increased production in non-OPEC states. US production is expected to reach 13.5 mbpd in 2025 and 13.6 million in 2026, up from 13.2 million in 2024.

 

 

oil pumping

 

NATURAL GAS

March Natural Gas is holding most of its gains from the recent rally, but it still faces the possibility that a near term top was put in place on Monday. EIA’s Short Term Energy Outlook is supportive long term, as they expect US demand to generally grow faster than supply in 2025. They look for 2025 supply to increase by 1.4 billion cubic feet per day and demand (including exports) to increase by 3.2 Bcfd. Exports are expected to increase by 2.9 Bcfd, mostly in the form of LNG. 2025 began with US storage 6% above the five-year average, and EIA expects it to be 4% below the average by the end of the year. Despite the recent cold trend, EIA forecast US gas consumption this January to reach 119 bcfd, similar to 2024 levels. They expect supply to grow at about the same rate as demand in 2026. For the weekly EIA storage report tomorrow, a Reuters poll has expectations for US gas storage to be -275 to – 227 bcf for the week ending January  10. Last year storage fell 154 bcf for the week, and the five year average decline is 137 bcf. The NWS 6-10 and 8-14-day forecasts still show colder than normal conditions over most of the lower 48, but conditions moderate significantly in the 8-14-day.

 

PRODUCT MARKETS

March ULSD is higher this morning and appears set to test Monday’s six-month high. The API report was bearish for diesel, but the trade is waiting for the EIA numbers. The trade is looking for a mild increase of 800,000 barrels in US distillate stocks. March RBOB extended its rally overnight to trade to its highest level since July 19. API gasoline stocks showed a larger increase than expected, but the trade awaits the EIA data. The Russia sanctions are leading the market. March ULSD broke above highs from October and August overnight.

 

 

 

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