Oil prices sold off yesterday after President Trump proposed to Russia to either make a deal in the war in Ukraine that let's face it is a quagmire, or he will have no other choice but to put more sanctions on Russia.
President Trump on Truth Social said that, “ I’m not looking to hurt Russia. I love the Russian people, and always had a very good relationship with President Putin – and this despite the Radical Left’s Russia, Russia, Russia HOAX. We must never forget that Russia helped us win the Second World War, losing almost 60,000,000 lives in the process.
All of that being said, I’m going to do Russia, whose Economy is failing, and President Putin, a very big FAVOR. Settle now and STOP this ridiculous War! IT’S ONLY GOING TO GET WORSE.
If we don’t make a “deal,” and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries. Let’s get this war, which never would have started if I were President, over with! We can do it the easy way, or the hard way – and the easy way is always better. It’s time to “MAKE A DEAL.” NO MORE LIVES SHOULD BE LOST!!!?”
New sanctions on Russia are causing super tanker freight rates to explode as the Russian dark fleet is now under scrutiny. Right now, no one wants to touch Russian oil, and so these tankers are going to be floating around somewhere.
Bloomberg reported that “Oil refiners in India are reaching for all available options in the rush to make up for Russian flows hit by Washington’s latest round of sanctions, turning to the spot market while simultaneously seeking more long-term supplies from Middle Eastern producers.
State-owned processors have issued a slew of spot tenders in recent weeks, snapping up oil from all corners of the world including the Middle East, Africa and the US. Some cargoes are scheduled to load as early as February, indicating the urgency of replacements for the Russian flows India has become reliant on.
There are more reports that Russian President Vladimir Putin is growing more concerned about the impact of the Russian-Ukraine war on his economy and is probably open to making a deal and let’s face it, Ukraine’s President Volodymyr Zelenskyy was open to a deal back in 2022, but the Biden administration told them not to make a deal. Now Newsweek is reporting that Ukraine’s first vice prime minister has signaled that Kyiv would be open to engaging in peace negotiations with Russian President Vladimir Putin.
It also appears that sanctions on Iranian crude are starting to kick in apparently you can see that most clearly by the so-called drop in “ Iraqi oil” exports. S&P Global reported that Iraqi crude oil exports hit a four-month low of 3.15 million barrels a day in December. Export volumes totaled 3.15 million b/d in the last month of 2024, down 9.7% from August, with China and India taking the bulk of Iraqi crude. In 2024, Iraq was the fourth largest supplier of crude to China, behind Russia, Saudi Arabia and Malaysia, which market sources told Commodity Insights was predominantly disguised Iranian crude.
Iranian oil sanctions are probably going to kill Malaysian oil export numbers as well. Malaysia was exporting twice the amount of oil that they produced during the day. That’s amazing. There is nothing like a ship-to-ship transfer of Iranian oil to improve your export numbers.
The larger point is that if President Trump is successful in bringing an end to the conflict between Russia and Ukraine it’s going to solve a lot of problems for the global economy and be a major factor in bringing down the global energy costs. Not to mention it’s going to save the US taxpayers billions of dollars because we won’t have to be writing a check to Ukraine every month. It will also mean that we could soon find a home for those poor Russian barrels of oil lost at sea.
It also is going to allow us to put tougher sanctions on Iran. Already Ayatollah Khomeini in Iran is offering an olive branch according to Newsweek’s saying that he will stop his nuclear program. They reported, “Iranian Supreme Leader Ayatollah Ali Khamenei has reportedly prohibited the development of nuclear weapons, in a move that some are perceiving as an attempt to initiate talks with the Trump administration about easing sanctions. The head of Iran’s “Armed Forces Judiciary” made the announcement on January 21, according to Iran International. That was just one day after Trump’s inauguration, but the possible olive branch does not necessarily mean that nuclear activity will stop.” So, what’s the point then?
Elizabeth McDonald, host of the Fox Business Network’s The Evening Edit, tweeted this morning that, “The new controversy of Biden’s Energy Secretary Jennifer Granholm at the last minute on Thursday sending more than $15B in Biden’s green energy loans to utilities in her home state of Michigan is a major wake up call to the significant taxpayer abuses in the Biden White House. Many of them are her donors to her gubernatorial campaign. Granholm approved a massive $22.9B in these 11-hour green loans, sending nearly 70% of that to Michigan, the Beacon reports, either feathering her political nest or her future in the private sector.
Democrats hammered President Trump when he campaigned on draining the swamp in 2016. Nancy Pelosi and Democrats pushed back hard to impeach him on one of 85 targets they launched. This also defies the energy department Inspector General who told Granholm to stop the conflicts of interest in these $400B slush funds. This highlights a government abuse of power sending hundreds of billions of dollars in taxpayer money out the door that gets recycled as campaign donations. This is one of the most underreported stories out there. Whose back is getting scratched and for how much?” As long as she has that extra money, she should get some dance lessons for her next climate change video.
Yet if we don’t get a deal, the global oil market is going to be extremely tight as the world is already in a deficit. Even Citibank is seemingly acknowledging the reality that the market is in a deficit. Reuters reported that Citi on Wednesday raised its oil price outlook for 2025 due to geopolitical risks centered on Russia and Iran, but noted prices were likely to ease through the second half of the year. “The oil outlook could see heightened, sustained geopolitical risks in Iran/Russia-Ukraine potentially wipe out the 2025 oil balance surplus, but the Trump administration appears intent on dealmaking,” the bank said in a note.
This morning the market seems to be shaking off a bearish American Petroleum Institute (API) supply report. API reported a surprising increase of 1 million barrels in crude supplies. The market was expecting a draw. We also saw another week where Cushing, OK supply levels increased coming off tank bottoms. Cushing, OK increased supplies by 500,000 barrels last week.
The API also reported an increase in gasoline supplies of 3.2 million barrels. Also, higher than the market was looking for and we also saw an increase of 1.9 million barrels in distillate inventories. Next week because of the winter storm we’re going to see import and export numbers impacted because of the shutting down of operations due to the cold and the snow.
Natural gas is back to facing the cold hard realities after selling off hard. In expectations of a warm-up the realities that we have seen record demand for natural gas in the last couple of days, is going to give the market a bit of a boost while the market tries to adjust over the next few days to the cold. The ultimate fate of this market will be how cold the month of February is. If it’s warmer than normal, then look for natural gas prices to settle back. If not get ready for a squeeze something like we haven’t seen for a few years.