Oil prices are on the rise as the Trump Administration starts to crack down on Iranian oil exports and concerns about the reserves of big oil companies. The market is also pricing in concerns that the ceasefire deal between Israel and Hamas could fall apart because Hamas it appears has starved its prisoners and now are reneging on the prisoner release. President Trump says all hell could break loose if the prisoners are not released.
Reuters reported this morning that Chevron’s oil and gas reserves have fallen to at least the lowest point in a decade in part because of the Biden administration’s anti-fossil fuel investment campaign along with the manipulation of the market by releasing oil from the Strategic Petroleum Reserves here and around the world. By artificially lowering the price it has discouraged investment along the uncertainty created by the Biden administration has caused oil companies to find replacement reserves at the lowest level probably since the 1980s.
Globally, oil reserves are being consumed faster than they are being replenished. According to Rystad Energy, discovered volumes are at record lows, and the reserve replacement ratio (RRR) is 16%, meaning for almost every six barrels produced, only one is replenished according to a report released last year. This data suggests that President Trump’s energy emergency is real and not just political. President Trump realizes that if we’re going to power the economy of the future, we must change this death spiral. Not just here in the US but in the world.
Bloomberg is reporting that US fuel makers are in a state of alarm as the water content of imported Mexican crude is up to six times higher than the industry standard. The low quality of imported Maya-grade crude could upend a trade flow that has lasted for decades.
OIL Price reports that the Indian government is considering extra energy imports from the United States, days before Prime Minister Narendra Modi’s visit to the country and a scheduled meeting with U.S. President Donald Trump. Modi will visit the U.S. on February 12-13 and hold bilateral talks with Trump, India’s Ministry of External Affairs said on Friday. The U.S. is the fifth-largest crude exporter to India, following Russia, Iraq, Saudi Arabia and UAE. However, Indian refiners are open to buying crude from anywhere if the economics are compelling. Whereas Trump has pledged to lower fuel prices, he faces a conundrum considering that U.S. oil production is entirely in the hands of independent producers rather than a national oil company.
Trump also cut a deal with China to work on an LNG deal that Canadian Prime Minister Pierre Trudeau killed.
The Toronto Sun reported last week that after meeting with Japanese Prime Minister Ishida Shigeru on Friday, the U.S. President mentioned several trade initiatives with Japan – but specifically exporting liquified natural gas to Japan. This is the very deal Japan asked Canada for two years ago, in an attempt to wean their country off of Russian and Middle Eastern products. Trudeau refused their request, but on Friday, Trump boasted of what he says will be a great deal for America.
“I’m also pleased to announce that Japan will soon begin importing historic new shipments of clean American liquefied natural gas in record numbers,” Trump said. “We’re talking about the pipeline in Alaska, which is the closest point of major oil and gas to Japan by far, less than half the distance of any other location,” he said. “We’re talking about a joint venture of some type between Japan and us, having to do with Alaska oil and gas.” Biden tried to price-fix energy. That didn’t work and now it appears that China is giving up on that as well.
Bloomberg is repotting that, “China is preparing to scrap fixed pricing on renewable power, and let the market decide how much users pay for clean electricity. The central government has agreed that electricity generated by renewables should be freely traded, leaving it up to local authorities to propose and implement market pricing by the end of the year, the National Development and Reform Commission and the National Energy Administration said in a statement on Sunday. Generators will be cushioned from excessive price swings by balancing payments, they said.
As I mentioned last week oil seemed to be bottoming near the lower end of the trading range and now it looks like we could be on target to hit the upper end of the trading range. Crude oil is testing 7333 resistances, and any close above that area could suggest that the market is going to head towards $76 and potentially to the upper end of the trading range which is $80.00 a barrel.
We will get some direction from the Short-Term Energy Outlook which is being released today at 11:00 central time from the Energy Information Administration as well as the American Petroleum Institute report. We do expect because of weather and other issues that we will see slight builds across the board. Crack spreads have exhibited significant fluctuations, yet they appear to indicate an upward trend in both diesel and heating oil markets.
The seasonal spreads also seemed to be working. February is normally a strong up month for April diesel as well as March RBOB gasoline. Spreads such as being long August to RBOB and short December gasoline seem to be attractive strategies. Additionally, if you are in good health, you might consider buying gasoline versus heating oil, often referred to as the “widow maker.” Bull spreads on crude oil are attractive, especially going long in June and short in December.
Reuters is reporting ChampionX (CHX.O), opens a new tab and expects new U.S. import tariffs on steel and aluminium to drive up equipment costs for oilfield service firms, a company official said on Tuesday. U.S. President Donald Trump raised tariffs on steel and aluminium imports on Monday to a flat 25% “without exceptions or exemptions” in a move he hopes will aid the struggling industries in the United States, but which also risks sparking a multi-front trade war.
Natural gas is surging as technical and weather fundamentals get in line. A potential short squeeze is developing in the natural gas.
The EIA reported that colder-than-normal temperatures across much of the United States in mid-January increased natural gas consumption, resulting in the fourth-largest reported weekly withdrawal from natural gas storage in the Lower 48 states, according to our Weekly Natural Gas Storage Report (WNGSR).
During the week ending January 24, 2025, stocks fell by 321 billion cubic feet (Bcf), which was nearly 70% more than the five-year (2020–24) average withdrawal for the same week in January. With withdrawals in January totaling nearly 1,000 Bcf, U.S. natural gas inventories are now 4% below their previous five-year average after being 6% above the five-year average at the start of the 2024–25 heating season, which began in November.
For the week ending January 24, the South-Central region of the United States, which accounted for approximately 35% of working gas in U.S. storage, reported its fourth-largest withdrawal of 136 Bcf. In the East and Midwest, the regions with the next-largest storage inventories, stocks fell by 10% in the East and by 11% in the Midwest over the week. The East and Midwest are also the U.S. regions with the most natural gas consumption in the winter to meet space heating demand.
Temperatures in the U.S. Southeast fell to record lows, and snow fell in parts of Louisiana, Texas, and the panhandle of Florida, increasing natural gas consumption. During the week ending January 24, 2025, U.S. heating degree days (HDDs) reached 262, or 28% more than normal, according to the National Oceanic and Atmospheric Administration.
Population-weighted HDDs represent temperature deviations lower than 65°F and are weighted based on population distributions across the country. These data help us model and forecast energy consumption in different regions of the United States. Cold weather also led to modest production declines in January because of freeze-offs, which occur when water and other liquids freeze at the wellhead or in natural gas gathering lines near production activities.