Energy and global politics can be downright cold-hearted, leading to a surge in prices to start the new year as the bullish fundamentals are getting harder to ignore.
Oil and natural gas are on the rise as an arctic cold blast is about to descend on the United States. Russia cut off natural gas supplies to Europe through Ukraine. This comes after the Energy Information Administration (EIA) had to admit that they have overestimated supply and underestimated demand, which will lead to revisions in their monthly report and will force the market to readjust to a much tighter market than they had expected.
Russia and Ukraine failed to come to an agreement to extend the contract for Russia to send supply through Ukrainian pipelines led to a New Year’s Day cut off supply leaving some people out in the cold. The BBC says that, “Kyiv is calling it a “historic” day as its refusal to extend a transit agreement with Russia’s Gazprom (MCX:GAZP) has halted the return flow of cash to fund the full-scale invasion of Ukraine. But in neighboring Moldova, the move threatens to cause a crisis. In Transnistria, a separatist region of eastern Moldova loyal to Moscow, the year began with only hospitals and critical infrastructure being heated, not houses. “The hot water was on until about 2am, I checked. Now it’s off and the radiators are barely warm,” Dmitry told the BBC by phone from his flat in the enclave. “We still have gas, but the pressure is very low – just what’s left in the pipes. “It’s the same everywhere.”
Transnistria split from the rest of Moldova in a short war as the Soviet Union fell apart. It still has Russian troops on its soil and an economy that’s fully dependent on Russian gas, for which the authorities in Tiraspol pay nothing, the BBC wrote.
Bloomberg reports that the gas cut off brought an end to more than five decades of being the key conduit for the region. While the move was expected after months of political wrangling, Europe will still have to replace about 5% of its gas and may rely more heavily on storage, which has fallen below average levels for the time of year. Bloomberg says that gas prices rose in anticipation of the cut-off, with Europe’s gas benchmark closing 2024 up more than 50%. Those gains haven’t yet been fully reflected in the cost of the normally more-expensive LNG that nations including Japan and South Korea are heavily reliant on according to Bloomberg.
It’s not just Europe that’s going to be facing some cold here. In the US forecast for an Arctic cold blast is already impacting the market. Fox Weather is reporting that a major blast of Arctic air will bring a cold, snowy start to 2025. Several rounds of cold air will set up the eastern half of the U.S. for bitter cold to start 2025. This long-lasting cold streak is forecast to stretch into mid-January.
This comes after the Energy Information Administration (EIA) had to admit that they have overestimated supply and underestimated demand which will lead to revisions in their monthly report.
While oil production did hit a record, it failed to reach market expectations. HFI research pointed out that the EIA said that October and November US oil production was supposed to be at 13.45 million barrels a day to 13.5 million b/d but came it at 13.3 million b/d. That puts the three-month average at 13.25 million barrels a day and a mother’s sign that U.S. oil production may be peeking. And oil production in December production will be lower than October raising concerns of peak oil production in the US and the possibility we are starting to feel the damage of the Biden Administration’s anti-US oil and gas policies.
(0|Total}} U.S. oil demand rose by about 700,000 bpd from September to 21.01 million bpd in October, the highest since August 2019, EIA data showed and a record for the month of October. Demand for distillate fuels, which include diesel and heating oil, rose to 4.06 million bpd in October, the highest in a year. Jet fuel demand is soaring as well as the TSA put total travelers over the last seven days to be 6.9% over the levels we saw back in 2019 before the Covid lockdown.
In 2025 India is expected to be the world’s driver of oil and energy demand growth. According to the American Petroleum Institute (API), the primary driver of global oil demand growth is currently the Asia Pacific (APAC) region, with countries like India leading the charge as major consumers, primarily due to their rapidly growing economies and transportation needs. This trend is expected to continue in the near future, with India potentially surpassing China as the top source of global oil demand growth.
To that point, the Economic Times in India reported that India’s petrol and diesel consumption increased in December 2024 due to holiday travel. Petrol sales rose 9.8 per cent and diesel demand was up 4.9 per cent from the previous year. Fuel demand also increased due to agriculture activities. This rise continues the trend of growth seen in November 2024 despite the tepid monsoon months according to the Economic Times.
Market headdresses look like they are going to pay off.
Natural gas sees some ups and downs here because of strong production here in the US but if these forecasts that we’re seeing from the Fox Weather channel come true, we could continue to see new highs for this contract.
The Energy Information Administration is going to release both reports today about the natural gas inventory reported at 9:30 and petroleum at 10:00 central .