Today, Russia suggested that they are open to negotiations on Ukraine which could bring an end to the conflict and thereby allow sanctions to come off of Russian oil. At the same time, a move by the treasury market has made Iranian oil “kryptonite“ as the Trump administration announced sanctions that sent a clear message to anyone that dealing with Iranian oil either shipping or oil companies could be taking a huge risk. Yesterday, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) said they were sanctioning an international network for facilitating the shipment of millions of barrels of Iranian crude oil worth hundreds of millions of dollars to the People’s Republic of China (PRC).
The action they say, is consistent with the President’s February 4 National Security Presidential Memorandum directing the Treasury Department and other U.S. government agencies to enact maximum economic pressure on Iran in order to deny all paths to a nuclear weapon and counter Iran’s malign influence. They especially hit “Sepehr Energy and its affiliate companies, which they say operate under the umbrella of the AFGS, use deceitful evasion methods such as falsification of maritime documents to obfuscate the Iranian origin of the oil that it trades and transports to overseas buyers, including the PRC. This revenue stream generates billions of dollars for the AFGS each year, which is used to fund Iran’s military and proxies and their destabilizing activities around the world.”
And that may just be the start, and the oil world is on notice. The world now knows that Trump will do what he says he is going to do, so if you want to test him, do so at your own risk or peril. No one’s going to want to touch Iranian oil and even as President Trump put on the toughest sanctions on Iran that the world has ever seen. He is also holding out the olive branch for a potential deal with the Iranian regime.
On Truth Social, he posted that,
“I want Iran to be a great and successful Country, but one that cannot have a nuclear weapon. Reports that the United States, working in conjunction with Israel, is going to blow Iran into smithereens ARE GREATLY EXAGGERATED,” he wrote on Truth Social. “I would much prefer a Verified Nuclear Peace Agreement, which will let Iran peacefully grow and prosper,” he continued. “We should start working on it immediately and have a big Middle East Celebration when it is signed and completed. God Bless the Middle East!”
Today, Ali Khamenei the Supreme Leader of Iran is saying that talks with the US are “not intelligent wise or honorable” but at the same time doesn’t rule them out. And the reason why the Supreme Grand Poohbah isn’t ruling talks out is because he knows he may not have any other choice but to support his failing terror-supporting regime. Ultimately, he knows that his political survival may depend on bowing down to the demands of the Trump Administration.
It’s either that or watching his economy collapse before his very eyes. It’s not like his economy is doing any good anyway. And his dream of wiping Israel off the map has been shattered. Kamani complained about Trump's vision of the map with Israel still on it and said,
"The Americans sit, redrawing the map of the world — but only on paper, as it has no basis in reality...They make statements about us, express opinions and issue threats. If they threaten us, we will threaten them in return. If they act on their threats, we will act on ours. If they violate the security of our nation, we will, without a doubt, respond in kind.”
Kamanis bitter because his dream to wipe Israel off the face of the map will never come true at least in his lifetime. And as oil tries to digest this as well as Trump’s tariff threats, oil demand is rocking.
The latest reports from India show that oil demand rose by 3. 1% this year to a near-record 20.489 million metric tons in January. India’s demand for gasoline surged by over 6.7% and diesel demand increased by 4.2% year over year.
In the US, we saw a big surge yesterday in the gasoline crack spread as it hit the highest level since June. That is a signal to refiners that they better get cracking and get some more gasoline in the system. The diesel crack hit the highest level since last month but seems to be hitting resistance.
The natural gas market has some conflicting chart patterns and closed slightly higher after a bullish EIA report. EIA reported that working gas in storage was 2,397 Bcf as of Friday, January 31, 2025. This represents a net decrease of 174 Bcf from the previous week. Stocks were 208 Bcf less than last year at this time and 111 Bcf below the five-year average of 2,508 Bcf. At 2,397 Bcf, the total working gas is within the five-year historical range. So stocks are 111 BCF below the five-year average something that we haven’t seen in the natural gas market in the US for a very long time. This could be very significant if winter hangs around.
On the one hand, the natural gas futures at the CME Group closed above its resistance but bearish traders are eyeing its downside gap. They believe it has to be filled before natural gas can move higher. Trend followers must be long but at the end of the day, it may come down to the weather and how cold it’s going to be in February.
Some people are calling for winter to extend into March so you might want to pull out your green heavy jackets for Saint Patrick’s Day.
Regardless, Fox Weather is reporting that New York City and Boston are among 30 million under Winter Storm Watch. Just as one winter storm that brought snow and ice exited the Northeast, a new winter storm is expected to slam similar areas over the weekend. New winter weather alerts have already been posted for cities that stretch from the eastern Rockies and Dakotas to New York City and even Boston.
And supplies below normal aren’t only a US phenomenon in natural gas. J Kemp Energy reported that Europe’s gas storage continues to empty at an unusually rapid rate with storage facilities less than 51% full on February 5 compared with more than 68% full on the same date in 2024 and 70% full in 2023. The rapid drawdown has pushed nearby futures contracts sharply higher with the front-month contract trading over €55 per megawatt-hour.