Energy Prospectus

Trading Economics

WTI Oil
WTI crude oil future rose more than 2.5% to over $79.50 per barrel on Wednesday, the highest since August, after softer underlying inflation in the US triggered bets of lower rates by the Fed this year, stimulating economic activity and pressuring the dollar.
> Additionally, EIA data showed a 1.961 million-barrel drop in US crude inventories, surpassing market expectations of a 1.6 million-barrel draw for an eighth straight decline.
> Meanwhile, the IEA noted in its monthly report that the full effects of US sanctions on Russian oil tankers on global markets remain uncertain. < IEA continues to under-estimate oil demand and over-estimate oil supply growth. "Drill Baby Drill" is not going to have any impact on U.S. oil production this year. U.S. oil production will increase only 200,000 to 300,000 bpd in 2025.
> Also, OPEC maintained its forecast for global oil demand to rise by 1.43 million barrels per day in 2026, reflecting a steady growth rate from 2025.
> In turn, prices were unaffected by news that Israel and Hamas agreed to a ceasefire, easing concerns of supply disruptions from the Middle East that had previously triggered spikes in prices throughout the conflict. < Most of the hostages have been killed by Hamas.

U.S. Natural Gas
US natural gas futures rose past $4/MMBtu, nearing their highest level since January 2023, spurred by forecasts of colder weather over the Martin Luther King Jr. Day weekend. The cold snap is expected to freeze gas wells and pipes, leading to lower supply at the same time there is a surge in heating demand.
> Analysts predict utilities will withdraw over 200 billion cubic feet (bcf) of gas from storage in each of the next three weeks, potentially surpassing the record 994 bcf pulled in January 2022. < See more accurate forecasts of coming draws from storage here: https://www.celsiusenergy.net/
> Although storage levels are currently 7% above average, they could be (will) be depleted by month-end, dropping below the five-year average for the first time since January 2022.
> Additionally, US gas production has declined in January due to freeze-offs, and further freeze-offs are expected, while LNG exports have reached new highs, adding to demand.

CelsiusEnergy.net is now forecasting that NGas in U.S. storage will be 100 Bcf below the 5-year average on January 31st.

Note from HFI Research Jan 15 PM

WTI breached $80/bbl today on the back of 1) continued panic in the physical market from Chinese oil traders, 2) inventory draws in the US with commercial crude storage sitting near multi-year lows, and 3) weak implied US oil production.

The physical market continues to dominate oil trading for now with Chinese traders frantically trying to replace sanctioned barrels from Russia and Iran with alternatives. Floating storage in China is starting to pile up as the US sanctions the dark fleet. And because of the visibility of these tankers, it will take time before they go offline, conduct ship-to-ship transfers, and offload the crude.

In the meantime, traders are trying to find replacements for these barrels, and we are seeing the panic in the crude timespreads.

How long will this last? I don't know and the only way we know it's getting close to the end is by paying attention to the timespreads. Once crude timespreads peak, that's when you know the frantic buying is over, and oil prices will correct lower. In the meantime, oil fundamentals are trending bullish and in-line with our projections.

A Good Start
IEA published its latest oil market report today and true to its bias, it still projects a massive surplus for 2025. < Ignore IEA supply/demand forecast.
> This will be the first time in history where the 1-12 month crude timespread shows a material backwardation, while the IEA expects that large of a surplus.
> This is why readers need to pay attention to what the market is saying versus what these biased energy agencies are saying. It's clear from the physical market that the implied balance is much tighter than what's on paper...