Written Commentary
CRUDE OIL
December Crude Oil eased back overnight after the API report showed US crude oil stocks up 1.64 million barrels last week versus trade expectations for an increase of 300,000. Gasoline stocks fell by 2.02 million barrels versus -1.2 million expected, and distillate stocks fell by 1.48 million versus -1.7 million expected. The EIA report this morning will provide the bigger picture, and it often contradicts the API numbers. Refinery utilization is expected to fall 0.3% to 87.4%. As of last week, gasoline stocks were the lowest they had been since November 2022 and the second lowest for this time of year in at least five years. Crude and distillate stocks were just above last year, but they too were second lowest for this time of year in at least five years. The US supply setup does not look burdensome. The market is still waiting on Israel’s response to Iran’s bombings from a couple of weeks ago, notably whether the Iranian oil or nuclear infrastructure will be attacked. Israel confirmed that it had killed the heir-apparent to the Hezbollah leader, who himself was killed last month in a missile attack. To no one’s surprise, little results were reported from the meeting US Secretary of State Blinken had with Israeli PM Netanyahu yesterday. This was Blinken’s 12th visit to the region since the war in Gaza erupted. The IEA said this week they expect Chinese oil demand growth to remain weak in 2025 as they shift to more EVs. China has set the crude import quota for non-state-owned firms at 257 million metric tons (5.14 million barrels per day) for 2025, up from 243 million tons in 2024.
NATURAL GAS
December Natural Gas is slightly lower this morning following yesterday’s follow through rally off Monday’s bounce off contract lows. Expectations for tomorrow’s EIA Gas Storage report call for an increase of 43-90 bcf for last week (median of +66.5). In last week’s report storage was up 76 bcf. The five year average for this week is +71 bcf. Lower production had been slowing the seasonal build, but the unusually mild weather has lowered domestic consumption. The 6-10 and 8-14 day forecasts call for above normal temperatures from the Great Plains to the East Coast, with much above normal temperatures showing up in the 6-10-day for the Midwest and Great Lakes and extending down into the Delta. West of the Rockies are expected to be below normal, with some much below normal temperatures in the PNW, northern California and east into Nevada and Idaho. Perhaps the hot temps in the Delta will boost cooling demand somewhat and the below normal out west will increase heating demand, but that will be offset by the mild temps elsewhere. TotalEnergies Senior Vice President Gregory Joffroy said yesterday that the next wave of LNG supply will come on line in 2027, which later than earlier forecasts of 2025, due to project delays. He said that the delays have stemmed from a shortage of skilled labor, inflation and equipment shortages, and President Biden’s pause on approvals for LNG export projects last January. Slower implementation of LNG exports could make US supply more burdensome
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