Watch What They Do
- Energy markets cycle between periods of quiet and volatility
- Large market moves can be caused by sudden changes in expectations
- Policy matters, but so to do economics
- Significant LNG capacity additions on the horizon
Sincerely,
David Thompson, CMT
Executive Vice President
Powerhouse
(202) 333-5380
The Matrix
Many market observers expect a return of energy market volatility after several months of range-bound trading. A big driver of this possible price volatility may turn out to be the large gulf between expectations and actions. Many issues could fall under this rubric, but two currently stand out.
Prior to his return to office, President Trump had spoken repeatedly about establishing a 25% tariff on Canadian imports on “Day 1” of his second term. Currently, the U.S. impots of approximately 4.5 million barrels/day of Canadian crude oil. Canadian crude makes up morethan 25% of total U.S. refinery throughput. This means that roughly a quarter of the gasoline in Americans’ tanks started out as Canadian crude oil. A large, enduring tariff on a category of imports of this size would be a market-moving event and could significantly increase gasoline prices. However, on ‘Day 1’, the President said the tariff may not be implemented until February 1, 2025. Markets will remain very focused to see whether the Administration adheres to this position.
President Trump has also spoken of a ‘national energy emergency’ and announced a series of executive orders aimed at increasing U.S. oil & gas production. The Administration clearly is in favor of lower energy costs for U.S. consumers but while issuing more permits for drilling typically appeals to E&P companies, the ultimate arbiter in the decision to produce is the price of the barrel. A move to lower prices in anticipation of increased production may cause producers to delay drilling new wells, even if the regulatory hurdles have been streamlined.
Headlines can quickly manifest themselves in the futures markets. Prices can change significantly when those headlines touch on issues that affect large portions of the energy economy. Volatile whipsaws in price can occur when the reality turns out not to match the rhetoric. Fuel marketers should use this opportunity to strengthen relationships with customers by talking about hedging strategies that thrive during volatile periods.
Supply/Demand Balances
Supply/demand data in the United States for the week ended January 10, 2025, were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased (⬇) 3.4 million barrels to 1.2314 billion barrels during the week ended January 10th, 2025.
Commercial crude oil supplies in the United States were lower (⬇) by 2.0 million barrels from the previous report week to 412.7 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Down (⬇) 0.6 million barrels to 7.2 million barrels
PADD 2: Down (⬇) 0.9 million barrels to 102.3 million barrels
PADD 3: Down (⬇) 2.1 million barrels to 230.3 million barrels
PADD 4: Up (⬆) 0.1 million barrels to 24.5 million barrels
PADD 5: Up (⬆) 1.6 million barrels to 48.4 million barrels
Cushing, Oklahoma, inventories were up (⬆) 0.8 million barrels to 20.8 million barrels.
Domestic crude oil production decreased (⬇) 82,000 barrels per day from the previous report at 13.481 million barrels per day.
Crude oil imports averaged 6.124 million barrels per day, a daily decrease (⬇) of 304,000 barrels. Exports increased (⬆) 1,000,000 barrels daily to 4.078 million barrels per day.
Refineries used 91.7% of capacity; a decrease (⬇) of 1.6% from the previous report week.
Crude oil inputs to refineries decreased (⬇) 255,000 barrels daily; there were 16.647 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, decreased (⬇) 273,000 barrels daily to 16.816 million barrels daily.
Total petroleum product inventories decreased (⬇) by 1.4 million barrels from the previous report week, up to 818.7 million barrels.
Total product demand increased (⬆) 882,000 barrels daily to 20.673 million barrels per day.
Gasoline stocks increased (⬆) 5.9 million barrels from the previous report week; total stocks are 243.6 million barrels.
Demand for gasoline decreased (⬇) 156,000 barrels per day to 8.325 million barrels per day.
Distillate fuel oil stocks increased (⬆) 3.1 million barrels from the previous report week; distillate stocks are at 132.0 million barrels. EIA reported national distillate demand at 3.839 million barrels per day during the report week, an increase (⬆) of 661,000 barrels daily.
Propane stocks fell (⬇) 4.7 million barrels from the previous report to 77.9 million barrels. The report estimated current demand at 1,597,000 barrels per day, an increase (⬆) of 161,000 barrels daily from the previous report week.
Natural Gas
Years of high prices in Asia and Europe have spurred a wave of new construction of LNG infrastructure. Analysts estimate that as much as 150 million tonnes per annum (mtpa) is now under construction. For scaling purposes, the global market currently has 400 mtpa of capacity.
At present, stronger demand and project delays have kept supply and demand in balance. Although nothing appears imminent, any resolution of the Ukraine-Russia conflict that allowed for Russian gas to return to the market would, by itself, tend to soften prices.
It is important to note that recent Executive Orders regarding permitting in the LNG sector have no impact on projects already under construction and will not have any impact on new capacity additions in the next few years.
According to the EIA:
- Net withdrawals from storage totaled 258 Bcf for the week ended January 10, compared with the five-year (2020–24) average net withdrawals of 128 Bcf and last year’s net withdrawals of 150 Bcf during the same week. Working natural gas stocks totaled 3,115 Bcf, which is 77 Bcf (3%) more than the five-year average and 111 Bcf (3%) lower than last year at this time.
- According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net withdrawals of 235 Bcf to 281 Bcf, with a median estimate of net withdrawals of 259 Bcf.
- The average rate of withdrawals from storage is 20% higher than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawals from storage matched the five-year average of 14.7 Bcf/d for the remainder of the withdrawal season, the total inventory would be 1,937 Bcf on March 31, which is 77 Bcf higher than the five-year average of 1,860 Bcf for that time of year.
Was this helpful? We’d like your feedback.
Please respond to [email protected]
This material has been prepared by a sales or trading employee or agent of Powerhouse Brokers, LLC and is, or is in the nature of, a solicitation. This material is not a research report prepared by Powerhouse Brokers, LLC. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Powerhouse Brokers, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.
Copyright 2025 Powerhouse Brokers, LLC, All rights reserved
