A rollercoaster week for benchmarks as prices climbed to a four-month high this week. Supply concerns from US sanctions on Russian oil producers and tankers, combined with expectations of a demand recovery driven by potential US interest rate cuts, were bolstering the crude market.
BKR Rig Count | The total active drilling rigs in the United States decreased by 4 last week, to 580. Oil rigs dropped by 2 to 478, and gas rigs dropped by 2 to 98. Rig count in the Permian Basin remained flat at 304 | Jan 17 | BKR NAM Rig Count
US Crude Inventories, excluding those in the Strategic Petroleum Reserve (SPR), decreased by 2.0 MMbbl to 412.7 MMbbl (about 6% below the 5y average for this time of year). On the products side, gasoline increased by 5.9 MMbbl (slightly below the 5y average). Distillate fuels increased by 3.1 MMbbl (4% below the 5y average). Total commercial petroleum inventories decreased by 3.4 MMbbl | Jan 10 | EIA Weekly Report
Russian Oil Trades Risk Wipeout After Sweeping US Sanctions | The latest US sanctions on oil tankers hauling Russian petroleum look set to cause severe disruption across the nation’s export machine, with some of Moscow’s flows at risk of a near wipeout if history is any guide. Nearly 1.5 million bpd of crude shipped from Pacific and Arctic ports could be heavily curtailed. The oil market is still trying to pick apart the impact of the sanctions, which could redraw traders’ expectations for a global supply surplus in 2025. Brent oil has rallied $5 a barrel since the measures were introduced, with some predicting further gains | Jan 17 | Bloomberg
Russia and Iran Draw Closer With New Pact Before Trump Returns | The agreement seeks to deepen political and economic ties between Russia and Iran. With Iran facing a domestic energy crisis and unable to meet record levels of demand for natural gas and electricity, Putin held out the prospect of energy from Russia, though he offered no timetable. Russia could supply gas to Iran with exports starting at 2 billion cubic meters per year and rising to as much as 55 billion cubic meters in the future, Putin said. “Russia was previously cautious about describing ties with Iran as ‘strategic’ to avoid antagonizing key regional players like Saudi Arabia, Israel, the UAE, and even the West,” said Nicole Grajewski from the Carnegie Endowment for International Peace. Now, “Russia is reliant on Iran for its war,” she said | Jan 17 | Bloomberg
EU Burns Through Gas Stocks With Some Nations to Miss Targets | Storage sites in the Netherlands were only 45% full as of Saturday, below an official threshold of 47% set by the European Commission, and Croatia was also below its goal. While there’s no risk of an immediate shortfall, the rapid depletion could make stockpiling this year more challenging and drive up prices for households and industry. France is also among countries seen at risk of missing its threshold by the end of this month if it continues withdrawals at a similar pace to the past two weeks | Jan 20 | Bloomberg
China's GDP rose 5% in 2024, meeting the government's annual target, as recent stimulus measures bolstered growth reaching 5.4% in October-December, the fastest pace in six quarters. However, the threatened tariffs of as high as 60% on Chinese goods could decimate trade with the Asian country and hurt a key growth driver. 2024 industrial production and retail sales also exceeded forecasts, but property investment contracted 10.6% for the year | Jan 16 | Bloomberg
Bakken Oil Strengthens as Trump Tariffs Threaten Canada’s Oil | Bakken oil at Patoka, Illinois, traded at $2.55 a barrel more than benchmark WTI on Thursday, up from a $2 premium last week. Meanwhile, grades of light Canadian crude were dipping to the weakest levels in almost a year. US Midwest refineries heavily depend on Canadian crude, with fuel makers in the region relying on Canada for 46% of the crude they turn into gasoline and diesel. Lacking pipelines running from the US Gulf to Midwest refiners, Bakken is a potential substitute for lighter Canadian grades such as synthetic crude | Jan 16 | Bloomberg
Six US banks quit net-zero finance group as ESG pressure mounts | JP Morgan was the latest to announce it has withdrawn from the Net-Zero Banking Alliance (NZBA) this week. It joined Goldman Sachs, Citigroup, Morgan Stanley, Wells Fargo, and Bank of America. None of the six banks provided a reason for the specific timing of their decision. Some critics have linked the announcements to political developments in the US | Jan 10 | Upstream
Looking ahead
IEA Oil Market Report – January 2025 | Global oil demand rose seasonally in 4Q24, posting robust annual growth of 1.5 mb/d – the strongest level since 4Q23 and 260 kb/d higher than IEA’s previous forecast. Lower fuel prices, colder weather across the Northern Hemisphere and abundant petrochemical feedstocks all combined to boost consumption. Annual growth is now assessed at 940 kb/d for 2024, accelerating to 1.05 mb/d in 2025 as the economic outlook improves marginally. World oil supply inched higher by 20 kb/d m-o-m to 103.5 mb/d in December, up 390 kb/d y-o-y, as increased output from OPEC+ African producers more than offset seasonal declines in non-OPEC+ supply. Global oil supply is projected to rise by 1.8 mb/d in 2025 to 104.7 mb/d, compared with an increase of 660 kb/d in 2024. Non-OPEC+ production is set to rise by 1.5 mb/d in both 2024 and 2025, to 53.1 mb/d and 54.6 mb/d, respectively. Global observed oil inventories increased by 12.2 mb to 7 655 mb in November, as higher crude oil stocks on land and on water more than offset draws in oil products. OECD industry stocks drew 20.1 mb to 2 749.2 mb, 118.3 mb below their five-year average and the lowest level since August 2022. According to preliminary data, global inventories extended the gains in December, led mainly by a surge in oil products on water | Jan 15 | IEA OMR
OPEC Monthly Oil Market Report – January 2025 | Global economic growth is forecast to grow at 3.1% in 2025, accelerating slightly to 3.2% in 2026, supported by anticipated inflation normalization and corresponding adjustments to monetary policies in major economies. The global oil demand growth forecast for 2025 remains unchanged at 1.4 mb/d from previous month. 2026 is expected to grow at the same rate of 1.4 mb/d, y-o-y, sustained by continued solid economic activity in Asia and other non-OECD countries. OECD is forecast to grow by about 0.1 mb/d in both 2025 and 2026, entirely from the Americas in the latter year, while non-OECD is forecast to grow by about 1.3 mb/d in both 2025 and 2026, mostly in India, China, Other Asia, the Middle East and Latin America in 2026. Non-OECD liquids supply is forecast to grow by 1.1 mb/d y-o-y in in 2025, unchanged from last month. Non-OECD liquids supply in 2026 is forecast to expand by 1.1 mb/d, y-o-y, supported by planned projects and expected upstream investment. Upstream oil investment in non-OECD countries in 2026 is expected at around $278 billion, slightly higher than anticipated spending in 2025. Non-OECD liquids supply growth in 2026 is primarily set to come from OECD Americas at about 0.7 mb/d, y-o-y. US liquids production is forecast to expand by 0.5 mb/d, y-o-y, mainly from non-conventional NGLs, Permian crude oil and the Gulf of Mexico. In addition to the US, the other main growth drivers are forecast to be Brazil, Canada and Argentina, through various offshore asset developments, tight oil production enhancement and the extension of existing projects in oil sand facilities. Liquids production in OECD Europe is projected to see a decline, y-o-y, given a lack of sufficient new projects in the region | Jan 15 | OPEC
EIA Short-Term Energy Outlook – January 2025 | Macroeconomic assumptions are a key driver in EIA’s forecast, assuming US GDP will grow by 2% in both 2025 and 2026. EIA expects downward oil price pressures over much of the next two years with Brent crude oil price to average $74/b in 2025, 8% less than in 2024, then continue to fall another 11% to $66/b in 2026. The unwinding of OPEC+ production cuts and strong growth in oil production outside of OPEC+ results in an increased global oil production forecast. EIA expects global production of liquid fuels to increase by 1.8 mb/d in 2025 and 1.5 mb/d in 2026. Although EIA forecasts OPEC+ will increase production, it expects the group will produce less crude oil than stated in its most recent production target in an effort to avoid significant inventory builds. Note this forecast was completed before the January 10 US sanctions on Russia, which have the potential to reduce Russia’s oil exports to the global market. After reaching an annual record of 13.2 mb/d in 2024, EIA forecasts US crude oil production to increase to 13.5 mb/d this year, and average 13.6 mb/d in 2026 as operators slow activity due to price pressures. WTI prices expected to average $62/b in 2026, down from $70/b in 2025. The Permian’s share of US production will continue to increase to more than 50% of all US crude oil production in 2026, to be offset by contraction in other regions. Global consumption of liquid fuels is forecast to increase by 1.3 mb/d in 2025 and 1.1 mb/d in 2026, driven by consumption growth in non-OECD countries, mainly in Asia, where India is now the leading source of global oil demand growth. The Henry Hub spot price generally rises over the next two years, expected to average $3.10/MMBtu in 2025 and $4.00/MMBtu in 2026, up from an historically low average of around $2.20/MMBtu in 2024. Wholesale natural gas prices are expected to increase because growth in demand—led by LNG exports—outpaces production growth and keeps inventories during the next two years at or below their previous five-year averages during most of the forecast period | Jan 14 | EIA
