Tariff And Texas Tea. The Energy Report 01/06/2025

A Washington Post report that President Trump is going to release a list of tariffs against plans and every country caused a sharp drop in the dollar and a rally in oil and other commodities. Yet even before this story moved the markets, oil and natural gas were getting support from the major blast of Arctic air and snow and the realization that the supplies of petroleum are below average and supply of natural gas while above the five-year average are now below levels. And as EBW Analytics points out, the February WTI contract broke upward to $73.96/barrel Friday, the highest level in nearly three months—as crude cleared the high end of the $66.50-72.50/bbl trading range that defined 4Q2024. That came as six straight draws and bullish technical catalyzed the move higher.

We also saw a sign of confidence in the demand side from Saudi Arabia when they raised the price for its main Arab light crude grade by a whopping $1.50 a barrel premium to the regional benchmark for February, an increase of 60 cents a barrel. That was 6 times the amount the market had expected.

The February WTI contract broke upward to $73.96/barrel Friday—the highest level in nearly three months—as crude cleared the high end of the $66.50-72.50/bbl trading range that defined 4Q2024. Six straight draws and bullish technical catalyzed the move higher.

Reports say Trump’s aides are exploring tariff plans that would be applied to every nation but only cover critical imports is raising concerns that we may see tariffs on countries that continue to do business with Iran.  Under Biden, Iran has had a field day selling their oil raising billions of dollars for their terror campaigns. Kpler, a commodity intelligence company, said under Joe Biden’s presidency, Iran exported approximately 2 billion barrels of oil—a significant increase compared to the volumes recorded between 2019 and 2021. Iran, whose daily oil exports had fallen below 400,000 barrels in January 2021, at the start of the Biden administration, exported 1.6 million barrels daily last year.

Yet even as Iran was exporting more oil than they had here in the last five year high, here in the United States there are signs that Biden’s regulations are starting to take their toll. HFI Research reports that except for 2020, US oil production is on track for the weakest growth since the beginning of the US shale revolution.

Energy’s hard realities are starting to shape up right in front of our eyes. In Europe we see gas storage depleted at the fastest pace since 2018. Here in the US and other countries, the Arctic surge is pushing natural gas prices up 7.57%.That increase of course is based on the realization that the cold blast is going to hit. There’s still some issues about how long it’s going to stay around but there’s talking about different waves on the Fox weather channel that could mean a very tight market for natural gas. There are reports that in some areas they are already experiencing freeze offs that could impact reduction and the real cold stuff hasn’t really hit yet.

EBW Analytics reported that last week saw the February contract initially spike 81.8¢/MMBtu (+24%) to $4.201—only to return the entirety of gains by Friday to mark a small week-over-week loss. Weather-induced volatility was amplified by thin holiday trading ahead of a severe January cold blast. While January may not feature a 10+ Bcf/d freeze-off event if current forecasts hold, durable, substantial cold weather across the central and eastern lower 48 for the first time in three years may still yield a sizable monthly storage draw to offer support for near-term pricing.

You have to download The Fox Weather Ap to keep up with the lasted breaking on the arctic blast.

Stay tuned to the Fox Business Network! Invested in you!

Call to open your futures trading account and get the wildly popular Phil Flynn Daily Trade Levels. Call 888-264-5665 or email pflynn@pricegroup.com.

Thanks,