U.S. Crude Exports: U.S. crude oil exports to Europe are expected to decline early next year after reaching a record high of 771,000 barrels per day in November due to a narrowing WTI-Brent spread and rising freight costs. The spread has tightened to around $3.40 per barrel, making shipments less economical, while crude stocks in the U.S. have fell to 23 million barrels, their lowest mid-December level in 17 years. Higher freight rates, now at $3.80 per barrel, have further limited export flows and are influencing shipments for January 2025. In contrast, a wider WTI-Brent spread of around $4.50 per barrel in late November had supported higher export volumes. These conditions suggest reduced U.S. crude shipments to Amsterdam-Rotterdam-Antwerp in the upcoming months.

U.S. Rig Counts: U.S. energy firms kept the oil and natural gas rig count steady at 589 for the second consecutive week, a 5% drop from last year, as companies prioritized debt reduction and shareholder returns over production increases. The oil rig count rose to 483, the highest since September, while natural gas rigs fell to 102, reflecting reduced drilling due to lower prices and high costs. U.S. oil output was expected to rise to 13.2 million barrels per day in 2024, up from 12.9 million barrels per day in 2023, while gas output is projected to decline slightly to 103.2 billion cubic feet per day after a record high in 2023. Despite a 49% increase in gas futures in 2024, producers have reduced gas drilling following price plunges earlier this year.

Russia/Ukraine War: Russian President Vladimir Putin expressed readiness to negotiate over Ukraine, potentially with U.S. President-elect Donald Trump, but emphasized that talks would require mutual willingness for compromise. He ruled out a temporary truce, advocating for a lasting peace deal and suggesting any agreement be based on a preliminary draft from early in the war, which some in Ukraine view as capitulation. Putin dismissed preconditions for negotiations but maintained that agreements could only be signed with Ukraine's legitimate authorities, currently seen by Moscow as the Ukrainian parliament, while casting doubt on President Zelenskyy's legitimacy under martial law. The Russian leader reiterated his commitment to achieving strategic goals in Ukraine, asserting that Russian forces were advancing steadily and that Ukrainian resistance would eventually diminish. He dismissed the possibility of major territorial concessions and insisted Ukraine abandon its NATO ambitions. Putin acknowledged the war's economic impact, noting signs of overheating in Russia's economy alongside growth surpassing some Western countries. He defended the timing of Russia's invasion, stating it should have occurred earlier and highlighted Russia's military strength, including the "Oreshnik" hypersonic missile, as a signal of Moscow's enduring power.

Market Overview: The energy sector saw Crude Oil and RBOB finish bullish at the end of last week while HO was down under a penny. Headlines that highlighted the week were the continued concern of the Chinese demand and the interest rate cuts following the U.S. Inflation Data that was reported. Over the weekend the U.S. conducted an airstrike near Baghdad targeting the Iran-aligned Popular Mobilization Forces, killing four and wounding four others. The strike was described as an act of self-defense in response to drone attacks threatening U.S. forces. This incident highlights ongoing tensions in the Middle East that could impact pricing if a refinery or oil target is attacked. Energy futures are bearish starting out the Holiday week with crude down $0.41 to $69.05, HO is down $0.0033 to $2.2284, and RBOB is down $0.0036 to $1.9380.

President-elect Donald Trump has urged the European Union to increase imports of U.S. oil and gas or face tariffs on goods like cars and machinery, the EU already buys nearly half of U.S. liquefied natural gas exports and 17% of its oil imports, Trump has pledged to boost U.S. energy production to meet rising demand. The European Commission expressed willingness to strengthen energy ties with the U.S. as it reduces reliance on Russian energy, although private European refiners typically base purchases on price and efficiency rather than government influence. Trump’s broader tariff threats, including a potential quadrupling of duties on European car exports, have raised concerns about retaliation and disruptions in trade flows. The U.S. is exporting record levels of oil and gas, with over half of its crude exports going to Europe, but further increases would require substantial investments, particularly in LNG infrastructure. Experts suggest the EU could avoid tariffs by agreeing to buy more U.S. energy, but long-term demand for oil and gas is uncertain due to Europe’s shift to renewables. Trump has also proposed steep tariffs on key trading partners like Mexico, Canada, and China to address border security and fentanyl trafficking. Although European refinery closures in 2025 may limit future crude imports, the U.S. remains a leading global oil producer, supplying over 20 million barrels per day of oil liquids, or 20% of global demand.

Starting out the holiday week the energy sector saw little moves throughout the day, then became bearish towards today’s close. Crude oil prices rose at the end of last week which was driven by optimism around the reported inflation data, which boosts the probability of additional Federal Reserve interest rate cuts. Meanwhile, progress has been reported in ongoing hostage negotiations as part of the ceasefire discussions between Israel and Hamas, the API Report is expected tomorrow afternoon, and then followed by the DOE Report later this week. At the end of today crude oil is down $0.22 to $69.24 a barrel, HO bearish to $2.2263, with RBOB following down to $1.9383.