Chinese Exports: China has issued 19 million metric tons of export quotas for gasoline, diesel, and aviation fuel for the first batch of 2025, maintaining levels similar to the previous year, with state-owned firms Sinopec and CNPC receiving 70% of the allocations. Additionally, 8 million tons of low-sulfur marine fuel export quotas were released, with the majority also allotted to Sinopec and CNPC. Refined oil product exports for the first 11 months of 2024 totaled 54.4 million tons, down 6.3% year-on-year, as refiners adjusted operations. China’s oil consumption is expected to peak in 2027 at 800 million tons annually, driven by declining diesel demand due to LNG adoption and reduced gasoline demand from the rise of electric vehicles.

Russia/Ukraine War: Russia launched a large scale missile and drone assault on Ukraine's energy infrastructure and cities on Christmas Day, killing at least one person and wounding six, while causing widespread blackouts and heating outages. Ukrainian President Volodymyr Zelenskyy condemned the attack as" inhuman," noting over 70 missiles and 100 drones targeted energy facilities and civilian areas. Russia's Defense Ministry claimed the strikes hit critical infrastructure supporting Ukraine's military industrial complex. The U.S. condemned the attack, with President Joe Biden announcing plans for more military aid to Kyiv, while concerns arose about future support under incoming President Donald Trump. Meanwhile, Moldova reported a Russian missile crossing its airspace, and Ukraine’s energy sector faced its 13th major assault this year, with officials urging allies to supply more air defense systems to counter the attacks.

U.S. Crude Inventories: U.S. crude oil inventories are expected to have fallen by an average of 1.9 million barrels in the week ending December 20, according to a Reuters poll of analysts. Gasoline stockpiles are estimated to have decreased by 1.1 million barrels, while distillate inventories, including diesel and heating oil, are expected to have dropped by 300,000 barrels. The refinery utilization rate is projected to have declined by 0.4 percentage points from the previous week’s 91.8% capacity. These estimates come ahead of reports from the American Petroleum Institute on Tuesday and the Energy Information Administration (EIA) on Friday, delayed due to the Christmas holiday. In the prior week ending December 13, EIA data showed crude inventories fell by 934,000 barrels to 421 million, below the expected 1.6-million-barrel draw.

Market Overview: The markets were closed yesterday and opened up this morning stronger than anticipated due to the ever changing forecasts and the supply and demand trends that have current levels slow due to the holidays. Analyst are waiting for what supply inventories will be to close out 2024. Energy futures are bullish to start after the holiday break yesterday as crude is up by $0.48 to $70.58, HO is up $0.0207 to $2.2422 and RBOB moving up at $0.0115 to $1.9704.

Oil and natural gas companies are adopting advanced technologies like AI, electronic hydraulic fracturing, and automated drilling to enhance efficiency and reduce rig downtime. These innovations have improved drilling techniques, boosted productivity, and enabled better targeting of operations, especially in regions like the Permian Basin, which saw a 9% year-over-year productivity increase per rig in November. Enhanced technological performance has driven higher production rates, contributing to the forecasted rise in Lower 48 crude oil production to a record 11.3 million b/d by 2025. Increased pipeline capacity, such as the new Matterhorn Express pipeline in the Permian, supports this growth by addressing natural gas takeaway constraints that can otherwise hinder drilling activity. The combination of technology and infrastructure expansion is expected to sustain productivity growth and enable higher output.

The energy complex saw markets up to start the day and end the day bearish. Light trading continues due to the Christmas holiday, as the U.S. Dollar strengthens which could make oil more expensive for holders in other currencies. Israel sent a missile strike to Houthi in Yemen damaging the Sanaa International Airport. The American Petroleum Institute showed crude stocks fell last week by 3.2 million barrels has traders waiting for the EIA data which comes out tomorrow, later than normal because of the Christmas holiday. At the end of today crude oil is down $0.48 to $69.62 a barrel, HO down $0.0162 to $2.2053, and RBOB just down $0.0131 to $1.9458.