California Wildfires: On one side of the United States there is cold and on the other side there are fires. Kinder Morgan said that two fuel pipelines in the Los Angeles area have been shut in since January 8 due to power outages. These pipelines help supply California, Arizona, and Nevada. As of now, there are no refineries that have shut down and they predict they can catchup quickly when they can regain power. More than 300,000 customers are without power in California as of Thursday, according to figures from utility Southern California Edison.
Cold Weather Impacts: With the cold weather gripping the United States and Europe, demand is significant, and inventories are low in different areas. Here in the United States the cold weather is staying north of the refinery belt, as of now which is good so no shutdowns have occurred, but there are concerns of rain and power outages that could change that. In Europe, Britain has now come out that their gas level are concerningly low stating they may have less than a week left of gas. “As of the 9th of January 2025, U.K. storage sites are 26% lower than last year’s inventory at the same time, leaving them around half full. This means the U.K. has less than a week of gas demand in store,” Centrica said in a statement. Unlike Europe, Britain does not have a mandatory gas storage target which Europe set following price spikes and supply fears during the energy crisis. At this time, it is not said where they started to now be put in this position. But it is increasing fuel demand to heat homes.
Trump's Energy Picks: "The U.S. Senate Energy Committee will hold nomination hearings for President-elect Donald Trump's picks for energy roles on Tuesday and Wednesday next week," the panel's chairman Senator Mike Lee said. The committee will hold a hearing to consider Doug Burgum, Trump's nominee to be secretary of the interior, on Tuesday, Jan. 14 at 10 a.m. Burgum was until last month the governor of North Dakota, a big oil-producing state. Burgum is also expected to head a new National Energy Council to coordinate policies to boost U.S. energy production. The committee will hold a hearing for Chris Wright, the pick for energy secretary, a day later at the same time. Wright, CEO and chairman of the board of Liberty Energy, plans to step down from that role when confirmed as secretary. The candidates are expected to be confirmed by the Senate, now controlled by Trump's fellow Republicans, as they only require a majority to be confirmed. They are expected to carry out Trump's policies to boost production of oil and gas and rein in President Joe Biden's rules and regulations on climate change.
Market Overview: Energy is up significantly as we begin the day. The two biggest factors continue to be the same headlines. Traders are focus on potential supply disruptions from more sanctions on Russia and Iran. Along with short term the very cold weather across the U.S is driving up demand for fuel. Ahead of U.S. President-elect Donald Trump's inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low. This could materialize even earlier, with U.S. President Joe Biden expected to announce new sanctions targeting Russia's economy before Trump takes office. A key target of sanctions so far has been Russia's oil industry. Oil prices continue to rally despite the U.S. dollar strengthening for six straight weeks, making crude oil more expensive outside the United States.
Crude Oil Analysis
The chart above is a Crude Oil chart which shows the highs and the lows of trades for the past 6 months. Yesterday we spoke about the Fibonacci retracement tool that can help predict trends along with supports. Looking at the chart like we did yesterday, Crude we took the most recent high on 7/18/24 at 83.85 and the low on 9/10/24 at 65.29. From there you can see today's high so far tested the next minor support at 76.76. It did come down after testing it which can lead to stating that it hit its high. To break through support and get upside like this takes the help of a lot of factors. Those tend to be more traders buying to cover short positions, physical inventory in certain regions becoming low. Or what is starting to occur is more investments are being done in oil to help with inflation. One technical tool we also look at is the Relative Strength Index (RSI) which shows traders are over bought and have been for a little bit of time which can suggest downside in the future. The question then is poised there is how much? That will be a hard answer with upcoming tariffs and economic factors that are going to be discovered the next few weeks.
Oil prices rallied today. This is the highest its been in over 3 months as markets brace for supply disruptions from the broadest U.S. sanctions package targeting Russian oil and gas revenue. The Biden administration on Friday imposed fresh sanctions targeting Russian oil producers, tankers, intermediaries, traders and ports, aiming to hit every stage of Moscow's oil production and distribution chains. The move is meant to cut Russia's revenues for continuing the war in Ukraine that has killed more than 12,300 civilians and reduced cities to rubble since Moscow invaded in February 2022.
The U.S. Treasury imposed sanctions on Gazprom Neft and Surgutneftegas, which explore, produce and sell oil plus have 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum. Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil.
