Chinese Economic Optimism: Markets returned in 2025 with an optimistic view on the Chinese economy. Crude futures were brought higher in overnight trading and continued a trend higher from the last trading session in 2024 on Tuesday. President Xi Jinping delivered his New Years address to the nation and referenced new and creative approaches to stimulating economic growth in 2025. 

EIA Data: US weekly inventory data was delayed until today due to the New Years holiday. The values will be released this morning at 10am CST. A Reuters poll shows that crude and distillate inventories dropped, while gasoline inventories went higher in the week last week. API estimates that were released on Tuesday showed a larger build on gasoline that Reuters but also differed in showing a massive build on distillates. Both show a draw on crude oil. 

US Crude Output: US Crude oil production hit a record high in October according to the EIA. The US production levels rose 260k bpd month-to-month to 13.46 million bpd. Demand surged to the highest level since the COVID-19 pandemic destroyed demand in 2020. Oil output has become more efficient in the United States but will start moderating moving forward. Expectations for growth next year, and after, are approximately 300-400k bpd compared to over 1 million bpd in 2023. 

Market Overview: Morning trading appears to be sending contracts higher this morning on the first trading session in 2025. Optimism around the Chinese economy, and the energy demand a healthy China would bring to bear, have set concerns somewhat to the side about the global market being flooded with crude oil from lack of demand. While optimism on the demand side appears to exist, production increases in non-OPEC countries appear to be keeping prices in check and hampering OPEC attempts to shore up the contract price. 

Front month heating oil values are quickly making ground up and approaching the high from this past October. Back in October front month values traded as high as $2.41, while current front month values are approximately $2.33/gal. The implications of demand optimism from favorable economic data gives reason to think that front month values could challenge the recent high. If this should happen, it could be an odd spike in market values during what generally is accepted as the lowest trading points in the year from a seasonality perspective. 

Energy futures traded higher during the first session of the new year. Headlines during the day didn't offer much in the way of new information, with the exception of the inventory report that was released this morning. Inventories for the end of last week showed a drop in crude oil, with a draw of 1.2 million bbls, while products had builds. Gasoline inventories rose by 7.7 million bbls while distillates rose 6.4 million bbls. The product builds were attributed toa lagging demand from the holiday week, while refiners continued to supply product. Product supplied last week fell by 3.3 million bpd - the largest weekly decline since December 2022. With the bearish inventory report, the market continued to be supported by optimism on the Chinese economy after weak data raised hopes for further stimulus actions taken by the central government-- indirectly supporting energy consumption.