No Changes for Fed Reserve: The U.S. Federal Reserve kept its policy rate steady at 4.25%-4.50%, with Chair Jerome Powell emphasizing a cautious approach to future cuts until inflation and job market data support further action. The Fed remains in a holding pattern as it assesses the potential economic impacts of President Trump’s policies on tariffs, taxes, and immigration. While inflation has stabilized but remains slightly above target, officials believe progress will resume, though they are wary of cutting rates too quickly. Investors anticipate the next rate cut may not come until mid-2025, as the Fed prioritizes economic stability over aggressive easing.

Ukraine Attacks Russian Refinery: On Wednesday, Ukraine claimed responsibility for a drone strike on Russia's NORSI oil refinery in Kstovo, causing a significant fire, while a Russian official reported intercepting a Ukrainian drone attack on a nuclear power plant in Smolensk. Russia's Sibur temporarily halted operations at its petrochemical plant in Kstovo due to a fire caused by drone debris. Russia continues to process more crude through refineries to counter U.S. sanctions restricting raw crude exports. The Russian Defense Ministry reported destroying 104 Ukrainian drones across multiple regions, as cross-border attacks between the two countries intensified amid the ongoing war. In a related development, Russian President Vladimir Putin has expressed his readiness to meet with U.S. President Donald Trump to discuss the conflict in Ukraine, though the Kremlin has stated it has not yet received a formal proposal from the United States regarding such a meeting.

Inventory Report: U.S. crude stocks rose by 3.5 million barrels to 415.1 million barrels for the week ending January 24, as refinery utilization declined due to winter storms impacting fuel production. Distillate inventories saw a sharp 5 million barrel drop, with demand for heating fuel pushing distillate supply to its highest level since March 2022. Gasoline stocks increased by 3 million barrels, while crude imports rose by 532,000 barrels per day to 2.76 million bpd, and exports fell by 829,000 bpd. Refinery crude runs and utilization rates both fell as refineries reduced output during the winter weather conditions.

Market Overview: Oil prices are flat to start Thursday, with WTI crude hovering around $72.61 a barrel as markets balanced rising U.S. crude stockpiles against geopolitical and trade uncertainties. Traders remain focused on potential 25% tariffs on Canadian and Mexican imports, which could disrupt supply chains. The upcoming OPEC+ meeting on Feb. 3 is also in focus, as the group prepares to address U.S. production policies and Trump’s calls for lower oil prices. Additionally, U.S. sanctions on Russian exports and weather-related demand fluctuations continue to add uncertainty to the market outlook.

Energy Earnings

Wall Street expects a significant decline in U.S. refiners' fourth-quarter profits due to weakening fuel demand and potential cost increases from Trump's proposed 25% tariff on crude imports from Canada and Mexico. Refining margins and crack spreads have dropped, leading to lower earnings forecasts for major refiners like Valero, Marathon Petroleum, and Phillips 66. The potential tariffs, set to take effect on Feb. 1, could further pressure refiners, particularly in the Midwest, which relies heavily on Canadian crude. Investors are watching how refiners plan to mitigate these challenges, with some increasing Canadian crude purchases to hedge against potential tariff impacts.

WTI crude futures finished flat on Thursday, edging up 11 cents to settle at $72.73 on Thursday, as markets weighed the potential impact of U.S. tariffs on Canadian and Mexican crude. Heating oil futures also gained, rising just over 2 cents to settle at $2.4754. President Trump's threat to impose a 25% tariff this weekend unless both countries curb fentanyl shipments added uncertainty, though analysts suggested the market had already priced in the risk. U.S. crude stockpiles rose by 3.5 million barrels last week, exceeding expectations, as winter storms dampened demand and refiners cut production. Meanwhile, OPEC+ is set to meet on Feb. 3 to discuss U.S. oil production policies, though analysts believe a price war between the U.S. and OPEC+ remains unlikely.