U.S. Oil Imports from Canada: U.S. crude oil imports from Canada rose last week to the highest on record, data from the U.S. Energy Information Administration (EIA) showed on Wednesday, ahead of incoming U.S. President Donald Trump's plans to levy a 25% tariff on Canadian imports. Trump, who has long complained about Canada's trade surplus with the U.S., on Tuesday threatened to use economic force to turn Canada into the 51st U.S. state. He previously said he will apply tariffs on imports from Canada and Mexico immediately after his inauguration on Jan. 20. Canada has been the top source of U.S. oil imports for many years and supplied more than half of the total U.S. crude imports in 2023. Many U.S. oil refiners, especially in the Midwest, are geared specifically to run heavier crude oil grades sourced from Canada. This is something that we keep a close eye one because CHS Inc has two refineries that do take Canadian crude.
US Crude Stocks: Inventories on Diesel saw a build of 6.1 million barrels vs the expected build of 600,000 Barrels which the traders expected. Gasoline saw a build of 6.1 million barrels vs the expected build of 1.5 million barrels. Crude on the other hand did have a larger draw of 1 million barrels vs a draw of 200,000 barrels. Refinery Utilization continues to be high as refiners try to make any margin they can.
Saudi Arabia's crude to Asia: Saudi Arabia's crude oil supply to China is set to decline in February from the month before, trade sources said on Thursday, after the kingdom hiked its prices and as OPEC+ extended production cuts in the first quarter. OPEC+, which pumps about half the world's oil, decided in early December to push back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026 due to weak demand and booming production outside the group. With tighter supply, Aramco has also increased official selling prices to Asia for the first time in three months. Earlier this week, it raised the official selling price (OSP) for flagship Arab Light crude by 60 cents to $1.50 per barrel above the Oman/Dubai benchmark average, slightly above market expectations.
Market Overview: Oil markets are slightly up as we begin the day after as traders look at winter fuel demand against the large inventories that were built yesterday. The market continues to try and figure out what to truly do. Inventories are building, but winter demand is holding strong. When we look at headlines the stronger dollar is a strong head wind because not as many foreign currencies can invest. One area where supply won't build as much is the crude oil supply to China. Saudi Arabia's crude supply is set to decline next month after the kingdom raised its official selling prices to Asia for the first time in three months.
Heating Oil Analysis
The chart above is a Heating Oil (Diesel) chart which shows the highs and the lows of trades for the past 6 months. We can use a tool call the Fibonacci Retracement which will help us predict possible trends or support and resistances. This tool works by taking the high on 7/3/2024 at 2.6595 and the low on 9/11/2024 at 2.0431. From there it will create a fan of what we can call Minor and Major lines. These lines tend to show support and resistances. This is just one tool of many we use to help predict trends, but this one is nice to show where technical buyers may jump in and buy more or the opposite and sell. This tool is nice because you do start to see trends. A good example is in Nov and Dec you can see that the market tried to break a minor support. Tt eventually did and soared to the next level of support around 2.3513. So one could predict we could stay here for a bit, or it could be unattainable like it was back in the middle of October and drop back to where we were back in Nov and Dec.
Prices end up on the day as the cold weather continued to help boost winter fuel demand. Cold weather continues to take hold in the United States and Europe which is helping the market today. One interesting tidbit came from JP Morgan. JP Morgan analysts estimate that for the United States, Europe and Japan, for every degree Fahrenheit the temperature drops below its 10-year average, there is an increase of 113,000 barrels per day (bpd) in demand for heating oil and propane "as teeth-chattering temperatures prompt consumers to crank up their heat." Extreme winter conditions can lead to disruptions in oil supplies as freezing temperatures may cause temporary freeze-offs and production cuts, JP Morgan analysts said.
Looking to where the cold has taken hold it is north of the main refinery area, but power outages could be concern as heavy rain and wind is coming south of the storms in the United States.
