Russia & Ukraine: Ukraine and Russia accused each other of violating a U.S.-brokered truce on energy strikes, with the EU refusing Russia's conditions for a Black Sea ceasefire. The U.S. announced separate agreements with both nations, but disagreements persist, particularly over reconnecting a sanctioned Russian bank to the international payment system. Despite claims of a pause in attacks, Ukraine reported continued Russian strikes on its energy facilities. The agreements, led by Donald Trump, aim for a ceasefire but lack a clear timeline. Overnight, both sides reported drone attacks, with Ukraine's President Zelenskyy urging further U.S. sanctions on Russia.
Biofuel Policy: U.S. President Donald Trump's administration has requested oil and biofuels producers to negotiate the next phase of the nation's biofuels policy to prevent political conflicts similar to those in his first term, according to sources. Big Oil and biofuels makers, traditional rivals in the U.S. gasoline market, have often clashed over the Renewable Fuel Standard, which mandates blending billions of gallons of ethanol and other biofuels into the fuel supply. The White House directive has led to at least two bilateral meetings, including one hosted by the American Petroleum Institute last week. Discussions covered topics such as future biofuel blending volumes, exemptions for small refiners, and biofuel tax policy. Any agreement between these industries could be adopted by the Trump administration.
U.S. Inventories: Yesterday the Department of Energy reported a draw on crude oil of 3.3 million barrels, less that the anticipated draw of 4.6 million barrels projected by the API. However, the decrease in inventory gave support for the market bulls. Diesel inventories saw a small draw of 0.4 million barrels due to a 9.3% decline in demand while gas saw a 1.4-million-barrel decline even with a 2% decline in inventories. Although U.S. inventories remain high, recent draws cause concern for traders.
Market Overview: In early trade the market again isn't showing much for change. The lack of new headlines to drive the complex in either direction has led to either small gains or losses recently across the complex. As reported earlier this week, eyes will be on WTI crude oil and that $70 a barrel level. Yesterday WTI was able to trade above $70 a barrel, however settled below the level or resistance at the end of the day. Should WTI settle above $70, that could open the trade range higher with the next level of resistance around $72.70.
EIA Chart: Permian Basin
U.S. oil producers are facing geological challenges that limit production growth as the nation's leading oilfield ages, resulting in more water and gas and less oil. The Permian Basin, which was central to the shale revolution nearly two decades ago, helped the U.S. become the world's top oil producer, overtaking OPEC and other major producers. However, slowing output growth and increasing costs make it difficult for producers to increase production and lower oil prices, as envisioned by President Donald Trump with his "drill, baby, drill" approach. Currently, the Permian Basin is producing 6.5 million barrels per day, a record level and nearly half of the U.S.'s peak production of 13.5 million barrels per day in December.
Oil prices rose slightly on Thursday, with U.S. West Texas Intermediate crude futures increasing by 27 cents to $69.92, as traders considered tightening crude supplies and the impact of new U.S. tariffs. On Wednesday, prices had reached their highest levels since February, driven by concerns over trade tensions. U.S. President Trump announced plans to impose 25% tariffs on imported cars and auto parts, raising concerns about their potential to slow global demand for oil. The U.S. also imposed new tariffs on Venezuelan crude, prompting India's Reliance Industries to halt imports from the country. While U.S. crude inventories showed a significant decline of 3.3 million barrels, analysts remain cautious about future price growth due to uncertainty surrounding U.S. policies and tariffs.
