⚡Crude Build Beats Expectations

February 21, 2025

PRESENTED BY: POWERING THE FUTURE

Morning,

~Doug​

What's in this issue:

• Energy Market Recap

• EIA Inventory Data

• Refining Revolution

• Headlines

Energy Markets

🛢️Front month WTI ended higher by another .5% making it three consecutive moves higher. Nothing too dramatic as we continue to trade in a range awaiting direction.

The March contract quietly went off the board today.

The EIA reported a build in crude oil inventories of 4.6 million barrels, in line with CRG’s estimates but well above the consensus of 3.1 million.

Cushing showed a sizable build of 1.5 million barrels while the Gulf Coast built by 3.8. The West Coast showed a draw of 1.5, bringing down the headline number.

WTI Spreads

Apr/May: +0.19
Jun/Dec: +2.59
Dec5/Dec6: +2.79

🔥Natural gas prices closed lower by 3% after putting up new highs at 4.476. The EIA showed a draw in inventories of 196 bcf.

The big cold blob on the maps will linger for a few more days, but begins to weaken over the weekend and into next week.

PRESENTED BY POWERING THE FUTURE
A curated course featuring today’s most relevant topics

Powering the Future pulls together content from across our Oil 101, Power 101, and Renewables courses. These lessons dive into the topics that are driving headlines and capital flows today.

Modules include introductions to natural gas, LNG, nuclear power, hydrogen, energy storage management, renewable power generation, and the grid.

Refining Revolution

You don’t hear about big changes in the refining world very often. But there are some shifts happening in the industry. Some facilities, like the Lyondell facility in Houston, are just aging out after over 100 years in operation.

Phillips 66 announced in October last year that it will cease operations of its refinery outside of Los Angeles.

Some of these facilities, however, are taking on new life in biofuels; including a Phillips 66 refinery in San Francisco.

Rystad Energy pointed out in recent research:

“As the energy transition progresses, these biofuels offer a practical, near-term solution to reduce emissions without requiring significant changes to current infrastructure.”

West Coast Fuel

The EIA recently highlighted how biodiesel consumption is growing on the West Coast.

And the World Resources Institute shows how rapidly it is taking over the market:

“Although the state’s overall diesel use only accounts for 7% of the country’s total, bio-based diesel makes up more than 70% of California’s overall diesel consumption.”

Aviation - Chicken and Egg

Aviation doesn’t have many options for decarbonization, and bio-based Sustainable Aviation Fuels (SAFs) are the main one.

“Depending on what it is made from, it can reduce the net carbon emissions from flying between 60 per cent and 90 per cent. But it costs at least two to three times more than standard jet fuel.”

To be clear, these are small shifts in a massive global refining picture, but they are a sign of things to come. As the FT article goes on to point out:

“…the uncertainty over SAF’s future has seen many energy companies scale back investment plans. Last July, Shell paused construction of a SAF and renewable diesel plant in Rotterdam, which it had given the green light in 2021, when the market had a more optimistic outlook.”

Headlines

“Knowing where we’ll be in four or five years is honestly impossible to tell but we’ve invested to support this growth in the next few years. The bottleneck is also going to be on the side of manufacturers like Schneider Electric and others being able to meet demand.”
+DeepSeek will not hit demand for data centres, says kit supplier - FT

“This would challenge the rosy outlook for 2025 for commodity demand, which is largely dependent on the benign view of Trump's tariffs playing out, rather than the more realistic view of significant impacts as more measures are announced and other countries retaliate.”
+BHP, Rio Tinto talk up energy transition, bet on minimal Trump fallout - Reuters

Economic Calendar

Monday -
Tuesday -
Wednesday - Housing Starts, FOMC Minutes,
Thursday - Natural Gas Storage Report, Jobless Claims, Crude Oil Storage Report
Friday - Consumer Sentiment, Existing Home Sales