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- ⚡Gas and Oil Industry
March 21, 2025
Morning everyone,
Markets initially read Powell’s comments as not really bad. But that’s not the same as good.
“Many investors likely shuddered when Powell invoked the T-word on Wednesday, given the Fed has had to keep rates higher for longer precisely because the post-pandemic inflation surge wasn't as transitory as Powell and then-Treasury Secretary Janet Yellen had claimed.”
Jobless claims and existing home sales both came in with good numbers, but it wasn’t enough for equity markets to follow through on Wednesday’s gains.
What's in this issue:
Energy Market Recap
Gas and Oil Industry
Headlines
| Crude Oil (May) | $68.07 | +1.16 | +1.73% |
| Natural Gas (Apr) | $3.975 | -0.272 | -6.40% |
| Copper (May) | $5.1120 | +0.0120 | +0.24% |
| S&P 500 | 5,662.89 | -12.40 | -0.22% |
| Dollar Index (DX) | 103.50 | +0.41 | +0.40% |
Energy Markets
🛢️WTI was up by 1.75% yesterday on news that the White House is imposing sanctions on an independent Chinese refiner, the Shandong Shouguang Luqing Petrochemical Co.
These small refiners, known as teapot refineries, are the main customers of Iranian oil and operate largely outside of the western financial system, so have been able to work around all sanctions to date.
Targeting a Chinese company is certainly an escalation of “maximum pressure” on Iran, but it comes at a significant cost of directly dragging China into the equation.
WTI Spreads
May/June: +0.37
Jun/Dec: +2.41
Dec5/Dec6: +1.60
🔥 Natural gas gave up 6.4% yesterday after the EIA reported a build in inventories of 9bcf. Expectations were for a draw of around 12 bcf.
“While not unprecedented, net injections are rare at this point in the season,” according to Andy Huenefeld of Pinebrook Energy Advisors.
Source: EIA
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The Gas and Oil Market
I’ve been hearing our company president, Marty Stetzer, saying that “instead of the oil and gas industry we’re going to call it the gas and oil industry,” at new hire orientations for over a decade.
It turns out that the message is getting out.
If you feel like nat gas and LNG headlines are driving more and more of the market, you probably don’t even get half the picture.
It wasn’t that long ago that natural gas was a domestic market with fairly simple supply/demand characteristics. Sure the demand side is driven by volatile weather, but you get what’s going on.
You didn’t have to worry too much about demand coming from the other side of the pond.
Clearly, that has changed.
But, what about in the oil market?
Well, it turns out that natural gas is increasingly driving that as well. As Bloomberg columnist Javier Blas points out, ignore the boom in oil that isn’t oil at your peril.
“Back in the late 1990s, crude accounted for almost 90% of the petroleum market, so it was a good proxy for overall supply and demand. Counting barrels of crude gave you the measure of the market.
Since then, however, three developments have turbocharged the contribution of those other oils: rising biofuel output, surging production of NGLs thanks to the US shale revolution, and OPEC nations using a loophole to bypass their self-imposed output limits. The result? The share of crude in the total oil market has dropped to 74%.”
So, if you’re following natural gas you’ve got to follow developments in LNG. I think we all get that at an intuitive level.
But if you’re following oil, get on the gas game as well…
Headlines
“One of the sources told Reuters the administration was considering extending Chevron's license by 60 days and possibly more, but reversing the broader U.S. decision to ultimately end Chevron's license to operate in Venezuela was not being discussed.”
+Trump weighs extending Chevron's license for Venezuela operations - Reuters
“The oil industry has signaled it would be hesitant to rush into Alaska given its high risk and the possibility of a political pendulum swing in four years that could put Alaska off limits again.”
+Trump administration to open more Alaska acres for oil, gas drilling - Reuters
“Traders [are] rushing to deliver metal into the US,” said John Meyer, an analyst at corporate advisory firm SP Angel. This factor is pushing up the difference in price between the two markets.”
+Copper price hits $10,000 on US tariff fears - FT
Economic Calendar
Monday - Retail Sales
Tuesday - Housing Starts, Cap U
Wednesday - Crude Oil Storage Report, FOMC
Thursday - Natural Gas Storage Report, Jobless Claims, Existing Home Sales
Friday -