- Energized
- Posts
- ⚡ Oil dips after breaking $80
⚡ Oil dips after breaking $80
Plus, End of a Supercycle, Beginning of Sanctions-cycle
Doug Stetzer
January 17, 2025
Energy traders have had to keep one one eye on headlines about sanctions, and another on data showing any signs of life out of China. The later seems to have faded in the distance a bit as of late, and the FT has two great articles on why it might stay that way (see End of a Supercycle).
I'm waiting for any new chatter out of OPEC who doesn't convene for their next ordinary meeting until May 28.
~Doug
What's in this issue:
Energy Market Recap
Gas Draws
End of a Supercycle
Headlines
| Crude Oil (Feb) | $78.68 | -1.36 | -1.70% |
| Natural Gas (Feb) | $4.258 | +0.175 | +4.29% |
| Copper (March) | $4.4410 | +0.0520 | +1.18% |
| S&P 500 | 5,937.34 | -12.57 | -0.21% |
| Dollar Index (DXY) | 108.96 | -0.13 | -0.12% |
Energy Markets
🛢️Oil prices ended lower by 1.7%. We're in a headline driven market which makes the time in between ripe for consolidation.
Will the Trump team impose sanctions on Iran and Venezuela? Bloomberg reports that their team is already drafting up what it might look like, stating:
"There’s a general consensus among his key advisers to return to a full maximum pressure strategy targeting Tehran, starting with a big sanctions package that hits major players in the oil industry, which could come as early as February"
Will OPEC come to the rescue or just sit back and enjoy the $100 oil?
Stay tuned...
WTI Spreads
Feb/Mar: +0.83
Mar/Dec: +7.63
Dec25/Dec26: +3.21
🔥Natural gas prices rallied 4% after the EIA reported an inventory draw of 258 bcf.
The draw was widely expected, but inventories are now below where they were at this time last year.
China Commodities Supercycle is Over
Traders have one eye on sanctions, and the other out for signs of life from China. The FT has a couple of good articles on why demand from China might not be coming back - ever.
Peak Oil Demand
Calls of peak oil demand elicit justifiable eye-rolls, and article highlights just how difficult it is to determine China's demand. It also presents pockets of future demand as well. (Spoiler alert: petrochemicals).
Why all of the focus on demand growth? As Martijn Rats, an analyst at Morgan Stanley points out:
“if you truly have very little oil demand growth then that is a different oil market in the future than it has been in the past.”
The End of a Supercycle
While there is debate on when peak oil demand will occur, there is no question that the commodities supercycle that China presided over for the last 25 years is over.
The industrialization and urbanization that drove global commodities demand has run its course. It isn't just he current economic downturn that ended it, but that beast called demographics.
Peter Toth, chief strategy officer of Newmont, puts it this way:
“At its height, the China supercycle in iron ore was something I’ve never seen,” says Toth. “And will never see again in my career.”
Headlines
"In April Auchincloss set a cash-cost reduction target of at least $2 billion by the end of 2026"
“These bonds will multiply the funds available for scaling-up clean technology and infrastructure in developing countries — not in ten years, but now, when it’s most critically needed,”
"The World Nuclear Association reckons there are around 300,000 tons of spent nuclear fuel globally in need of disposal. Most of it is stored in cooling ponds near the reactors that produced it."
"More bunker volumes emerged in 2024 as shipping tensions in the Red Sea altered refuelling patterns and buoyed marine fuel demand, while shipowners also lifted more alternative fuels to support emission cuts, said industry sources."