⚡Oil Gains on Iran Sanctions

February 25, 2025

PRESENTED BY: POWERING THE FUTURE

Morning everyone,

Eyes on Nvidia earnings Wednesday as equity markets have plateaued since the election. The dollar is also about 3.5% off its peak (also post election).

For context on the dollar’s impact on commodity prices, listen to Jeff Currie explain (also linked in the ‘Electric Supercycle’ segment below.

~Doug​

What's in this issue:

• Energy Market Recap

• Electric Supercycle

• Headlines

Energy Markets

🛢️WTI briefly dipped below $70, following through on Friday’s move lower before rallying back into the range on the news that the US Treasury Dept. announced more sanctions targeting Irainan oil exports.

At the end of the session, prices were higher by .43%.

Of course, we’ve covered how Iran’s oil mostly goes to small refiners in China who operate without the use of the US dollar. Additionally, with OPEC holding back exports, there is plenty of spare capacity to make up for any lost oil on the market.

So not expecting a huge move on this, but it was enough to stop prices from breaking support.

WTI Spreads

Apr/May: +0.25
Jun/Dec: +2.38
Dec5/Dec6: +2.34

🔥Natural gas fell by over 5.5% as the arctic winter has come to a close (for now at least).

The next cold front moves through at the end of the week, but it is expected to clip the northeast. While this affects a large population area, it isn’t on the same par as the last two events that blanketed much of the nation.

The March contract expires on Wednesday so there may be some rolling of length, but most of the open interest has already moved to the April and May contracts.

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.

Electric Supercycle?

In this older interview with S&P Global (still well worth a listen), Jeff Currie, former head of commodities research at Goldman, said this:

“What is the definition of a commodities supercycle? It’s a structural upward shift in demand.”

He goes on to point out,

“The other aspect that makes this a supercycle is the underinvestment in supply.”

So, does this fit what’s happening in electricity infrastructure? The Economist thinks so.

It’s hard not to say that this is what is happening in our power sector. The onset of AI driven electricity demand blown up growth curves well beyond even what the ‘electricfication of everything’ had in mind.

The IEA stated in it’s Electricity 2025 report:

“In advanced economies, electricity demand – both in total and per capita – has stayed relatively flat or even declined since 2009, as in the case of Japan, although GDP PPP per capita has continued to rise.”

Now, some expect US power demand to grow by over 15% by 2029.

Scott Strazik, boss of GE Vernova was quoted in the Economist,

“Demand for everything from transformers and switchgears to high-voltage transmission cables is being turbocharged.”

Equity markets have noticed. Siemens Energy was up 300% last year, outpacing Nvidia.

Jevons Paradox in Action

Oh ya, and think DeepSeek is coming to the rescue?

“Tencent, Alibaba, and ByteDance have "significantly increased" orders of the H20 - a chip specific to China due to U.S. export controls - since the Chinese AI startup burst into the global public consciousness last month, two of the people said.”

+Nvidia's H20 chip orders jump as Chinese firms adopt DeepSeek's AI models, sources say - Reuters

Headline

“Some previous corporate users of credits have limited or halted purchases to focus on emissions reduction, and amid investor concerns about offsetting strategies.”
+Carbon Credits Needed for Hard to Curb Emissions, Woodside Says - Bloomberg

"This measure is intended to regulate supply on the international market, which is faced with a production glut,"
+Congo bans cobalt exports for four months to curb oversupply - Reuters

“The pipeline was first proposed in 2008 to bring oil from Canada's Western tar sands to U.S. refiners and was halted in 2021 by then-owner TC Energy Corp after former Democratic President Joe Biden revoked a key permit needed for a U.S. stretch of the project.”
+Trump says he wants Keystone XL Pipeline to be built - Reuters

Economic Calendar

Monday -
Tuesday - Case-Schiller, Consumer Confidence
Wednesday - New Home Sales, Crude Oil Storage Report
Thursday - Natural Gas Storage Report, Jobless Claims, GDP
Friday -