⚡What Sanctions

February 10, 2025

PRESENTED BY: ENERGY 101

Finishing up the newsletter from the United lounge in Houston. Super Bowl is on but I won’t see the end.

Crude oil is falling despite sanctions. Copper is up over 7% on the week. European equities are leading despite dismal growth prospects.

Getting ready for another wild and unpredictable week!

~Doug​

What's in this issue:

• Energy Market Recap

• Europe on the Move

• Headlines

ENERGY MARKETS

🛢️Oil prices bounced just .5% on Friday on low volume despite the ongoing headline risk going into the weekend.

WTI was lower by 2.1% on the week, marking the third straight weekly decline.

Despite all of the sanctions and tariffs dating back to the Biden administration, WTI has peeled off $8, or 10.4% since recent highs. So trade war concerns and jawboning about local production are enough to offset sanctions on Iran and Russia.

Maybe Venezuela will do it. Or those tariffs that are just “on hold”. Stay tuned!

WTI Spreads

Mar/Apr: +0.26
Mar/Dec: +3.30
Dec5/Dec6: +2.36

🔥Natural gas prices were down 2.9% on Friday, but marked an 8.7% recovery last week.

Weather was the main driver as winter isn’t quite over yet. Inventories are now trending below where they were this time last year. With last year’s record low nat gas prices leading to production shut ins, we’ll have to see how fast inventories recover.

The middle of Feb was still looking cold as of last week, however weekend updates to models will be closely watched. NatGasWeather.com had posted:

“Overall, Light national demand through the weekend, then increasing to High next week.”

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EUROPE ON THE MOVE

The Economist recently wrote that Europe has “no escape from Stagnation”, but don’t tell the stock market that.

Amid sentiment in the financial community that couldn’t get worse, indexes from Germany to France are leading global returns this year.

Luca Paolini, chief strategist at Pictet Asset Management, was quoted in the WSJ saying:

“Europe was treated like it was almost uninvestible. The sentiment on European stocks was so bad, any single positive thing would have a significant impact.”

One thing the markets have going for them is relative value. At the end of last year, one article after another was saying the rally in the SP500 was because there was nowhere else to invest than the US.

But with the SP500 at 22x earnings and Europe at 14x (plus an environment of rate cuts), I guess there is another option.

HEADLINES

“China's share of U.S. LNG offtake is set to grow sharply. Chinese importers have committed to buying nearly 20 million metric tons per year from existing and new U.S. export terminals in contracts that often exceed 20 years, according to Reuters calculations.”
+US risks losing long game in China LNG spat - Reuters

“Facing an official inflation rate of about 35%, Iranians seeking safe havens for their savings have been buying dollars, other hard currencies, gold or cryptocurrencies, suggesting further headwinds for the rial.”
+Iran currency plunges to record lows amid escalating U.S. tensions - Reuters

“Estonia, Latvia and Lithuania disconnected from the IPS/UPS joint network and, subject to last-minute tests, they will synchronise with the EU's grid at 1200 GMT on Sunday after operating on their own in the meantime.”
+Baltic nations cut ties to Russian power grid, prepare to link with EU - Reuters

“After taking another look at the plant's expected air emissions, the FERC staff concluded in the current draft EIS that the project's emissions impacts "are not significant."
+Venture Global CP2 LNG export plant in Louisiana moves forward with environmental report - Reuters

ECONOMIC CALENDAR

Monday -
Tuesday -
Wednesday - CPI, Crude Oil Storage Report
Thursday - Natural Gas Storage Report, Jobless Claims, PPI
Friday - Retail Sales