It’s been an eventful first week back in the office. Donald Trump’s back at it, playing Monopoly with a globe in front of him, while here in the UK, electricity prices were gone (berserk) with the wind. Meanwhile, the Mar’25 Brent futures contract briefly hit levels recorded in October while the six-month spread climbed to its widest since August – a firm backwardation. We ended 2024 cautioning a dismal fundamental narrative in oil… so what changed? Our global oil balance still flags a bearish picture in 2025. As per the EIA, US gasoline and distillate fuel oil inventories recorded significant builds in the week ending 3 Jan. Additionally, despite China’s recently announced economic stimulus measures, the yield on China’s 10-year bonds fell to all-time lows, exacerbating worries of a deflationary spiral a la Japan. However, Cushing crude oil inventories have fallen to a decade-low level. Moreover, the US has doubled down on its sanctions on Russian and Iranian crude – which may pose problems for buyers in India and China, with Shandong also reportedly tightening its monitoring of US-sanctioned ships. Finally, the emergence of a winter storm in the US has buoyed heating oil and gas demand in the near term. We see no impact on infrastructure yet, although temperatures remain low in the East and South, including in critical regions like Chicago and the Gulf of Mexico (sorry, the Gulf of America).
