surged by 3% on Tuesday, driven by heightened geopolitical tensions as President Donald Trump increased pressure on Russia regarding the ongoing conflict in Ukraine, alongside renewed optimism surrounding the easing of trade disputes between the U.S. and its key partners and the Fed stays steady as Fed chairman Jerome Powell starts to see crack in his alliance And the trend that if it continues he may be as lonely as the Maytag washing machine repair man.
In a major development shaking global energy markets, reports say that Indian state refiners have abruptly halted purchases of Russian oil this week. This decisive move comes as discounts on Russian crude tightened, and President Donald Trump issued a strong warning against sourcing oil from Moscow. Industry insiders are closely watching this shift, which could have significant ramifications for international supply chains and pricing dynamics in the weeks ahead.
The U.S. Treasury Department also announced new sanctions on Wednesday targeting more than 115 individuals, entities, and vessels associated with Iran, indicating that the Trump administration is intensifying its “maximum pressure” strategy following airstrikes on key nuclear facilities in Tehran in June, as reported by Reuters.
However, Chair Jerome Powell remains steadfast, resisting calls to adjust monetary policy despite mounting evidence that suggests a shift may be warranted. For the first time since the 1990s, two Federal Reserve officials broke ranks, advocating for immediate interest rate cuts as inflation targets have been basically met, economic growth is on the rise, and the housing market continues to show signs of strain.
Powell’s recent remarks have sparked debate as to why interest rates remain elevated despite stable inflation, a constrained housing market, and robust GDP growth. Notably, even Fed governor Christopher Waller and fed vice chair for supervision Michelle Bowman dissented, calling for a 1/4 point rate cut, marking the first such action since 1993. While Powell continues to cite inflationary pressures and tariff concerns, the justification for maintaining higher rates is becoming less clear, and some suggest it may be influenced by non-economic factors.
Greater clarity and decisive action from the Fed could help make homeownership and economic opportunity more attainable for all Americans. The Fed’s stubbornness or its misunderstanding about how tariffs are going to impact the economy is making the Fed decision look either uninformed or mainly political.
The Fed chair did acknowledge that the housing market is struggling but thinks that it’s not the Fed’s job or fault.
Fox Business reported that Powell said that Fds actions are not the primary driver of mortgage rates.
He acknowledged that the Fed’s overnight rate influences other borrowing costs, but emphasized that longer-term rates, like those for mortgages, are more affected by other factors, including market conditions and the long-term housing shortage.
Powell also stated that the best thing the Fed can do for housing is to achieve its dual mandate of 2% inflation and maximum employment.
Oil continues to hold strongly above the 200-day moving average, showcasing a robust market breakout and fueling optimism for further gains. This momentum is supported even as yesterday’s Energy Information Administration () Energy Status Reports raised new questions but also highlighted notable progress by US refiners in responding to demand. Distillate inventories saw a much-needed boost, reflecting the impressive ability of U.S. refineries to step up and meet demand.
On the other hand, the substantial build in crude oil inventories can likely be attributed to recent weather disruptions in Texas—either delaying exports or recording imports that were postponed due to storms. Distillate inventories put in another big week of builds it’s refiners rose to the occasion, increasing by 3.6 million barrels.
Despite these temporary hiccups, the market’s underlying fundamentals remain resilient, inspiring confidence in the outlook ahead.
The EIA reported that US crude oil inventories had a massive 7.7-million-barrel weekly increase in crude oil inventories but even with that massive bill, crude oil is still about 6% below the five-year average.
Now, looking at gasoline stockpiles dropped by 2.7 million barrels and are about 1% under the five-year mark, while finished gasoline rose a bit, and blending components dipped. Energy analyst Tim Dallinger notes that ready-to-use gasoline stocks are tight, as reflected in recent figures.
Distillate inventories had a solid and much-needed boost, jumping by 3.6 million barrels, but they’re still around 16% below the five-year average.
Propane and propylene inventories went up by 1.1 million barrels and are sitting 9% higher than usual this time of year. All in all, total commercial petroleum inventories climbed by 7.1 million barrels last week.
Let’s break down what’s happening with refinery activity. U.S. refineries were putting out about 16.9 million barrels a day, which is just a hair less than the week before.
Refineries were running at a strong 95.4% of their capacity, and gasoline production even went up to 10 million barrels per day. Distillate fuel production also grew, reaching about 5.2 million barrels per day as refiners rose to the occasion to fill the diesel void.
On the import side, the U.S. brought in an average of 6.1 million barrels of crude oil per day last week, up a bit from before, but still about 11% lower than the same period last year. Gasoline imports averaged 691,000 barrels a day, and distillate fuel imports clocked in around 229,000 barrels daily.
Zooming out over the last month, Americans used about 20.8 million barrels of petroleum products per day, which is up about 1.5% from last year. Gasoline demand slipped by 3%, and distillate fuel use was down 4.1%, but jet fuel demand jumped nearly 9% compared to the same four weeks last year.
So, while there are some ups and downs week to week, the big picture shows a market that’s shifting but still resilient, with some categories seeing increases and others not quite catching up to past trends. And at the same time as people speculate about the incredible growth in the economy that came in at 3% yesterday, one would expect to see the demand for oil to be better than the naysayers were saying just a few months ago.
Another supporting factor is one that I don’t fully believe in: the claim that U.S. shale oil production has already peaked, with its best days behind it. But history shows that you should never count out U.S. oil and gas producers—when prices get high enough, they always find a way to extract more oil.
I recently spoke with my colleague and oil analyst Anas Alhajji, and I genuinely share his positive outlook on these developments.
Anas Alhajji, a well-respected energy analyst and former OPEC adviser with experience in the shale industry, stated that when prices rise sufficiently, more oil will be found in the shale patch—and I fully agree.
Today, sanctions turmoil and the big drops in and other metals are keeping the risk off for oil. It just seems that the desire to catch up with inventories has left us short with gasoline, so the gasoline crack spread and gasoline over heating oil continues to look very bullish.
Natural gas can get a bid as the hot temperatures haven’t lived up to some people’s expectations in US production continues to be strong.
The Energy Information Administration has provided a comprehensive outlook on the future of . The report highlights regional price and production differences driving infrastructure development to meet Gulf Coast demand.
The EIA projects increased natural gas flows from the mid-Atlantic’s Appalachian Basin to the Gulf Coast due to growing demand, primarily from liquefied natural gas (LNG) exports. Here’s what’s going on: LNG Exports Are Booming: Most U.S. liquefied natural gas (LNG) export facilities are on the Gulf Coast, and even more are being built in Texas and Louisiana. LNG exports are set to more than double, from 4.4 trillion cubic feet in 2024 all the way up to 9.8 trillion by 2037, and should stay pretty steady after that.
Where the Gas Is Coming From: The Appalachian Basin (think Pennsylvania and nearby states) is ramping up. Gas production there is expected to increase from 12.6 trillion cubic feet in 2024 to 19.6 trillion by 2050 because it’s cheap and there’s a lot of it. Meanwhile, gas production in places like the Permian Basin, the Gulf Coast, and offshore is set to drop by about 3.3 trillion cubic feet by 2050. That’s mostly because oil production there is slowing down, drilling is expensive, and offshore projects need a lot of money.
What’s Happening with Prices: The main U.S. price for natural gas (the Henry Hub price) will probably go up from $2.19 per unit in 2024 to $4.80 by 2050. There’s also going to be a bigger price difference between East Coast gas and the Gulf Coast — more than $2 per unit by 2050. Because of this, we’ll likely see more pipelines built to move gas from the East to the Gulf Coast.
What’s Assumed Here: These numbers are based on the latest laws and rules as of December 2024 — anything that changed after that isn’t included.