G7 Heat
Market is balanced with seasonality about to kick in
In this report: G7 to ratchet up significant heat on Russia, while the market trades well-balanced.
Key Stats. WTI +2.84% (-$1.66) for the week. Open $58.96 High $60.50 Low $58.28 Close $60.14
Articles
G7’s Russian oil tanker ban shows teeth, but bite is in doubt
Russia’s Western Port Oil Exports Up 25% After Drone Attacks
EU Finalizes Deal to Phase Out Russian Gas Imports by 2027
Chevron to spend up to $19 billion next year in focus on US, Guyana oil production
China floods the world with gasoline cars it can't sell at home
Exclusive-Former Pornhub Owner Interested in Lukoil Assets
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In one sentence:
Oil is stuck in a comfortable range as Russian barrels keep flowing despite harsher policy, but with year-end seasonality turning, the play now is to buy dips rather than sell rips.
The broader view.
Crude prices are supported by the prospects for the war in Ukraine to continue, which will keep sanctions on Russian energy exports in place, after US-Russian talks failed to reach a breakthrough in ending the war.
Policy is grinding steadily tighter around Russian energy – from the G7’s push to weaponise maritime services, to the EU’s legally binding path off Russian gas, to the forced sell-down of Lukoil’s overseas portfolio. On paper, that’s a structurally bullish backdrop for non-Russian barrels, Atlantic basin LNG, and “clean” shipping capacity. It also keeps a persistent geopolitical risk premium in the system: every incremental step in enforcement, insurance, or ownership screens raises the probability of real barrels going offline rather than just being rerouted.
At the same time, the flows keep adapting. Russia is pushing more crude out of western ports when refineries are hit, the shadow fleet is now a core pillar of seaborne trade, while US shale and Guyana are still adding non-OPEC supply.
Net-net, the market is being pulled in two directions: sanctions headlines and policy creep keep the upside tail alive, but the physical balance still looks broadly well supplied into the back half of the decade unless (or until) enforcement and geopolitics finally bite hard enough to break the workarounds.
Price
You can always find a bull or a bear. But the one leveller is price. Oil markets are pretty well-balanced over the last 9 weeks within a $5 range.
When we look at price - below in trade section-keep it in mind that price is happily balanced - on the quarter and monthly timeframes. We are going to need a biting catalyst to change this picture. I think given the seasonality of the market, this will come in the next 5 trading sessions. When it happens, if there is no new catalyst, the talking heads will find one.
Top headline risk is obvious at the moment
US invasion of Venezuela - the risk here should not be an upside catalyst.
Russian sanctions go all the way, with G7 implementing a global seaborne services ban. If this kicks in, it would only serve common sense that Russia would take this as close to an act of war.
WTFK - Who the f$%k knows. Normally what happens
Keeping track o the glut
American stores-starting to tick up. They are floating now well above the 5yr average
Commitment Of Traders Report
The data will not be back up-to-date until we get a report on the 23rd Jan. Nothing to report until then.
TRADE
For all the balancing that we see in the market for the last 6 to 12 weeks, it is turning out to be a pretty dead market this year. However, the risks are firmly to the
