Prices Strengthened but Outlook is Uncertain

Crude Oil

Prices rose amid sixth consecutive weekly decline in inventories

• WTI crude oil futures traded around $73.1 per barrel on Friday, hovering near its highest level in over two months and on track for a second consecutive weekly advance
• Prices were buoyed by optimism surrounding China’s economic outlook
• Additionally, a continued decline in U.S. crude inventories provided further support
• However, the broader outlook for the year remains uncertain, amid expectations for oversupply and the possible revival of idled OPEC+ production

Gasoline

Gasoline exceeds $2 despite biggest build-up in stocks since end of 2023

• US gasoline futures rose above $2 per gallon, nearing their highest levels since October, driven by rising oil prices and shrinking US crude stockpiles
• Globally, energy demand prospects received a boost from China’s economic stimulus measures and the World Bank’s upward revision of China’s growth forecast
• However, supply-side constraints persisted as domestic gasoline production averaged 9.9 million b/d, slightly below prior levels, and unplanned outages in the Gulf of Mexico due to hurricanes, further tightened supplies
• Gasoline stocks, however, rose by a larger-than-expected 7.7 million barrels, biggest increase since late 2023

Natural Gas

Natural gas prices fell on unexpectedly eased demand

• US natural gas futures dropped over 7% to $3.4/MMBtu after the EIA reported a smaller-than-expected storage draw
• US utilities withdrew 116 bcf of natural gas last week, below forecasts of 127 bcf, reducing total stockpiles to 3,414 bcf
• This narrowed the surplus to the five-year average to 4.7% and left inventories 1.9% lower than a year ago
• However, prices remain on track for a weekly gain as colder-than-usual weather is forecast from January 6–17, boosting heating demand
• Rising gas flows to US LNG export plants are also expected to continue, especially after the end of a Russia-Ukraine pipeline deal