Production continues to outpace demand
January 6, 2025
Crude oil prices are up this morning on the news that Saudi Arabia raised prices for Asian buyers next month. This could be an indication that Saudi Arabia the world largest exporter sees tighter supplies in its largest market. This situation is helped by OPEC+ continuing to stick with production cuts holding barrels back from the market.
The market continues to expect excess supply in 2025 as demand from China will remain soft and non-OPEC supply forecast may rise with the risk of OPEC+ deciding t0 begin output normalization. More refineries announced maintenance recently as production continues to outpace last year’s levels, so large builds in 1Q2025 look likely.
China continues to talk about stimulus for its economy and that is helping drive the current price rally. The latest winter storm and cold weather is also supporting prices as distillate demand picks up and the risk to refineries, prodctuion, and transportation add some support to prices also.
This week is the start of what I would call the markets getting back to a more normal routine with more of the traditional players back to work in the energy space and begging to put their plans into place for 2025. It will be interesting to see how this week turns out. Crude oil, gasoline and diesel markets can be summarized right now as being in upward biased congestion and this is likely to continue here in the near term.