U.S. Weekly Energy Stocks: U.S. crude oil inventories are anticipated to have fallen by 1.9 million barrels last week ending Dec. 20, with distillate stocks weakening by 300,000 barrels and gasoline inventories rising by 3.9 million barrels, according to an API report. Crude stocks dropped more sharply than expected, with a reported decline of 3.2 million barrels, while distillate inventories fell by 2.5 million barrels. Refinery utilization was estimated to decrease by 0.4 percentage points from 91.8% of total capacity in the previous week. The official EIA report, delayed until today due to the Christmas holiday, is expected to confirm these trends which have investors and traders waiting to make moves.
Russia/Ukraine War: The Biden administration plans to announce another Ukraine Security Assistance Initiative (USAI) package worth $1.2 billion, including air defense interceptors and artillery munitions, which will be procured rather than drawn from existing U.S. stocks. The USAI program, which has accounted for about half of the $61.4 billion in security assistance provided to Ukraine since Russia's invasion, has benefited U.S. defense contractors like L3Harris Technologies. Questions loom over future U.S. military aid to Ukraine, as this package uses up remaining USAI funds and presidential drawdown authority is limited to $5.6 billion. President-elect Donald Trump has expressed skepticism about U.S. involvement in the conflict, calling for European allies to contribute more and vowing to end the war swiftly if in office. This shift instance among some Republicans, who will control Congress next month, raises concerns about the continuity of U.S. support for Ukraine.
Slow Energy Investments: In 2024, major European energy companies like BP, Shell, and Equinor shifted efforts back to oil and gas for near term profits, scaling down climate commitments and renewable energy investments amid high energy costs and geopolitical disruptions like the war in Ukraine. This cutback reflects lagging share performance compared to U.S. oil focused rivals and challenges such as inflation, supply chain issues, and investor opportunities. Global carbon emissions are set to hit a new high in 2024, with the year becoming the warmest on record, highlighting the climate consequences. The energy sector faces a uncontrolled 2025, as Donald Trump's return to the White House raises prospects of repealed U.S. green energy policies and withdrawal from global climate efforts. Geopolitical tensions in Europe, China's economic challenges, and disappointment over global climate action further complicate the outlook for addressing climate change.
Market Overview: The energy sector is watching bullish oil prices early which is higher than anticipated this morning, driven by expectations of lower U.S. inventories and optimism over China's stimulus driven economic recovery. Analysts estimated a U.S. crude stock decline of almost 2 million barrels to be reported today, while the American Petroleum Institute reported a larger drop of over 3 million barrels. Despite gains in crude driven by increased demand and cold weather, a stronger U.S. dollar limited further price increases. Energy futures are bullish to end the last Friday of the year with crude up $0.83 to $70.45, HO is up $0.0352 to $2.2405, and RBOB is up $0.0198 to $1.956.
U.S. electric and hybrid vehicle sales increased to 18.7% of total new light duty vehicle sales, driven primarily by a 30.7% year over year rise in hybrid electric vehicle (HEV) sales. Battery electric vehicles (BEVs) held steady at 7.1% market share, with luxury BEVs representing 73.8% of total BEV sales. Tesla’s market share in the electric vehicle segment fell below 50% for the first time since 4th quarter 2017, as legacy manufacturers like Ford and Chevrolet gained ground. The average transaction price of BEVs decreased from $57,405 in January to $56,371 in June 2024, narrowing the price gap with conventional vehicles. While 74.4% of BEVs sold in the U.S. were manufactured in North America, compliance with Inflation Reduction Act requirements for tax credits remains contingent on meeting domestic content criteria beyond location.
The Energy sector saw bullish prices early due to slow trading and the anticipation of the DOE report which was late due to the Christmas holiday. With a higher volume of trucking activity prior to the holiday season, crude inventories fell 4.2 million barrels, distillates fell 1.7 million barrels, while gas had a build of 1.6 million barrels. The U.S. Energy firms have reported no change in rig counts for the third week in a row, which in total is now down for the second year in a row due to a reduction in drilling activity, higher equipment prices, and a higher cost in labor. To end the last full week of 2024 crude oil will finish up $0.98 to $70.60 a barrel, HO up $0.0395 to $2.2448, and RBOB up $0.0124 to $1.9582.
