Threats of an “armada” Heading for Iran Rally Crude Prices  

 Oil – Fundamental Analysis

President Trump’s announcement that a US Naval “armada” is heading towards Iran fueled a rally in crude prices this week that had otherwise been range-bound on conflicting signals. Possible progress in Russia/Ukraine talks and across-the-board gains in crude and refine product stocks had dropped prices below the key $60/bl. mark before Trump’s statement on Iran. WTI’s weekly high of $61.26/bl. occurred Friday while the low of $58.55 was on Tuesday. Brent followed a similar pattern with its high of $66.05/bl. on Friday and its weekly low of $63.25 on Monday. Both grades settled higher week-on-week. The WTI/Brent spread has widened to ($4.80).

 On Thursday, Trump again said he was “watching Iran closely” in regard to governmental actions against protestors there, adding that a US Navy “armada” was heading toward the country, once again raising the geopolitical risk premium in global oil markets as the Strait of Hormuz could again be “in play”. On the flip side, in post-Davos comments, the President said he would hold off on the threaten tariff increases on country’s that opposed his planned takeover of Greenland. Furthermore, after US representatives met with the Kremlin in Moscow, there is now a planned meeting in the U.A.E. for the US, Russia and Ukraine. Zelensky has expressed some optimism regarding the meeting. Meanwhile, Kazakhstan’s largest oil field halted production Friday due to power issues, adding further bullish sentiment since it represents actual supply curtailment and not perceived disruption.

 The market overall still remains bearish with an oversupply outlook despite a report by the IEA raising its global oil demand forecast. The agency foresees positive economic growth but warned that supply will still outpace consumption this year. The economy of the world’s largest importer of oil, China, expanded by +5% last year according to governmental data.

 Winter Storm Fern will have an impact on heating oil demand this week as the cold front covers the entire consuming region. HO is also a replacement fuel for many power plants should natural gas freeze-offs curtail supplies. February NYMEX ULSD futures are up +$0.20/gal. this week which is also supporting higher crude prices.

 The Energy Information Administration’s Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week increased again, this time by +3.6 million bl. to a total of 426 bl. million and -2% below the 5-year average. The API forecasted a +3.0 million bl. gain while market analysts forecasted a -0.5 million decrease. US refinery utilization was 93.3% down from 95.3% last week. Gasoline demand was -50k bld. to 7.8 million bld. Total motor gasoline stocks increased +6.0 million bl. to 257 million bl. and are now +5% above the 5-year average. Distillates were +3.3 million at 133 million Bbl. and are now at -1% below the 5-year average. Inventory at the key Cushing, OK hub changed +1.5 million Bbl. to 25.1 million Bbl. or 32% of capacity. The SPR was +800k bbl. to 415 million bbl. Imports of crude oil were -650k bpd. to 6.5 million Bbld. vs. 7.1 the prior week while exports were 3.7 million bpd. vs. 4.3 the prior week. Exports of petroleum products were 6.9 million bpd. last week vs. 7.1 the prior week. Total US oil production dipped to 13.7 million bld. vs. 13.5 last year at this time. Total US active rigs rose +1 last week to 544 vs. 576 last year with +1 in oil and -0- in gas.

 AAA’s average US retail gasoline prices at the pump were most recently reported at $2.862/gal., +$0.023/gal. vs. last week, +$0.004/gal. from last month and -$0.275/gal. less than a year ago.

 Consumer spending for the 3^rd quarter of last year was +3.5% and led the GDP higher to +4.4% which was up from 2Q25’s +3.8%. Spending on “durable goods” such as cars was only up +1.6%. Job creation since last March has only averaged +28k per month but unemployment is holding at 4.4%. The Producer Price Index (PPI) rose +0.2% in November leading to a year-on-year increase of +3.0%.  Personal income for November was +0.3% vs. a forecasted +0.4%.The PCE, the Fed’s preferred indication of inflation increased in November by +0.2% to an annual rate of +2.8%. The Fed will hold its first policy meeting of the year next week and there are no expectations of another rate cut at this time. The Dow and S&P are off slightly this week while the NASDAQ saw a small gain. The USD is lower week-on-week which is supportive of oil prices. Investors appear to have moved into hard assets such as silver and gold as the former hit $100/oz. while the latter pushed towards $5,000/oz.