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Oil market participants waiting for oil price volatility might need to settle in for the long haul, according to StoneX Director of Energy Market Strategy Alex Hodes. "$65 [or $70] is emerging as a real sweet spot,” Hodes told co-host Trevor McClanahan on the latest Focus on Fuels podcast from the StoneX Energy Desk. “Both OPEC and U.S. producers have found their comfort zone and that's not changing anytime soon."
Hodes points to recent trading volumes to back up his view. Activity just hit levels not seen since March 2022, suggesting markets are finding clarity despite the political noise. The reason? Fundamentals are drowning out headlines. As an example, the Focus on Fuels hosts called attention to Iranian exports, which have quietly surged to 1.5 million barrels daily - up from just 300,000 while under strict sanctions. While the new administration might talk tough on Iran, China's buying decisions matter more than U.S. policy shifts according to Hodes.
Recent cold snaps are driving the narrative, too, with heating oil basis differentials seeing multi-year extremes in some regions. "These aren't normal market conditions," notes McClanahan. "Once temperatures normalize, these spreads should tighten, but right now they're creating real opportunities."
Current backwardation combined with wide regional spreads has traders eyeing storage plays, particularly in the Midwest and Pacific Northwest where basis values have weakened considerably.
Don't count on a production surge either. Despite campaign promises, U.S. producers aren't taking the bait. "Capital discipline isn't just a buzzword anymore," Hodes points out. "These companies learned their lesson about chasing growth at any cost."
While headlines grab attention, Hodes notes Chinese demand and OPEC decisions remain the real market movers. That suggests current price stability could hold unless these fundamental factors shift significantly.
For energy buyers, this creates a clear playbook. Regional dislocations offer tactical opportunities, but the broader market looks remarkably stable. Companies with storage flexibility and regional optionality stand to benefit most.
Are you looking for deeper insight into oil market dynamics? Join StoneX for the 2025 Crude and Refined Product Outlook on January 21 at 2:00 PM CT. Alex Hodes will provide a comprehensive overview of the crude oil and refined products market, spelling out specific implications for market participants.
Stay ahead of market moves with Focus on Fuels, StoneX's essential podcast for energy and fuel market participants. Each episode features Alex Hodes and Trevor McClanahan breaking down market developments. You’ll also hear from industry experts who explore hedging strategies and practical insights for managing price volatility. Available on all major podcast platforms, including Apple Podcasts, Spotify, or YouTube.
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---Experts: Alex Hodes, Director of Energy Market Strategy
Energy
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