By: Harry Altham, Energy Analyst, Market Analysis EMEA & Asia
Crude markets have continued their volatile start to the year, with Brent and WTI rising by 2% after three days that saw Brent lose as much as $7 due to rising OPEC+ production during December and heightened concerns surrounding the death toll in China amid a surge of COVID-19 infections. The NY Harbor ULSD crack to NYMEX WTI has widened by 0.6% this morning due to an outage on the Colonial oil pipeline in Virginia. The line has a capacity of 600k bbd, which is comparable to the Keystone pipeline that reopened on Tuesday after a three-week outage.
Over the month of January, temperatures look set to remain above average throughout the month due to a strong low pressure system that is inhibiting the breakout of cold fronts from the Arctic. Though we believe gas storage will be depleted through the month as industrial activity recommences, we believe the depletion rate will be much lower than the five-year seasonal average due to the aforementioned policy initiatives by the European Union. Should the low pressure system hold out, we believe Dutch TTF prices could fall beneath €55/MWh, although a simultaneous period of strength in middle distillate markets risks spurring resurgent natural gas demand, that could jeopardise E.U. policy objectives as well as the welcome price relief.
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