Crude buoyed by cold weather, sanctions, China recovery – oil CEO

Al Greenwood

14-Jan-2025

HOUSTON (ICIS)–The rally in crude markets could get continued support from cold weather, sanctions and a recovery in demand from China, the CEO of US crude producer Hess said on Tuesday.

Oil markets are important to the US chemical industry because prices for crude influence prices for several commodity petrochemicals. Since the first day of trading in 2025, front-month Brent crude futures have risen by nearly 7%.

Oil demand could be several hundreds of thousands of barrels of oil a day higher because of the cold winter, said John Hess CEO of Hess and chairman of the American Petroleum Institute (API), an oil trade group. He made his comments during API’s State of American Energy presentation.

A further rise in oil demand could come from continued economic growth in the US and a recovery in China.

“They are going to do everything they can to stimulate their economy,” he said “I would not bet against China for two years in a row.”

During the end of 2024, Hess suspects that oil demand shrank in China because of the slowdown in the nation’s economy.

The third leg of support for oil markets will come from geopolitical tensions, Hess said.

On 10 January, the US Department of the Treasury introduced more sanctions on vessels that carry Russian oil.

“The initial numbers that are out there are up to a million barrels a day of impact of supply that might have trouble getting into the market for Russia,” Hess said. “There could be another 1 million barrels a day from Iran.”

If sanctions and other factors cause a large enough spike in oil prices, Saudi Arabia and other members of OPEC have spare capacity that they can use to stabilize the oil market, he said.

PROSPECTS FOR PERMIT REFORM, EXTENDING TAX CUTS
Senator John Thune (Republican, South Dakota) said Congress may opt to address energy, military spending and border security in one bill and extending tax cuts in a second bill.

The tax bill will make permanent nearly all of the 2017 Tax Cuts and Jobs Act (TCJA). This was a campaign promise made by Donald Trump, who will be sworn into office on 20 January.

WAYS TO ROLL BACK EV PERKS
Thune said Congress could use the Congressional Review Act (CRA) to repeal a waiver that California needed to adopt its Advanced Clean Car II (ACC II) program, which gradually phased out sales of vehicles powered by internal combustion engines.

The California program is a lynchpin for similar programs adopted by 12 other states and territories. If California loses its waiver, then those other states and territories cannot adopt their programs.

The fate of the ACC II program could become a legal dispute over state versus federal power that would need to be settled in court.

Trump’s predecessor, President Joe Biden, introduced two other auto programs that critics say are so strict, they act as effective bans on ICE vehicles.

  • The Environmental Protection Agency’s (EPA’s) recent tailpipe rule, which gradually restricts emissions of carbon dioxide (CO2) from light vehicles.
  • The Department of Transportation’s (DoT’s) Corporate Average Fuel Economy (CAFE) program, which mandates stricter fuel-efficiency standards.

Thune doubts that Congress can use the CRA to roll back the tailpipe rule.

Nonetheless, Trump may find other ways to scale back or repeal the tailpipe rule and the stricter CAFE standards during his first days in office.

Even though EVs make up a small share of overall US auto sales, they are important to the chemical industry because they consume more plastics than their counterparts that are powered by internal combustion engines.

EVs are also creating demand for new polymers and fluids that can meet their unique material challenges.

Thumbnail shows snow. Image by Xinhua/Shutterstock

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