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First Look - Asian refiners cut run rates on sanctions impact

Oil is trading higher, reversing yesterday’s losses
- The API is forecasting a 1 MMBbl build in US crude inventories ahead of the official EIA data release later this morning
  - This would be the first build in several weeks
Asian refiners cut throughput rates as costs rise (BBG)
- Refiners in Asia are cutting or considering cutting run rates due to the impact of US sanctions
- Independent refiners in China and merchant processors in Singapore and South Korea have been the hardest hit
- Refinery utilization at independent refineries in China has fallen to around 50% as margins fall
Indian buyers scramble to replace Russian oil (BBG)
- Refiners in India are seeking alternative sources of crude, turning to the spot market and Middle East producers
- State-owned refiners have now bought cargoes from the US, Africa, and the Middle East, with some cargoes being loaded as soon as February
- India could have to replace as much as 1.8 MMBbl/d of Russian oil

March gas futures were up 3c to $3.99 on Thursday morning, following yesterday’s 21c rally on hopes of a cooler start to February
- A cold reset is showing up in the tail-end of the 15-day forecast amid a warming period in the first few days of next month
- The EIA is expected to report a 252 Bcf withdrawal from underground storage, according to the average Bloomberg survey
- January’s anomalous cold has put a big dent in the storage surplus, as stocks will be only a few percent above the five-year average if today’s estimated draw is confirmed
Higher temperatures are allowing shut-in gas to once again flow
- Dry gas production was modeled at 101.4 Bcf/d this morning, up from the 96.6 Bcf/d level observed on Tuesday (S&P Global data)
- Permian supply was back to 21.3 Bcf/d for morning nominations
- The gas market will be hyper-focused on what level of supply the US operates at following this freeze-off event
  - The amount of daily supply, at current prices, will be a major factor in how 2025 unfolds
  - In our Factor Matrix, a slow or lagging response in supply growth to match new LNG this year is marked as a bullish surprise
  - Our base case is that supply should be able to easily match the ramp-up in LNG from the two new facilities in progress