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US sanctions take effect, stranding Russian crude at sea

Oil prices remain lower this morning despite Ukraine and Europe rejecting key parts of the proposed peace deal for Russia-Ukraine
- WTI traded $1.09 lower to $58.03 at (8:10) am
- The plan includes Ukraine giving up territory and the removal of sanctions as well as Ukraine being responsible for defending its sovereignty
- If the peace deal were to be accepted, the lifting of sanctions would bring more supply availability to the market – a market that is already oversupplied
US sanctions are now in effect and have left almost 48 MMBbl of Russian crude stranded on the water (Bloomberg)
- Indian refiners are looking for replacement barrels as they book oil takers coming from the Middle East that has pushed freight rates near a five-year high
- There is still uncertainty around how much Russian crude will find a home due to concerns over looming secondary sanctions
- AEGIS notes that sanctions on Russia have helped buoy the front of the crude curve as supply is at risk. If Russian barrels are able to find a home around sanctions or a peace deal is agreed upon, oil prices are likely headed lower as the supply risk premium would fade.

Regional Market Insights

Updated regularly with the most important market moves and outlooks.

Natural gas is trading lower ahead of EIA storage report
- The December contract is lower this morning, after climbing 18c yesterday
- The EIA is expected to report a withdrawal of -15 Bcf, according to the Bloomberg survey, with this being the first storage draw of the winter season
- Lower-48 population-weighted temperatures are still forecast to be elevated for the next week before dropping below the ten-year average heading into December
NERC sees 2.5% increase in peak winter power demand (S&P)
- The North American Electric Reliability Corp. expects peak electricity demand this winter to rise by 20.2 GW or about 2.5%
- This represents a sharp increase from previous outlooks, which called for peak demand growth of 1%
- The Rocky Mountain subregion is expected to see the largest increase, growing by 10% from last year, driven by datacenter and industrial demand
- NERC continued to flag potential reliability issues in New England and the Maritimes, as traditional generation sources are retired leading to increased reliance on imports