Hi YXI friends,

The oil price surge in late December and early January seemed to be fizzling out. It is a good time to assess the fundamentals and price technicals to find clues on what could happen next.

In this article, we start with the Oil supply of OPEC+ countries in January. We examine the US oil production and inventory, before looking at the price technicals of USO.

In the final third, we provide a detailed update on SLB’s earnings, with a price analysis update on Diamondback (FANG).

Let’s dive in!

Table of Contents

• 1. World Oil Supply Fell in January

• 2. WTI Futures Shape

• 3. US Production & Deregulation

• 4. USO Technical Analysis

• 5. SLB Update

• 6. Diamondback Energy (FANG)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. World Oil Supply Fell in January

In 2024, the total oil supply and demand were even at 102.9 mb/d (source: IEA). For 2025, the IEA projects an average growth in oil demand of 1.1 mb/d (vs. 0.87 mb/d in 2024), while supply likely increases by 1.6 mb/d to 104.5 mb/d. This is not accounting for OPEC+’s plan around its current cuts that officially last until April.

However, in January, the global oil supply shrank by 0.95 mb/d, due to a combination of cold weather disrupting supply from North America and broader supply drops in across OPEC+.

The chart above shows the outputs from the biggest producers in OPEC+ between December and January. We saw a decrease in Iraq, Kuwait, Saudi Arabia, UAE, Iran, Libya, and Mexico. Meanwhile, Russia, alongside Kazakhstan, increased its supply by 100 kb/d, despite the US sanctions.

Overall, the total OPEC+ countries saw a supply decrease in January of 280 kb/d.

This supply change, combined with the market reaction to US sanctions on Russia and Iran, explains the price squeeze we saw in late December and early January.

China Demand

On the supply side, China remains the biggest demand factor, which is a big uncertainty for 2025. The government has yet to announce new fiscal stimulus or monetary easing measures, but there is a strong expectation for further interest rate cuts and fiscal injections.

What we are looking for are twofolds. Firstly, outright stimulus or easing announcement by the governments, beyond measures that target the stock market performance. Secondly, we can find clues in the PPI and CPI movements

China’s latest PPI was -0.2 MoM or -2.3% YoY, while CPI printed 0.7% MoM (Chinese New Year seasonality) or 0.5% YoY. These are fairly deflationary figures at the moment.

Another big factor is the Round 2 of US-China Trade War. The US imposed a 10% tariff on all imports of Chinese goods on February 4th. In return, China will impose tariffs of 15 percent on imports of coal and LNG.

USDCNH

So far there hasn’t been a big market reaction to these tariff moves, despite the media indulging them with headlines.

Why? China doesn’t really rely on the USA for much coal or LNG. It can easily source energy supply from elsewhere.

The retaliation is more of a “show of anger” for political purposes than a real duel.

The market is still expecting Trump to leverage the tariff talks into negotiating peace in Ukraine and possibly making China import more US oil rather than from Russia or Iran.

2. WTI Futures Shape

WTI Futures Price March 2025 - February 2026

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