March Crude Oil Sharply Lower This AM

CRUDE OIL 

March Crude Oil is sharply lower this morning in the wake of a slew of executive orders by President Trump on his first day. Trump did not enact tariffs on Day 1, but he said he told federal agencies to investigate unfair trade practices by other nations. He said was thinking of proposing 25% tariffs on Mexico and Canada on February 1. US is a net importer of crude from Canada, so this action could tighten US supply but also leave more on the world market. It could also be a negotiating tactic. Trump also laid out a plan to accelerate oil, gas, and power permitting in order to maximize (already record) US energy production. He also said he would pull the US from the Paris climate agreement. He did issue an executive order repealing efforts by former President Biden to block oil drilling in the Arctic and along the US coasts. And he also said his administration would probably stop buying oil from Venezuela. He also promised to refill strategic reserves. The mix of statements adds to uncertainty and could keep the market volatile for a while. Yemen’s Houthis said they will limit their attacks on commercial vessels to Israel-linked ships provided the Gaza ceasefire is fully implemented. There are a lot of “ifs” here. This could encourage a resumption of shipping though the Red Sea, but shippers may be reluctant to resume shipping a promise, and insurance companies may be reluctant as well. North Dakota’s oil production is down an estimated 125,000-150,000 barrels per day (12%) due to the extreme cold weather. Gas production is also down significantly. Most of the production is expected to be back on-line over the next 4-7 days.  The China National Petroleum Corp (CNPC) said today that the nation’s crude oil import would likely rise only 1% this year.

NATURAL GAS

March Natural Gas gapped lower overnight and fell to its lowest level since January 15. A deregulatory environment under President Trump could be supportive to Natural Gas, as it could include an expansion of US LNG exports. The US is experiencing extreme cold this week, but a warmup is coming. The 6-10 day forecast mostly normal temperatures from the Plains to the east coast, with some above normal temps in Minnesota and Iowa as well as in parts of the southeastern US. Below normal temperatures are expected from the western Plains to the West Coast. The 8-14 day has above normal temperatures dominating from the Plains to the East Coast. China’s natural gas demand is expected to increase 6.2% this year. Production is also expected to increase 2.9% per year from 2026 to 2030. China is the world’s largest importer of LNG, with imports up 7.37% last year to 76.65 million tons, a three-year  high.

PRODUCT MARKETS

The products are following crude oil lower this morning. Extreme cold supports ULSD prices, but the forecast calls for milder weather in the next week or two.

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