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April 8, 2025
Morning everyone,
If you weren’t glued to your screen yesterday, you may have missed it. That incredible rally in the markets that brought equity indexes and oil into positive territory.
A headline saying that Trump was considering a 90-day pause in tariffs circulated on social media that sent markets on a $2 trillion ride.
Only problem… FAKE NEWS.
That’s the world we live in…
What's in this issue:
Energy Market Recap
WTI Spreads Collapse
Headlines
| Crude Oil (May) | $60.70 | -1.29 | -2.08% |
| Natural Gas (May) | $3.655 | -0.182 | -4.74% |
| Copper (May) | $4.1860 | -0.2160 | -4.91% |
| S&P 500 | 5,062.25 | -11.83 | -0.23% |
| Dollar Index (DX) | 102.97 | +0.20 | +0.19% |
Energy Markets
🛢️WTI settled lower by 2.08% after briefly breaking the $60 level overnight. Holding $60 seemed psychologically important, even if these whole levels are a bit arbitrary.
Any sort of rebounds from lows is welcome in this environment.
WTI Spreads
June/Dec made another dramatic move in, and Dec5/Dec6 flipped to contango. This can be interpreted as the market expecting the weakness to last longer.
I reached out to Andy Lebow of Commodity Research Group about this. He confirmed, stating:
“Balances look really bearish now with Saudi increasing production and slowdown/recession right around the corner.”
+The Cheating Game Inside the OPEC+ Oil Cartel - Bloomberg
May/June: +0.26
Jun/Dec: +1.09
Dec5/Dec6: -0.02
🔥 Natural gas peeled off another 4.74% on a sell everything day. However, there are some good arguments to be made that the sell-off in crude will actually be supportive for gas.
With so much nat gas production coming as associated gas out of the Permian, any slowdown in oil production will hit nat gas as well.
One example is from HFI Research, who argues:
“One of the key assumptions we used to derive our estimate was for Lower 48 gas production to average ~107.5 Bcf/d. Lower associated gas production of ~2.5 Bcf/d will push the average closer to ~105 Bcf/d.”
Of course, if industrial demand collapses and/or LNG exports decline, that sinks that ship.
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China Digs In
While Trump and his various secretaries are quick to point out all of the countries lining up to start negotiating tariffs.
“Taiwanese President Lai Ching-te on Sunday offered zero tariffs as the basis for talks, while an Indian government official said Delhi does not plan to retalliate.”
Japan is sending in a team to begin talks.
China Digs In
One country in particular is missing from that group - China.
China quickly responded to US tariffs with retaliatory tariffs of their own, and it looks like these two large trading partners are in for a prolonged battle.
In fact, Trump has responded to the Chinese response with the threat of additional tariffs on Chinese imports.
“Trump said he would impose an additional 50% duty on U.S. imports from China on Wednesday if it did not withdraw the 34% tariffs it had imposed on U.S. products last week. Those Chinese tariffs had come in response to 34% "reciprocal" duties announced by Trump.”
Headlines
“The source said that Wright will likely have conversations about ensuring an abundant global supply of oil beyond countries where the United States has sanctions on oil exports including Iran, Venezuela and Russia.”
+Exclusive: US energy chief Wright heads to Middle East for nearly two weeks, source says - Reuters
“Globally, last month was the planet's second-warmest March on record - exceeded only by March in 2024, the EU's Copernicus Climate Change Service (C3S) said in a monthly bulletin.”
+Europe just had warmest March on record - Reuters
“The growth of renewable power generation - including wind, hydro and solar - in the global electricity mix in 2024 beat the previous year's 30% record, Ember’s Global Electricity Review showed.”
+Renewables provided record 32% of global electricity in 2024, Ember says - Reuters
Economic Calendar
Monday -
Tuesday - NFIB Optimism Index
Wednesday - Crude Oil Storage Report, Fed Minutes
Thursday - Initial Jobless Claims, CPI, Natural Gas Storage Report
Friday - PPI