⚡Oil Hasn't Moved in 20 Years

March 7, 2025

Morning everyone,

At the end of last year, in that calm time in between an election and the inauguration, much of the financial news was reiterating the ‘American exceptionalism’ narrative - the idea in money managing circles that there was literally no where else to put your money.

Of course, when sentiment gets that frothy, there is only one way to go. Some voices questioned the mania, but they were few and loudly drowned out.

Well, with US equities and the dollar sliding and European markets surging the script has flipped. The question is, how far is this going to go?

Hard to say when no one knows what’s going on from day to day.

“In the second U-turn in two days, the US president signed an executive order on Thursday saying that all goods that met the rules of a 2020 free trade deal with the US’s neighbours would be granted a one-month reprieve from the duties.”

~Doug​

What's in this issue:

• Energy Market Recap

• China Boost?

• Headlines

Energy Markets

🛢️WTI took a day off, ending just shy of unchanged after a quick dollar move lower on economic data. The only thing saving this market right now is the collapsing dollar.

Javier Blas pointed out today on Linkedin that prices are now right where they were in 2005. Twenty years of going nowhere, not adjusting for inflation.

Just a reminder that crude is cheap, and getting near uneconomical territory (widely considered for US producers to be around $60).

2027 strip is below $62. Getting tight.

As they say in commodities, the cure for low prices is low prices.

WTI Spreads

Despite the price collapse, spreads remain in backwardation. This tells us that the market isn’t just expecting some short term demand destruction. If Dec26 is moving lower at the same rate as Dec25.

Apr/May: +0.36
Jun/Dec: +2.09
Dec5/Dec6: +1.33

🔥Natural gas pulled back by 3.3%, taking a break from its relentless move higher. The EIA reported a draw of 80 bcf, short of expectations.

Interesting chart on Natgasweather.com today showing that solar power production has begun to kick in.

Hard to pick a top in a market that is ripping but things can reverse pretty quickly. European TTF gas was in panic mode a couple of weeks ago, but is already 35% off its highs as temperatures have warmed, even if the supply situation has remained the same.

Speculative length had piled in, and now it wants out.

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China Boost?

With all of the action lately between the US and neighbors and allies, China news has been swept under the rug. So I thought I would just touch base with it.

On Wednesday, China responded to tariffs and general uncertainty with more fiscal stimulus.

They have plenty to worry about. Already in the midst of an economic slowdown, the tariffs will hit China’s export machine. They export $450 billion to the US vs the $150 billion we send them in goods, so the tariffs are particularly effective here.

Boosting consumer demand is now a priority as they country has set an ambitions 5% growth target.

Reuters energy analyst Clyde Russel urges caution:

“One of the major commodities that may continue to struggle to increase demand in 2025 is crude oil, with data from the first two months of the year suggesting that China, the world's biggest importer, is continuing along its recent soft path.”

Headlines

“In its latest report, Electrify America (EA) says it served more than 16 million EV charging sessions in 2024, a 50% increase from the previous year… For context, EA reported 11 million customer charging sessions in 2023, which itself was 106% more than in 2022's 5.3 million.
+Electrify America's 2024 Stats Reveal How The EV Market Is Blowing Up - Inside EVs

“After years of investments, global battery manufacturing capacity reached 3 TWh in 2024, and the next five years could see another tripling of production capacity if all announced projects are built.”
+The battery industry has entered a new phase - EIA

“Total chief executive Patrick Pouyanné told Reuters that he did not “want to deal with these guys, because of what they are doing . . . I don’t want to be in the middle of a dispute with my friends, with Shell and BP.”
+Shares of US LNG exporter Venture Global plummet as exports slow - FT

Economic Calendar

Monday - ISM
Tuesday -
Wednesday - ADP Employment, PMI, Crude Oil Storage Report
Thursday - Natural Gas Storage Report, Jobless Claims,
Friday - US Jobs Report, Employment Rate