Tariffs: As a Trump presidency begins, investors have been particularly interested in how the new administration would handle plans to apply tariffs as campaign rhetoric certainly seemed to indicate they would be coming. It now appears to not be a ‘Day 1’ priority as the new president has requested for federal agencies to investigate unfair trade practices by other countries. Yet, there are reports that 25% tariffs could be imposed on Canada and Mexico as early as February. That news did result in strengthening of the U.S. dollar and negatively impacting oil prices. However, eventual duties on Canadian crude could likely drive the market up.
North Dakota oil production: Extreme cold weather in North Dakota, the country’s third-largest oil-producing state, is creating operational issues that currently has oil production being down an estimated 125,000 barrels per day (bpd) to 150,000 bpd. Per data from U.S. Energy Information Administration (EIA), this represents about 12% of the region’s more than 1.1 million bpd of oil output. Warmer weather is anticipated in the coming days and the North Dakota Pipeline Authority does expect the majority of this lost production to be back online within a week.
Venezuela: This South American country saw its oil exports to U.S. strengthen last year to 222,000 bpd which made it second-largest export market (compared to China’s 351,000 bpd). However, the outgoing Biden administration had recently imposed new sanctions on government of President Nicolas Maduro and new President Trump is suggesting the U.S. has plenty of own oil and would likely stop buying oil from Venezuela. Richard Grenell, Trump’s envoy for special missions, has meetings with multiple Venezuelan officials both today and tomorrow with Maduro indicating that a Trump re-election offering “a new start” for bilateral relations. Mass deportation of undocumented migrants is another key campaign promise for new U.S. president and with many of them coming from Venezuela it is likely their cooperation on this matter will be key part of discussions over next couple days.
Market Overview: Both crude and products are being pressured lower early this morning as the market interprets the words and actions of President Trump during first 24 hours of new administration. Yesterday’s trade halted considering MLK Day holiday so movement is since last settlement on Friday (January 17 and crude is off around 2.5% while distillate futuresare down more than 3.5%.
As markets decipher what to anticipate as new Trump administration gets underway, it is suggested they will eliminate electric vehicle mandate but specifics on exactly what that will be are still a bit unclear. On that news, the RBOB contract is still off early today (by slightly more than 1%) but that is a small loss compared to declines for both crude and distillates. Since December low of $1.8949 there has been surprising strength in the RBOB contract as hadadvanced more than $0.28 to recent high of $2.1755 last Thursday (January 16) and, even with only red since then, is still ticking above $2.08. Withintense cold affecting much of country this past week, it will be interestingto see where demand is at and if more builds have occurred when government datais provided later this week. If so, maybe additional downward movement is instore?
Today's market was weaker as the 2nd Trump presidency has begun with the administration promising oil production increases. Plus, some geopolitical premium is likely being taken out as the Houthis appear to be honoring ceasefire between Israel and Hamas with ships on the Red Sea no longer being targeted. The settlements were first of the week (after yesterday's holiday) with WTI crude showing down $1.99 (to $75.89) and RBOB gasoline falling $0.0279 (to $2.0843) while ULSD distillates declined $0.0629 (to $2.5581).
