OPEC+: Saudi Arabia may slightly reduce its crude prices for Asian buyers in April, following a small decline in benchmark prices. The price of Arab Light crude could fall by 20 to 65 cents per barrel compared to March, narrowing its premium over Oman and Dubai prices. The reduction follows price hikes in February and March, driven by U.S. sanctions on Russia, which increased demand for Middle Eastern oil. Forecasts suggest price cuts for other grades of Saudi crude, such as Arab Extra Light and Arab Medium, due to changes in the market structure. The weakening refining margins in Asia and increased imports of Russian and Iranian crude could further dampen demand, while OPEC+ debates whether to adjust oil output in April.

Rig Counts: U.S. energy firms added oil and natural gas rigs for the fifth consecutive week, bringing the total rig count to 593, its highest since June 2023. Despite the increase, the total rig count is still 6% lower than the same time last year, with oil rigs down by two and gas rigs up by three. February saw the largest monthly increase in rigs since November 2022, with oil rigs rising by seven and gas rigs increasing by four. Over the past two years, lower U.S. crude oil and natural gas prices have led energy firms to focus more on boosting shareholder returns and reducing debt rather than increasing output. As a result, the oil and gas rig count declined by about 5% in 2024 and 20% in 2023. Energy firms are expected to cut spending by about 1% in 2025, following near-flat spending in 2024 and large increases in previous years.

Canadian Drilling Sector: While a 10% tariff on Canadian oil is not likely to immediately impact most oil producers' plans, Canada's oilfield drilling and services sector is facing a slowdown due to uncertainty over U.S. President Donald Trump's threatened tariffs on Canadian crude. Employment in the sector, which collapsed between 2014 and 2020, has been improving since 2020 but could stall if the tariffs are imposed. Precision Drilling, Canada’s largest drilling rig operator, saw a slowdown in its well servicing segment in late 2024 due to tariff related uncertainty. A report in February from TD Cowen reduced its 2025 Canadian rig count forecast by 5% because of the tariff fears. There are concerns that retaliatory tariffs from Canada could raise prices for drilling equipment and other industry inputs. If tariffs go forward, it could lead to job losses and derail the sector's recovery, which had shown promise in 2025.

Market Overview: The energy sector saw Crude Oil, HO, and RBOB all finish bearish at the end last week with continued news regarding tariffs on Canadian Crude and how it could effect the prices moving forward. OPEC+ is also weighing in on conversations whether to raise oil output in April as planned or continue with original plans as they look at global supply and the U.S. sanctions on Venezuela, Iran, and Russia. There was also a fire at the Ufimsky Oil Refinery in Russia, one of their largest, and has been extinguished. The fire is believed to have been started by technical issues and not a drone from Ukraine. Energy futures started out slow this morning to start the week as crude oil is up $0.41 to $70.17, HO is down $0.0078 to $2.3072, and RBOB is up $0.0123 to $2.2346.

Crude oil and petroleum product prices are highly sensitive to events that could disrupt supply, such as geopolitical tensions and weather related developments, leading to increased price volatility. This volatility is driven by the inelasticity of supply and demand, as both oil production and consumption infrastructure are slow to adjust to price changes. Significant price changes are often needed to restore balance when disruptions occur. Historically, political instability in major oil producing regions, such as the Middle East, has led to supply shocks and oil price spikes, including the Arab Oil Embargo and the Persian Gulf War. More recent supply disruptions have been seen in countries like Nigeria, Venezuela, Iraq, Iran, and Libya, which have further impacted global oil prices. As spring planting is around the corner, a rise in demand could impact a rise in prices.

The energy complex saw a relatively bearish day to start out the week as OPEC+ announced they will continue with their plan for April 2025 to produce more barrels of oil and in Russia a oil pipeline started on fire due to a Ukrainian drone attack. President Trump's tariffs on Mexico and Canada are set to take effect at 12:01 a.m. on Tuesday morning, with a 25% tariff on imports and a 10% tariff on Canadian energy. While President Trump is expected to implement these tariffs, there are indications that he may not impose the full amount, in addition to tariffs on fentanyl related Chinese imports are anticipated to rise from 10% to 20%. The tariffs are already impacting Canadian drilling companies, with Precision Drilling reporting a slowdown already. Analysts are concerned that the tariffs could lead to more inflation and force the U.S. Federal Reserve to keep interest rates high, potentially slowing economic growth and energy demand. At the end of today crude oil is down $1.39 to $68.37 a barrel, HO down to $2.2604, and RBOB is down to $2.1878.