Blowout!
Protectionism Meets Demand Destruction
In this report: Traiff impacts short and medium run, OPEC+ raise production again, Kasakh pipelines, Where is the oil going?
‘‘This is a reordering of global trade’’-
Commerce Secretary Howard Lutnick, Thursday 3rd April 2025
April book recommendation:
An Unsung Hero: Tom Crean
To say Tom Crean is a hero is an understatement. Well-known to many Irish, but underappreciated globally, Crean’s story is one of the most incredible true accounts of survival and grit during the heroic age of Antarctic exploration. A key figure in both Scott and Shackleton’s South Pole expeditions.
If you're into leadership under pressure, endurance in impossible conditions, or just a damn good real-life adventure — this one's essential reading.
Articles
OPEC+ Stuns Oil Market With Policy Shift to Drive Down Price
Howard Lutnick interview CNBC April 3rd 2025
IEA: Indian Oil market report
Kazakh CPC Oil Exports to Drop by 700,000 bpd After Russian Suspension
Russia imposes further restrictions on Black Sea oil export ports
Chevron will be forced to cough up at least $740 million
“We need to bring critical industries back to the U.S. to ensure our economic independence and security.” -Scott Bessent
📌 We’ll break down how this connects to energy policy, macro positioning, and trading implications in this week’s VWAP Report.
Macro
When Protectionism Meets Demand Destruction
When I was a kid, I once asked my dad (a drilling engineer) what is the worst thing that could happen on the job . He didn’t hesitate:
“A blowout,” he said. “You know in the movies, when they hit oil and it comes shooting out of the ground, and everyone’s jumping around celebrating? If that happens offshore, people can die. So you shut it in. You control it long before it blows out. Otherwise-it’s game over.”
Fast forward to today, and Trump’s Liberation Day tariffs feel a bit like hitting that high-pressure zone without enough control. The aim is to bring manufacturing back home and build long-term economic independence—but in the short and medium term, we’re looking at higher input costs, weaker consumption, and slower industrial throughput. That all spells lower oil demand in the quarters ahead. The market certainly priced this in. There should be more to come.
So- is this Trump’s blowout moment? The well is kicking up. The Dollar and energy dropped hard, while Bonds are up right after Wednesday’s event, a broader economic shakeout is underway. Added to which, OPEC+ had their own blowout on Thursday at a scheduled meeting, in which they went from a 138k bpd schduled hike to 411k bpd production hike in May.
The Consumption Crunch
Producers in North America were right to keep production flat this year. Something I noted in a report a couple of weeks back.
A 10% tariff across all imports, with steep escalations for goods from China and the EU, directly raises the cost of living for Americans and creates unemployment globally. This bites into household spending, reducing consumer travel, goods purchases, and retail logistics. Energy-intensive sectors like transport and trade take the first hit.
Manufacturing
While the long-run thesis is a U.S. manufacturing renaissance, rebuilding factories is a 5–10 year process, not a Q2 event. In the meantime, supply chains seize up, capital projects stall, and inventories balloon. That’s MEGA bearish for oil. Then throw an OPEC+ increase in production.
Higher costs → Lower production → Lower energy demand.
Refinery margins compress as throughput drops and demand weakens. Refiners go out of business. This helps when you try to make sense of the old saying ‘Nothing solves low prices, like low prices’. The supply/demand picture goes from abundence of supply in low demand- thus shutting down of production- to scarcity of supply in bouncing demand. This is price elasticity.
Eventually, should reshoring succeed, domestic energy demand will likely ramp up to support industrial expansion. But that’s not today’s trade or even next years. Today’s trade is driven by what’s being consumed now, and right now, the tariff tide is doing more to cool the economy than heat it up.
Pipeline Politics: Kazakhstan
Kazakhstan - an OPEC member is getting its wings clipped. Production in March was 2.17million bpd. The CPC pipeline was carrying 1.4m bpd and this has now been halved to 700k bpd. During the week gone by, News Squak (a real-time news service) updated clients on 'damage' to the CPC pipeline that would take up to a month to fix. We instantly saw a bid come into WTI/Brent on this news that moved across the respective calendar spreads. See if you can spot in in the price chart above on Wednesday.
Why It Matters
As U.S. sanctions tighten and global flows adjust, logistics risk becomes price risk. Further disruption to CPC flows could knock 1.4mbpd offline—enough to swing balances short-term in a fragile macro demand environment
Asia Replacing the West in Transport Fuel Demand
With U.S. demand soft on tariffs and economic drag, Asia is keeping a soft bid under crude, led by steady Chinese growth and accelerating Indian consumption.
China Holding Steady
China’s oil demand is set to rise 1.1% YOY in 2025, per CNPC, with industrial and transport usage staying firm despite EV and efficiency pushes.
India: The Demand Powerhouse
