Liberation 2.0
Return to tariff town
In this report: I dig into Hamm’s Bakken shutdown, BP’s green write-downs, the US–EU Greenland tariff fight and a brutal WTI COT short setup, and map out what it all means for crude, spreads and nat gas trades into next week.
Key Stats. WTI +0.75% (+$0.44) for the week. Open $59.00 High $62.36 Low $58.45 Close $59.22
Articles
Low Oil Prices Force Billionaire Harold Hamm to Halt Bakken Drilling
Trump to hit eight European countries with 10% tariff over Greenland dispute
BP Slashes $5bn in Green Energy Assets as Oil Major Retreats From Renewables Push
Oil Majors Tell Washington They Want PDVSA Out of the Way
Oil Prices Jump 2% Following Drone Strike at Major Black Sea Terminal
OPEC regains share in India as Russian oil imports slump in December
Norway Awards 57 New Licenses to Maintain Oil and Gas Production
Is the IEA Quietly Turning Bullish?
Detmar Selects Aurora to Deploy Expanded Fleet of Autonomous Trucks for Major Energy Producer
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‘‘For the first time in more than three decades, I won’t have drilling rigs operating in North Dakota……Margins are basically gone’’- Harold Hamm
There are a few items worth covering but net-net are pretty boring this week. This week my interest is 80% on the C.O.T and what the specs did- see below.
The writedowns/impairment charges that the oil majors are taking is a shattering event for the green energy enthusiasts, coupled recently with the EU softening on the 2030 engine emissions targets.
Bp is not alone in the write-downs. Shell and Eqinor are also following suit. This follows not long after BP have done a 180 back to its exploration and production activity in Oct with 6 new drilling projects. Does this impact the oil price markets? Not at all. Does it affect shareholders- sure. I think it will be a great net positive for anyone looking to initiate a position now, with dividends around 5.5% and room for upside growth. It is not the racehorse, but rather the turtle in the race amongst the oil majors. However, a 5.5% divvy from such an asset rich company is a nice addition to any dividend portfolio. More to come from me on all this. I’m prepping a larger 2 part article on investing in energy for 2026 that expands on a session I did while working as a senior trader for Amplify a few years ago - excuse the covid head-shave haircut.
The bigger news item is Hamm planning to close drilling in the Bakken fields. While drilling activity in the basin only reduces by about 4%, the production out of the basin will drop by about 16%-17%. Thanks to Plainview Energy analytics for the video.
Bottom line
This Bakken story matters. It is a large canary in the coal mine that is North American shale production. Should this retreat from drilling shift to The Permian or Eagle Ford, this would mean a large net contraction for North America production. Currently 13.83mbpd.
Front month prices would become incredibly unstable and volatility on futures would increase. Yes, it would be bullish, but not without widening average daily ranges. Important to futures traders who are modelling their risk book against such metrics like 30 to 60 day ATR (Average true range). A shift upwards in front month average ATR then forces managed futures books to size down and in extreme cases, exchanges to increase margin requirements. Net-Net, this will force the middle of the forward curve into steeper contango.
Okay, so with these two major stories covered, what do we need to look at in the week ahead regards oil price risk. We have to look at geopolitical and US Production levels.
Geopolitical- Greenland
Front month prices were undoubtedly reactive to the Iranian story this week. I believe however, that we are NOT up on prices the last 2 weeks solely due to an Iranian risk. My eyes are still on The Glut story- that the floating glut will drain down now post Maduros arrest and remove a large Damocles sword over supply.
It is my belief that China is building inventory for a tier 1 global risk event. Be this affected financially or on the ground, remains to transpire. Let me explain in terms of order of consequence.
CATALYST: The White House wants Greenland and explicitly promotes this as the inevitable. -DONE
1st order consequence-DONE -Europe forced into reaction-Boots on the ground preferred to the other weapons in this fight available to them. They include.
Tariffs on US goods importing to US.
Closure of US military bases in Europe
Withdrawl from US Bond markets to some degree.
Europe have already sent troops to Greenland.
2nd order consequence -DONE- US reacts to Euro posture. Trump is now placing 10% tariffs on 8 European countries starting Feb 1st. Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain. Welcome back to April 2nd 2025!
3rd order consequence-DONE -Euro to increase posturing and flex on its other levers. Counter tariffs seem like the most likely. As I publish this, Europe has cancelled their whopper trade deal with US.
4th order consequence- This is where the reactions become spread. Does Trump re-raise US tariffs on Euro goods? Does he just send in the troops? Does a third party get involved, like Russia or China? It is worth noting that key European leaders have been holding very warm and positive trade negotiations in China. Starting with Ireland’s trade delegation last week.
The important bit: Where does this all leave oil prices?
The most obvious impacts are
1 There is no real immediate impact to supply or demand until we get into a hot war ie. US boots on the ground in Greenland. The market will want to price down WTI against Brent, as was the case in April 2025. So the Brent/WTI spread would widen, with WTI dropping hard against Brent.
2 Euro gas picture gets extremely bid. Europe has been replacing lost Nat Gas supply from Russia with imports from US. This has created a reliance in Europe on US gas. I find this the biggest laugh of all. The whole reason Europe got off Russian gas was to reduce reliance on a ‘despotic’ leader. Well, now they have replaced Putin with Trump. Beautiful!
So what’s the trade? Be long exposure Nat Gas via European gas futures TTF. That trade is up 29% in the last 5 trading days. Just FYI- My favourite equity play NRT 0.00%↑ is highly correlated to TTF and Euro. How you like it now?
