Shifting Down
US Economy stutters and OPEC+ resupply
In this report: Macro overview and why oil is under fire, tax break thesis for US E&Ps, 35year seasonality projection, Trade charts.
Review on last weeks report.
Just as I was finalising the report, Trump announced he was considering banking sanctions and tariffs on Russia until a ceasefire is reached.
About 90mins later, the markets got a response out of Putin. Oil was probably the most responsive market on this breaking news pairing back 1.6% ($1.11) in 3minutes and some of the days persistent gains.
This now shows fundamental progress towards the peace deal, with the Russian leader responding to Trumps tough threats. I estimate that oil can remain weak though there will be a bounce from last weeks selling, the upside should now be limited. The evolution of this peace deal remains a driver, despite Russian production not really bring impacted at all over the last few years. They have simply found buyers elsewhere in China and India. We have to remember to trade on what the market shows us as being important, not what we think is important. Lets move on.
“We’ll substantially cut taxes for all domestic producers of oil and gas and just about everything else that they produce.” – Donald Trump
Articles
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A primer on oil & gas tax incentives
Macro
OPEC+ is proceeding with the addition of 138,000 bpd back into the market starting in April. This, coupled with a deteriorating economic picture in the U.S, has led to a much softer oil price this past week. If we then overlay the increased tariffs and counter-tariffs between the U.S, Canada, Mexico and China, we see a net weakness in trade confidence in WTI grade. Oil transits are being shuffled around rapidly, most notably with Canadian seaborne exports.
Russian build up of storage.
Evidence is here that Russian sanctions and price caps imposed by The EU are starting to take hold, with large build ups of onshore storage.
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