February 26, 2025 | WTI Breaches US$69/b. A New Energy Sector BUY Signal Should Occur in March

In early April we will see if President Trump is going to add stiff tariffs to Mexico and Canada and others around the world. It appears that he is using the hammer against his closest neighbours and then taking the plan against Europe and the rest of the world with trade surpluses with the US. Nothing is said about the large services surpluses with many countries around the world.

Inflation is on the rise due to higher food prices, insurance, property taxes, education and service costs. US PPI rose 0.4% in January up from a forecast of 0.3%. Consumers are feeling the pinch and are retrenching spending. Retail Sales in January fell 0.9% compared to a rise of 0.7% in December. Even juggernaut Walmart is warning of slowing sales and its concern about the impact of tariffs. US Consumer Confidence fell at its sharpest pace in 3.5 years or down 7 points.

Layoffs in the US Government due to voluntary acceptance of the 8 months of pay found over 75,000 taking the offer. Now we are seeing layoffs of DEI employees, probationary employees, those found in programs canceled and now members of the intelligence community who were fired this week for running a porn network on secure sites. The upcoming jobs reports may end up being negative due to the massive layoffs in the US Government. The private sector is also facing layoffs. Starbucks is laying off more than 1,100 corporate employees. Secretary of the Treasury Scott Bessent recently warned that the private sector of the US economy was weakening and now the government is not able to offset this. A mild recession warning was part of this speech. Now with tariffs on the horizon we are in uncharted territory and we may see more serious challenges to the economies impacted by Trump’s tariffs.

In Canada, the LIberals appear to be ready to crown Mark Carney the new leader and then call a quick election to see if the momentum of the LIberals can offset the prior lead of the Conservatives. Carney is tarnished by his prior Carbon Carney label and his leftist views, while Pierre Poilievre the Conservative leader is seen as a mini-Trump. Which of the two will get Canadian voters to give them the top job will be decided by whom they see being able to stand up for Canada and keep Trump’s hands off Canada’s natural resource wealth, including rare earths and water.

US stock prices are trading at lofty valuations, mainly due to the AI craze but cracks are now showing in the high flyers. TESLA is being hit hard due to falling sales and anti-Elon views. Others are being dragged down due to China’s success with ‘DeepSeek’. Warren Buffet is finding it hard to find value and has built up his cash reserves to US$334B after massive sales of Apple and other holdings.

Regarding energy,

Our WTI BUY price target of US$66-69/b was reached in September and is likely to test that level again in the coming weeks. Today WTI is at US$68.61/b (down over US$3/b over the last two weeks). We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (US$66-68/b). The forecasted breach of US$70/b has now occurred and more downside is ahead. When our price target range is hit we plan to add additional BUY ideas at that time. Subscribers please watch your emails on weak market days as this is when such an Action Alert would be issued.

Josef Schachter February 26th, 2025

Posted In: Schachter's Eye On Energy

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