February 5, 2025 | WTI Crude Oil Falls Below US$72/b As Trump Tariffs Get Delayed For Now. If WTI Falls Below US$70/b We May See New BUY Signal Triggered

President Trump used his Tariff threats against Mexico and Canada to get support in the battle to keep fentanyl and illegal immigrants outside of the US. Mexico’s team found the right solution of adding 10,000 National Guard soldiers to lock down the border and plan aggressive moves against the cartels. They also accepted Trump’s remain in Mexico policy. One pressure point by Mexico was to require the US to halt the massive influx of high powered weapons that gives the cartels the power to take on the government’s forces. A success here could be meaningful in giving Mexico the power to take back many parts of the country controlled by the cartels.

Canada took this template and also agreed to fight fentanyl and move 10,000 troops and border agents to lock down the border. Canada made a major concession calling the cartels ‘terrorist groups’ which gives them additional tools to fight the gangs in Canadian cities. Even if they move military troops, border agents and RCMP agents, Canada does not have the manpower to do this, not in a month nor a year. So a one month reprieve to see implementation would be good for Mexico but not for Canada. We can send more drones but if they pick up illegal crossings how do we get manpower to the area fast enough to apprehend the illegals. A month from now Canada will likely be in Trump’s cross hairs again. In the meantime Canadians disgusted by this attack are booing the US national anthem at sporting events and are looking to BUY Canadian if possible. Watch for stores to run out of Canadian made products as they did during the rush for items during the Covid crisis.

President Trump now has his eyes on Venezuela and plans to cut off Chevron’s license to produce in the country. Trump wants to deport Venezuelan gangs. This theater will be the one to watch. Do they lose crude exports, do they face new sanctions, does the US move for regime change. A showdown is coming! President Maduro has announced that he will take back Venezuelans held in the US but no planes have landed yet. In the meantime the worst of the violent Venezuelans have been shipped to Guantanamo Bay (Cuba) where the US has 30,000 beds ready for the worst criminals before they can be sent back to their home countries. Mexico, El Salvador and Colombia are now taking back their citizens with more deals being worked on by Secretary of State Rubio.

China tagged with an additional 10% tariff responded tactically. It imposed additional tariffs on US coal and LNG imports starting February 10th with a 15% tariff. China also imposed a 10% levy on crude oil, farm equipment and certain cars and trucks. It added export controls on critical minerals (tungsten, tellurium, bismuth, molybdenum and Iridium) which will annoy US manufacturers especially the military. Notably China did not impose new tariffs on US agricultural products.

The US economy remains resilient especially on the jobs side. This Friday there will be the jobs data for January and it is expected to be strong. Q4/24 Core PCE remains hot at 2.5% up from 2.2% in Q3/24 slightly below analyst forecasts of 2.5%. Core for December was a hot 2.8%. PCE price index rose 2.6%. This is before the data of higher food and energy prices which will hit the data in the coming reports. The Trade Deficit for December rose to US$98.4B from US$78.9B in the prior month. NOT GOOD!

Trump’s DOGE team is investigating most departments for waste and it has its eyes on the International Aid agency which has given out funds to many DEI projects. Funding has been frozen and the staff put on leave. To cut government spending they offered all employees pay until September if they accept terminating their jobs this Thursday. So far 20,000 have accepted or about 1% of the federal workforce. Trump wants 5-10% gone. Democrats, especially left leaning ones, are freaking out that their favorite programs to their supporters are being gutted. Some Democrats (the leftist of the lefties) are planning to bring impeachment charges against Trump once again.  If they do, they open up the Trump team to go after the bad actors of the Biden administration. Tit for tat!

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$71.54/b (down US$1.50/b from last week). 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). A breach of US$70/b should start the next material downwave for crude prices. When this occurs we should see another BUY signal triggered. 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 5th, 2025

Posted In: Schachter's Eye On Energy

Next: Canadian Tariffs Delayed – WHY? »