March 19, 2025 | Crude Oil Softens On Seasonal Build In Inventories. Important BUY Signal Imminent

A partial ceasefire in Ukraine where both Russia and Ukraine committed to stop attacking each other’s energy infrastructure for 30 days is the best that the US could get from the current negotiations to a long term de-escalation and towards a peace agreement. One additional move was a deal to exchange prisoners. Now 175 prisoners from each combatant will be going home to their countries today.

Why Putin did not go further is that the situation in Kursk is going his way. Of the 10,000 – 12,000 front line Ukrainian soldiers still in Russia, the situation is getting desperate. They are now surrounded on three sides by Russian and North Korean troops and President Putin wants them to use the corridor to Ukraine to depart and end the bloodshed. President Trump wants to see this Kursk situation resolved and Putin wants no more Ukrainian troops on his land before he agrees to more discussions. Just a few more days could give Putin what he wants and show his forces (Russian and North Korean) were able to recover Russian territory.

A war premium has returned to crude as Israel has gone back to destroy Hamas after the recent hostage deal and ceasefire fell apart. In addition the US is going after the Yemeni Houthis with continuing and unrelenting degrading attacks so that the Red Sea waterway will not be attacked going forward. They destroyed command and control facilities, missile and drone bases and killed a number of the Houthi military and political leaders. Trump on his social media favourite Truth Social stated “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of Iran, and Iran will be held responsible, and suffer the consequences, and those consequences will be dire.”  Iran is on the ropes economically and if Trump adds sanctions that end Iranian energy exports that would cripple their economy. A shut-in of 1.0 – 1.5Mb/d alone would drive crude prices up US$10/b+, if that occurs.

The US now has one aircraft carrier sending planes to attack Houthi facilities and degrade their war fighting efforts. Two more US carrier groups are heading to the area.  These forces may be required to force Iran to end their nuclear program and end supporting their terrorist proxies (Hamas, Hezbollah and the Houthis). If the US attacks Iran directly the war premium for crude will lift sharply. If Iran or the Houthis attacked any of their Arab neighbours, especially those producing oil (UAE, Kuwait and the biggie Saudi Arabia) a large crude price spike could occur especially if key export infrastructure was destroyed. These Iranian neighbours produce 12 Mb/d or 11% of global demand.

The US economy is showing mixed results at this time but seems to be deteriorating. Some of the recent releases show:

• US Consumer Confidence nosedived as Trump trade policies cause unease among Americans. The Michigan index fell to 57.9 in mid-March from 64.7 last month.
• US consumer inflation expectations jumped from 4.3% to 4.9% for 2025. This is not what the Fed wants to see.
• US February Retail sales rose only 0.2% versus the forecast of a 0.7% increase. The January number was revised to a decline of 1.2%.
• Federal revenues for February came in at US$296B. The deficit was larger than this at US$307B. A US$2T deficit is in the cards this year despite whatever cuts DOGE is making.

Josef Schachter March 19th, 2025

Posted In: Schachter's Eye On Energy

Next: Powell – The Fed- Inflation – Recession »