March 5, 2025 | Significant Decline in Crude Oil has Triggered a New Buy Signal

President Trump teased the markets last week with misdirection of when he planned to put on his tariffs. He mentioned early April to add stiff tariffs to China, Mexico and Canada and then the next day changed again. We hit all three on Monday March 3rd with various high tariffs. This shocked the stock markets and retaliatory measures were announced by China and Canada. Mexico plans on adding theirs on Sunday March 9th. Strong announcements in defense of Canada were made by Premier Ford and Prime Minister Trudeau. Even the NDP were seen calling for a return of Parliament to discuss the tariffs and come up with a united front. Conservative Leader Pierre Poilievre was nowhere to be seen. This is a failure of the conservative leadership to not show up on a critical matter to Canadians. If he keeps such a busy work schedule and is seen as an absentee leader (possibly still in first place for the election) he will have handed it  to the Liberals for his no comment leadership. This is the time we need our leaders and the Provincial Premiers are doing the hard work. Kudo’s to them.

The US Commerce Secretary is trying to get a more measured tariff program from President Trump today for Canada and Mexico but the measures may not entice both sides to end the trade battle that Trump started. More pain on the US economy and consumer frustration calls to their Congressperson or Senator will be needed before cooler heads look for solutions. I am concerned about Mexico’s moves on Sunday and then the March 12th US tariffs on Canadian aluminum and steel. More stress will come on April 2nd, when reciprocal tariffs are placed across the world by the US with the main target being the EU.

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

• US Durable Goods Orders rose 3.1% compared to a forecast of up 2.0%.
• Core PCE for January 2025 came in at 2.6% – right on forecast.
• US Q4/24 GDP appears to have grown 2.3%. However the Atlanta Fed sees Q1/25 falling at a 3% pace.
• M2 Money Supply is growing at a 3.9% pace which means that monetary inflation is not being tackled seriously by the Federal Reserve.
• Target has mentioned that Mexican tariffs will lift food costs for Banana’s, Strawberries, Avocados etc. in the coming days. They are already seeing a slowdown in store traffic.
• ADP today announced new non-farm jobs rose a bleak 77K jobs in February way below the 141K job increase forecast. Maybe the DOGE job cuts hit these numbers. We will get more data this Friday from the Department of Labour.
• Trump is getting pushback from the Supreme Court which ruled today that he could not hold back payment of US$2B of foreign assistance money.

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. The general US Indices are now flat to down for 2025 and it is likely an overall 10-15% correction is underway.

The fiasco in the Oval office with Trump, Vance and Zelenskyy was a terrible event for Ukraine. It increased the gulf between Ukraine and the US and Zelenskyy was shown the door. No trade deal was signed to develop Ukraine’s critical minerals. In his anger President Trump cancelled all new weapons sales agreed to by President Biden and weapons already in Poland will not be allowed to cross the border. Trump today suspended intelligence sharing with Ukraine. This two by four has woken Zelenskyy to the seriousness of US anger and he has reportedly agreed to sign the minerals deal and sit down for peace talks with Russia and the US. It is clear that his meetings with EU members did not come up with sufficient military support to keep the stalemate with Russia on the battlefield. It has been reported that Ukraine has munitions that can last until June. Diplomacy better start fast.

Regarding energy,

Our WTI BUY price target of US$66-69/b was reached today and we are sending out to our subscribers an Action Alert today with new ideas. Today WTI is at US$65.51/b (down over US$3/b over the last week). We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (lowered to US$64-66/b). The forecasted breach of US$70/b has now occurred and more downside is ahead. Subscribers please watch your emails.

If you want to see our new Action Alert BUYS, sign up now for access to the Schachter Energy Research reports.

Josef Schachter March 5th, 2025

Posted In: Schachter's Eye On Energy

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