President Trump is on the warpath against Venezuela and Iran. Regarding Venezuela he introduced a 25% tariff on any country buying its oil and on that country’s goods sold in the US, if they buy crude from the country after April 2nd. For China with a current tariff of 20% this goes up to 45% if not negotiated down by China. This would be very inflationary for US consumers unless China manufacturers eat the increases on US exports. Before this tariff introduction China was importing 500K b/d from Venezuela and was their largest buyer. We are watching China import data to see how they react and how quickly they stop or lower their purchases. China’s best negotiating issue is to end the export of fentanyl or their chemical precursors.

For Iran, President Trump has given them two months to agree to disarm their nuclear weapons program. Some recent intelligence reports say that Iran is only weeks away from having sufficient weapons grade material to arm several long range strategic missiles. These ballistic missiles could reach Europe and even the US. So Israel and the US have reason to intensify the pressure on Iran’s leaders to do a deal and get sanctions relief that their economy desperately needs. There is one US carrier group already in the area and two more are being positioned to the area to give the US military options at the end of the two month grace period. A showdown with Iran is now likely potentially in May. To scare Iran’s leaders the US continues to strike Houthi targets to decimate their offensive capabilities against international shipping in the Red Sea area. Will this be a joint operation with Israel or just an American take-out action against Iran?

The ceasefire deal between Russia and Ukraine appears to be moving forward despite fighting in the border areas and both bombing each other’s cities and military targets. The negotiation teams (with prodding from the US and Saudi Arabia) are working on getting a deal to reopen shipping in the Black Sea. This would aid both countries to ship agricultural and other non-military goods to their historic buyers. Russia appears to be stalling as they want to get one of their largest banks (their agricultural bank – Rosselkhozbank) being connected back into the SWIFT financial system so they can get paid for the products sold via the agreement. They also want to complete the takeout or chase out of Ukraine military forces from the Kursk area of Russia; which is nearly done.

A US$4-5/b 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 going after the Yemeni Houthis with continuing and unrelenting degrading attacks adds to the current lift to the US$70/b area. Between these issues and the new Venezuelan tariffs and Iran being on the ropes economically, and potential sanctions that end Iranian energy exports, which would cripple their economy. A shut-in (by sanctions or military force) of 1.0 – 1.5Mb/d would drive global crude prices up US$10/b+, if that occurs. We see crude rising over US$80/b by the fall and this could be one of the key reasons why. Supply and demand are now in balance but by Q3/25 there should be more demand then supply and prices will be demand driven higher. Any supply just drives the magnitude of the rise higher.

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

• The Fed kept their Fed Funds rate at their same level after last week’s meeting. They still project two cuts in 2025 but these are expected to be announced during 2H/25 if the tariff war does not cause materially higher inflation.
• US economic growth for 2025 has been lowered to 1.7% from the Fed’s previous forecast of a rise of 2.1%.
• US Consumer Confidence nosedived 9.6 points to 65.2. It is the lowest reading in 12 years. The Conference Board sees signals that a recession could occur in the near future.
• US Durable Goods Orders for February rose 0.9% but was down from the January increase of 3.3%.

Regarding energy,

Our WTI BUY price target of US$66-69/b was reached and we sent out to our subscribers an Action Alert with new ideas. We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (maybe even as low as US$64/b). 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.