April 2, 2025 | Weaker US Consumption Leads To 6.2Mb Increase In Commercial Crude Stocks. WTI Expected To Fall Below US$67/b.

While the US federal government cuts its employee count sharply in recent weeks the private sector is adding jobs at a fast pace. Today the ADP report showed private sector jobs rose 155,000 in March above the 120,000 forecast. Professional and business services added 57,000 workers, Financial services 38,000 (tax season ramp up), manufacturing 21,000 and Leisure and Hospitality 17,000 more workers. On the wage front, earnings rose by 4.6% (year over year). The US GDP for Q4/24 came in at 2.4%, better than the 2.3% expected. Core PCE rose 0.4% in February (12-month rate 2.8%) above the 0.3% expected. All these data points will keep the Fed from lowering rates at their next meeting.

Today is President Trump’s ‘Liberation Day’ tariff day. How severe the tariffs are and the counter tariffs will dominate the news cycle. The stock market appears fragile so if we see severe tariff rates to reverse globalization then the downside for the general stock markets over the coming weeks could be in excess of a 10% haircut. Details of what tariffs and rates for the auto sector will be the most watched. Will they put in parts levels from other countries with maximums to not get tariffs. How will Canada and Mexico react tomorrow given their being part of the three country trade deal Trump negotiated in his first term? How high will new car prices built in the US go and will buyers become reluctant to pay higher prices. One interesting point made by the Wall Street Journal is that used cars may get a material price bump given the higher prices expected for new cars. Economists are forecasting slower growth in the coming months due to the tariffs and consumers now retrenching from spending. CNBC sees Q1/25 GDP growth at just 0.3% as consumer and business sentiment declines due to the emerging trade war.

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. India’s largest Venezuelan crude buyers agreed last week to stop buying Venezuelan crude. US buyers of heavy crude used for paving highways have been told by the Treasury Department that all imports must stop and payments completed today. The Treasury Department has also revoked waivers for Italy’s ENI and Spain’s Repsol to operate in Venezuela and to end imports to their countries.  They had been allowed to operate by the Biden administration due to the debts owed to them by Venezuela (crude for debt deals).

For Iran, President Trump has them on a clock which leaves only weeks to agree to disarm their nuclear weapons program. Recent intelligence reports say that Iran is only weeks away from having sufficient weapons grade material to arm several long range strategic missiles.This has both Israel and the US getting ready to attack and destroy this capability. Iranian ballistic missiles can reach Europe and even the US. There is one US carrier group already in the area and two more are being positioned to give the US military options at the end of the grace period. A showdown with Iran is likely 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. The US has sent B-52 bombers to the area to fly near Iran and show how serious the US is at ending their nuclear weapons program. How far and for how long will Iran’s leaders accept this brinkmanship? Iran’s Foreign Minister mentioned that they have readied over 1,000 heavy hypersonic ballistic missiles to target Israeli facilities (including nuclear and military targets). The Iranian military is now reported to be on high alert in anticipation of a strike in the coming weeks.

Josef Schachter April 2nd, 2025

Posted In: Schachter's Eye On Energy

Next: Japan, China, and South Korea Strengthen Ties Amid US Tariffs »