Tariffs continue to roil oil markets

March 28, 2025
Oil prices neared $70 after the Trump administration announced 25% “secondary” tariffs to be imposed on buyers of Venezuelan crude and a large draw in inventories reversed earlier losses. However, the continued imposition of tariffs by President Trump are leading to trade wars which are dampening outlooks for future demand.

Oil, fundamental analysis

WTI crept higher this week on mixed market signals but topped-out at the key technical level of the Upper-Bollinger Band. Oil prices neared the key Resistance point of $70 on Wednesday after the Trump administration announced new 25% “secondary” tariffs to be imposed on buyers of Venezuelan crude. Additionally, a large draw in crude inventories reported on Wednesday reversed the prior day’s losses. However, the continued imposition of tariffs by President Trump are leading to trade wars which are dampening the outlooks for future demand.

The week’s High was $70.22/bbl. Wednesday with the Low occurring on Monday at $67.95. Brent crude traded in a similar fashion with the Low of $71.80/bbl. Monday while its High was Friday’s $74.20. The Brent/WTI spread now stands at ($3.20). Both grades settled higher week-on-week. 

In response to Trump tariffs, India is planning on further development of its oil reserves of which only 10% have currently been exploited. Meanwhile, Guyana is becoming a global player in the oil market and is projected to be producing up to 1.3 million b/d of crude and 1.5 bcfd by 2027.

In the ongoing Iran situation, the US has imposed further restrictions on buyers of Iranian oil by targeting the so-called “teapot” refiners in China. So far, little of the exports to China have been halted, but should the new sanctions be successful, the increase in OPEC+ output Apr. 1 could offset those reductions. 

Supply/demand balances for 2025 are mixed among analysts with Standard Chartered foreseeing a 0.9 million b/d deficit while the US Energy Information Administration (EIA) predicts a 0.1 million b/d difference and Bloomberg expects a balanced market.

In a report this week, Raymond James forecasted a growth in global oil production of 3.0 million b/d this year after last year's actual increase of only 800,000 b/d. However, other analysts are quick to point to lessening demand, especially from China, as well as the lack of desire by US oil executives to “drill, baby, drill”. BP has finalized an agreement started last year with the Iraq government in Baghdad to redevelop the oil and gas fields in the Kirkuk region. 

The EIA's Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week decreased while production held at 13.6 million b/d. Additionally, the Strategic Petroleum Reserve gained 286,000 bbl to reach 396 million bbl. 

Fourth-quarter 2024 GDP was upwardly revised to 2.4% vs. the previously-reported +2.3%. However, economists are still forecasting a less than 2% growth rate for first-quarter 2025. The Conference Board’s Consumer Confidence Index fell by 7.2 points to 92.9 this month, the fourth consecutive monthly decline. All three major US stock indexes are down on the week over concerns that the trade wars will have a negative impact on both economic growth and inflation. The USD is up just slightly on the week but has which may be capping oil prices. 

Oil, technical analysis

A 6-week downtrend was reversed this week and now NYMEX WTI Futures are above the 8-, 13-, and 20-day Moving Averages, having touched on the Upper-Bollinger Band limit. Volume is below average at 175,000. The Relative Strength Indicator (RSI), a momentum indicator, is “neutral” at the “47” mark. Resistance is now pegged at $70.15 (Upper-Bollinger Band) with near-term Support at $68.90.

Looking ahead

A Chinese refiner has opened an office in Calgary, Canada, to facilitate the purchase of crude from Suncor. With April approaching, heating oil consumption will not be much of a factor in gauging crude demand.  Also, the ever-changing tariff situation is impacting global economies which are directly tied to energy consumption. It has yet to be seen if Trump will actually impose the tariffs slated for Apr. 2 given his prior indecisiveness. If enacted, retaliatory tariffs have been the response of the countries impacted thus far. 

Natural gas, fundamental analysis

US natural gas futures edged up about 1% on Wednesday on record gas flows to LNG export plants and raised demand forecasts for the next 2 weeks, with price gains capped by record output and forecasts for mild weather through mid-April. However, prices settled lower at week’s end on the second consecutive storage injection in March. A High of $4.055/MMbtu occurred Monday  with the week’s Low of $3.73 printing on Thursday.

Supply last week was +0.1 bcfd to 110.8 bcfd vs. 110.7 the prior week. Demand was +3.5 bcfd to 107.7 bcf vs. 104.2 bcfd the week prior, with the biggest increase coming in residential consumption.

Exports to Mexico were 6.3 bcfd vs. 6.0 the prior week. LNG exports were 16.4 bcfd vs. 16.4 bcfd the prior week. European gas prices were most recently quoted at $12.00/MMbtu equivalent.

The EIA’s Weekly Natural Gas Storage Report indicated an injection of +37 bcf vs. near forecasts. Total gas in storage is now  1.744 tcf, dropping to 24.2% below last year and rising to 6.5% below the 5-year average.

Natural gas, technical analysis

May 2025 NYMEX Henry Hub Natural Gas futures take the front spot this week and prices are below the  13-, and 20-day Moving Averages but above the 8-day MA. Volume is about the recent average at 110,000. The RSI is still “neutral” at “49.5”. Support is pegged at $3.75 (Lower-Bollinger Band) with Resistance at $4.00. 

Looking ahead

European natural gas storage levels are down to about 34% full as winter exits the region. With China’s LNG imports dropping to a 5-year low, ample shipments should be available for the EU and UK which remain the No. 1 destination for US LNG cargoes. However, both the EU and UK are seeking agreements with Qatar and African exporters to diversify their supply portfolios.

US LNG exporter Venture Global is seeking FERC approval for commercial start-up of its Calcasieu Pass and TransCameron projects. Meanwhile, Canadian energy leaders are urging their federal officials to expedite natural gas pipeline and LNG development to boost the country’s exports.

As with heating oil, the next 8-14 days look bearish for natural gas demand. However, May futures will benefit from continuing storage injections. 

About the Author

Tom Seng

Assistant Professor of Professional Practice in Energy
Ralph Lowe Energy Institute
Neeley School of Business
Texas Christian University
Fort Worth, Tex.