Hard Slap. The Energy Report 03/21/2025

Oil prices got a bid after the Trump Administration cracked down on Iranian oil risking a hard slap from the slap happy Iranian Supreme leader and grand Poopah. Ayatollah Ali  Khamenei said that, “ The US needs to know that if they mess around with Iran, it will receive a hard slap.” So don’t go messing around, unless you want an Ayatollah slap. Yet I don’t know if putting tough sanctions on Iran and their favorite customers the Chinese teapot refineries, constitute messing around but we’ll have to see if the Ayatollah decided to start slapping.

Trump cracked down as the U.S. Department of State sanctioned the Huaying Huizhou Daya Bay Petrochemical Terminal Storage, an oil terminal in China, for buying and storing Iranian crude oil from a sanctioned vessel.  They concurrently sanctioned China-based Shandong Shouguang Luqing Petrochemical Co., Ltd., a “teapot” oil refinery, for purchasing and refining hundreds of millions of dollars’ worth of Iranian crude oil.  This includes oil from vessels linked to Ansarallah (Houthis), a Foreign Terrorist Organization, and the U.S.-designated Iranian Ministry of Defense of Armed Forces Logistics (MODAFL).  “Teapot” refiners are private Chinese refineries that are the primary purchasers of Iranian oil. This will be the United States’ first designation of a teapot refinery.

The report of the Trump crackdown supported oil and should give oil a floor. Yet other moves by Trump should keep prices from spiking. For example, there is a Reuters report saying that US. President Donald Trump’s Administration is considering a plan to extend Chevron’s (CVX.N), b license to pump oil in Venezuela by at least 60 days, according to two people familiar with the matter. The Administration had announced in February that it would scrap the U.S. company’s license to operate in Venezuela and gave it until early April to wrap up its business in the South American country.

Despite an agreement with President Trump not to attack energy infrastructure, reports indicate that Russia attacked overnight. Despite this, Russia continues to claim they have honored the agreement. Bloomberg News reported that European natural gas prices jumped after an attack on a pumping station in Russia’s Kursk region, which formed part of an inactive link that until recently sent fuel to Europe.  Benchmark futures rose as much as 6.2% in early trading on Friday. Ukraine’s General Staff of the Armed Forces confirmed  the Sudzha gas metering station was shelled, but said it was Russians who struck the facility, pointing to previous instances in which Russia appeared to send soldiers through a disused natural gas pipeline. Serious damage could make the resumption of Russian gas supplies more unlikely, a prospect that was already in retreat after a 30-day ceasefire didn’t immediately emerge as a first step toward a peace deal. Russia and Ukraine’s leaders indicated they’d agree to a ceasefire on attacking energy infrastructure, but so far that has not led to a halt in attacks.

The Trump administration has effectively controlled energy prices despite global inventories being below the 10-year average. While there are concerns about a potential price spike, the administration’s regulatory actions and foreign policy have kept these fears at bay. In comparison, Biden’s administration saw inflation rise, whereas Trump’s approach led to lower prices.

Traders should prepare for a seasonal rally as refiners ramp up for summer driving season. The EIA reported 1,707 Bcf of natural gas in storage as of March 14, 2025, an increase of 9 Bcf from the previous week. Stocks were 624 Bcf less than last year and 190 Bcf below the five-year average of 1,897 Bcf. Total working gas remains within the five-year range. Despite this, long-term fundamentals for natural gas appear bullish, with weather playing a key role.

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