A Way Out. The Energy Report 03/26/2025

President Trump has provided a potential way for the Russia and Ukraine war to have a way out and a way out of a trade war with targeted sanctions. Oil prices have reached a three-week high due to optimism about potential peace coupled with strict sanctions on Venezuela and Iran. As anticipated, U.S. supply is beginning to tighten, with the American Petroleum Institute (API) reporting a 4.6-million-barrel crude draw, double the market expectations, along with a decrease in gasoline inventories of 3.3 million barrels and a 1.3 million barrel drop in distillate inventory. Although the market is concerned about sanctions and tariffs, the prospect of peace could significantly affect various commodities.

The Wall Street Journal reported that, “The U.S. said it would help Russia boost agricultural exports and restore its access to payments systems, after the Kremlin demanded the easing of Western sanctions in return for a cease-fire in the Black Sea. The announcement, which followed two days of talks involving the U.S., Russia and Ukraine, sets up a potential standoff between America and its allies in Europe, who imposed some of the sanctions at issue.

Russia said it would only comply with a Black Sea truce upon the lifting of some banking sanctions, which European nations have vowed to keep in place. Ukrainian President Volodymyr Zelensky said he was opposed to weakening sanctions on Russia as a part of a deal. Moscow said major Russian banks involved in the food and fertilizer trade would need to be reconnected to the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, payment network, singling out Rosselkhozbank, a state-owned bank that deals with Russian agribusiness.

This comes as both Russia and Ukraine seemed to agree to quit hitting energy Infrastructure as a path to peace. On Tuesday, Russia released a list of facilities in Russia and Ukraine that are subject to a temporary moratorium on strikes against energy infrastructure — a list it says was agreed upon by the Russian and American negotiators according to reports. The list includes oil refineries; oil and gas pipelines and storage facilities, including pumping stations; electricity generation and transmission infrastructure, including power plants, substations, transformers, and distribution units; nuclear power plants; hydroelectric dam facilities.

Yet heating oil cracks rose after President Trump put on double secret sanctions on Venezuela. Ok maybe not secret. Reuters reported that, “Loading of Venezuela’s heavy crude at its main oil ports slowed this week after the U.S. imposed a tariff on trade with countries buying the South American nation’s oil and producer Chevron began reducing its tanker fleet there, according to shipping data and a document seen on Tuesday. On Monday, U.S. President Donald Trump’s administration published an executive order declaring that any country buying oil or gas from Venezuela will pay a 25% tariff on trades with the U.S. starting in early April.”

Venezuela is screaming about this. El Piaz reported that, “The Venezuelan government responded to the new U.S. crackdown on Monday with a message directed at Donald Trump. In a statement from the Venezuelan Foreign Ministry, it rejected the 25% secondary tariffs on Venezuelan oil and gas announced by the U.S. president, calling the measure “arbitrary, illegal, and desperate.” For the Venezuelan government, this move only confirms “the failure of all sanctions imposed against our country.”  Or maybe it exposes the fact that Venezula government is a corrupt cesspool. Yet the sanctions on Venezuela will increase the cost of diesel for a while. Heavy oil is needed to max that out.

Bloomberg reported that, “Reliance Industries Ltd. has paused further purchases of Venezuelan crude after US President Donald Trump authorized a 25% tariff on countries buying the South American country’s oil.

India’s largest privately owned refiner is expected to take delivery of a cargo of Merey crude that’s currently en route from Venezuela, but additional buying has been put on hold, according to people familiar with the situation, who asked not to be identified because the matter is sensitive.  Reliance secured waivers from the US last year to resume importing crude from Venezuela, and Kpler estimates the refiner has taken 6.5 million barrels since the start of the year. Trump’s executive order on Monday, however, will target any nation taking Venezuelan oil with “secondary” tariffs, with effect from April 2.

As I told Reuters yesterday that, “If there’s a ceasefire between Russia and Ukraine, it might open the door for the reduction of sanctions on Russian oil,” said Phil Flynn, senior analyst with Price Futures Group. Trump’s threat of tariffs against countries importing oil and gas from Venezuela has raised supply concerns, and both benchmarks rose more than 1% on Monday following the announcement.

The technical and crude markets are looking good seasonally. As we’ve noted, it’s likely a good time to buy products and oil or use bullish option strategies for seasonal hedges.

Natural gas prices declined following reports that Freeport LNG had to reduce production due to a pipeline struck by lightning. Additionally, conflicting weather forecasts and the market’s current shoulder season have contributed to some weakness. However, natural gas is attempting to maintain its strength.

Exports of liquefied natural gas (LNG) are becoming a major force in the US economy under President Trump as it strengthens US alliances and brings in billions of dollars of investment in the US economy.

China is not happy that Taiwan has cut a deal with President Trump to increase its imports of LNG from the United States. Taiwan signed a $44 billion deal to invest in the Alaska natural gas pipeline and has committed to purchasing LNG from Alaska, which will bring substantial economic benefits to the U.S. economy. Taiwan President Lai Ching exclaimed that, “Alaska is the source of high-quality natural gas, and its relatively short distance from Taiwan facilitates transportation. We are very interested in buying Alaskan natural gas because it can meet our needs and ensure our energy security.” Taiwan’s leadership is strategically focused on securing energy resources while fostering economic ties that could strengthen their position in the event of geopolitical tensions.

China as well is going to need more supplies of liquefied natural gas. And with the increases of demand in energy around the globe to keep up with the artificial intelligence challenges, going forward the United States is well positioned to secure its place as leader in the artificial intelligence race thank goodness, we have an administration that understands what’s at stake.

Download the Fox Weather ap! Stay tuned to the Fox Business Network!

Sign up for the wildly popular Phil Flynn Daily Trade Levels and call to get the special metals report. Call 888-264-5665 or email me at pflynn@pricegroup.com.

Thanks,