ByMichael Kern– Mar 04, 2025, 9:01 AM CST
The trade war between China and the U.S. is intensifying just as OPEC+ prepares to unwind its production cuts, putting oil prices under considerable downward pressure.
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– The US-China trade war escalated over the past week with the White House signing off another 10% hike on Chinese imports to the country, raising the overall level to 20%, all the while postponed tariffs on Canada and Mexico took effect March 4.
– Canadian crude flowing to US Midwest refiners will be subjected to a 10% tariff, most probably leading to a 2-3% increase in gasoline prices, whilst Mexico’s 25% levy would force refiners in the US Gulf Coast to look elsewhere for heavy barrels.
– Canada immediately retaliated by imposing 25% tariffs on some $30 billion of US imports, potentially followed by another levy targeting $125 billion in 21 days’ time, with the province of Ontario also threatening to stop electricity flows to the US.
– The discounts on Canada’s main export grade WCS widened massively this week, with the grade back to trading at -$14 per barrel to the prompt WTI futures contract, the same level it dipped to a month ago.
Market Movers
– UK-based energy major Shell (LON:SHEL) is considering selling some of its chemical assets in Europe and the United States, including the Deer Park chemical plant next to the refinery it sold in 2021 to Pemex.
– UAE’s national oil firm ADNOC merged its polyolefin assets with Austrian company OMV (VIE:OMV), which combined with its $13.4 billion Nova Chemicals acquisition will create a $60 billion petrochemical giant.
– Eni-backed Norway-focused upstream firm Var Energi (FRA:J4V) has reported the first oil discovery in Norway’s Barents Sea this year, finding some 15-45 MMboe of oil with its Zagato exploration well.
Tuesday, March 04, 2025
OPEC+ has been apprehensive ever since it started telegraphing its readiness to unwind production cuts, but the market now believes it will happen, prompting a slump in oil prices. So far, ICE Brent has shed $4 per barrel this week alone. Balancing on the edge of $70 per barrel, oil has remained immune to Trump’s tariffs on Canada and Mexico, fearing the US-China trade war much more.
US-China Trade War Escalates. Following President Trump’s tariffs on Chinese consumer electronics, Beijing announced its retaliatory tariffs on U.S. agriculture goods, slapping a 15% levy on U.S. imports of chicken, beef and cotton, 10% on beef and pork as well as adding 15 US firms to its Export Control List.
Speculators Are Shorting Crude Futures (Again). Hedge funds and other money managers have increased their short positions on WTI Nymex crude futures by a whopping 20% week-over-week to some 133,000 contracts, all the while long positions have remained unchanged at 330,000 lots.
Chinese LNG Demand Cools Down. China’s LNG demand dipped to its lowest since February 2020 as February arrivals totalled only 4.5 million tonnes amidst warm weather, high stocks and weak manufacturing growth, making Japan the world’s largest LNG importer for the second time in a row.
Johan Castberg Gets Delayed Again. Europe’s largest upstream project that is still yet to be launched, Equinor’s (NYSE:EQNR) 220,000 b/d Johan Castberg field located in the Barents Sea, has been delayed once again due to bad weather, initially expected to come online in December 2024.
Mexico’s Oil Industry Is Bleeding Money. Mexico’s national oil company Pemex reported a $9.1 billion Q4 2024 loss, a stark contrast to net profits posted a year ago amidst declining production, ending last year with $97.6 billion in financial debt and another $24.2 billion owed to service providers.
Kazakhstan Breaches OPEC+ Compliance. Buoyed by booming production from the Tengiz field, oil and condensate production in Kazakhstan soared to 2.12 million b/d last month, which would put crude-only output in the country some 350,000 b/d above its OPEC+ quota of 1.468 million b/d.
Libya Prepares First Upstream Auction Since 2007. Masoud Suleman, the acting chairman of Libya’s NOC, announced that the North African country plans its first exploration bidding round in more than 17 years, seeking to garner the $3 to $4 billion required to reach output of 1.6 million b/d.
China Takes Over Ecuador’s Main Field. The government of Ecuador has vowed to transfer the operation of its highest producing asset, the 75,000 b/d Sacha field, to a consortium led by China’s Sinopec (SHA:600028) as Quito seeks to reverse production declines.
Trade War Risks Depress Iron Ore. Heavily affected by the deteriorating U.S.-China trade war, iron ore futures have been declining for seven consecutive trading sessions with China’s benchmark Dalian May contract dipping to ¥780 per metric tonne ($107/mt).
India Wants Billions from Reliance. India’s Petroleum and Natural Gas Ministry has raised a demand of $2.81 billion vis-a-vis the country’s largest private energy firm Reliance Industries, citing gas migration to its offshore KG D6 block from the acreage run by state-controlled ONGC.
Saudi Aramco Slashes Its 2025 Dividend. Saudi Arabia’s national oil company Saudi Aramco (TADAWUL::2222) announced that it expects to pay an annual dividend of $85.4 billion, a 30% decline year-over-year, a much bigger cut than the 12% dip in annual net profits last year.
Chinese Copper Smelters Prioritize Market Share. Chinese copper production is set to rise by 5% in 2025 to 12.45 million tonnes, squeezing smelting margins to the lowest reading ever with processing fees currently being $20 per metric tonne negative, preferring to retain market share at the expense of profit.
Iraq Rushes to Bring Kurdish Oil Back. Iraq failed to reach a comprehensive deal with international oil firms operating in the semi-autonomous Kurdistan region, agreeing on the initial volumes of 185,000 b/d but seeking to introduce a third-party consultant to oversee future transactions.
By Michael Kern for Oilprice.com
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