Global Economic, Political & Military Update
In early April we will see if President Trump is going to add stiff tariffs to Mexico and Canada and others around the world. It appears that he is using the hammer against his closest neighbours and then taking the plan against Europe and the rest of the world with trade surpluses with the US. Nothing is said about the large services surpluses with many countries around the world.
Inflation is on the rise due to higher food prices, insurance, property taxes, education and service costs. US PPI rose 0.4% in January up from a forecast of 0.3%. Consumers are feeling the pinch and are retrenching spending. Retail Sales in January fell 0.9% compared to a rise of 0.7% in December. Even juggernaut Walmart is warning of slowing sales and its concern about the impact of tariffs. US Consumer Confidence fell at its sharpest pace in 3.5 years or down 7 points.
Layoffs in the US Government due to voluntary acceptance of the 8 months of pay found over 75,000 taking the offer. Now we are seeing layoffs of DEI employees, probationary employees, those found in programs canceled and now members of the intelligence community who were fired this week for running a porn network on secure sites. The upcoming jobs reports may end up being negative due to the massive layoffs in the US Government. The private sector is also facing layoffs. Starbucks is laying off more than 1,100 corporate employees. Secretary of the Treasury Scott Bessent recently warned that the private sector of the US economy was weakening and now the government is not able to offset this. A mild recession warning was part of this speech. Now with tariffs on the horizon we are in uncharted territory and we may see more serious challenges to the economies impacted by Trump’s tariffs.
In Canada, the LIberals appear to be ready to crown Mark Carney the new leader and then call a quick election to see if the momentum of the LIberals can offset the prior lead of the Conservatives. Carney is tarnished by his prior Carbon Carney label and his leftist views, while Pierre Poilievre the Conservative leader is seen as a mini-Trump. Which of the two will get Canadian voters to give them the top job will be decided by whom they see being able to stand up for Canada and keep Trump’s hands off Canada’s natural resource wealth, including rare earths and water.
US stock prices are trading at lofty valuations, mainly due to the AI craze but cracks are now showing in the high flyers. TESLA is being hit hard due to falling sales and anti-Elon views. Others are being dragged down due to China’s success with ‘DeepSeek’. Warren Buffet is finding it hard to find value and has built up his cash reserves to US$334B after massive sales of Apple and other holdings.
Regarding energy,
Our WTI BUY price target of US$66-69/b was reached in September and is likely to test that level again in the coming weeks. Today WTI is at US$68.61/b (down over US$3/b over the last two weeks). We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (US$66-68/b). The forecasted breach of US$70/b has now occurred and more downside is ahead. When our price target range is hit we plan to add additional BUY ideas at that time. Subscribers please watch your emails on weak market days as this is when such an Action Alert would be issued.
If you want to see what our subscribers are looking at, sign up now for access to the Schachter Energy Research reports.
EIA Weekly Oil Data:
The EIA data for last week was a moderately bearish report. Commercial Stocks fell 2.3 Mb to 430.2 Mb and the SPR was unchanged at 395.3 Mb. Motor Gasoline Stocks rose 0.4 Mb while Distillate Fuel inventories rose 3.9 Mb. Overall Stocks fell 2.2 Mb to 1,605.1 Mb. Refinery Utilization rose 1.6% to 86.5% but was much higher than the 2024 level of 81.5%.
US Production remained at 13.5 Mb/d and is 202 Kb/d above 2024 levels. Exports fell 193 Kb/d to 4.19 Mb/d. Overall demand rose 1.19 Mb/d to 20.8 Mb/d, as Other Oils demand rose 735 Kb/d to 4.67 Mb/d and Propane demand rose 596 Kb/d to 1.92 Mb/d. Motor Gasoline rose by 215 Kb/d to 8.45 Mb/d while Jet Fuel consumption rose 72 Kb/d to 1.53 Mb/d. Cushing Inventories rose 1.3 Mb to 24.6 Mb. However this is below the 2024 level of 31.0 Mb.
Overall US demand is now up 3.6% from last year while Gasoline demand is up 0.7% from last year.
EIA Weekly Natural Gas Data
Cold weather across eastern and southern USA helped to draw storage down materially last week. Storage fell 196 Bcf to 2.10 Tcf with the largest decline in the Midwest with a 65 Bcf usage. This compares to a decrease of 54 Bcf last year when there was even colder weather and the 5-year average withdrawal rate of 116 Bcf.
US Storage is now 15.5% below last year’s level of 2.49 Tcf and 5.3% below the five year average of 2.22 Tcf. This comparison in the negative for the five year comparison is really bullish for prices. NYMEX is today priced at US$4.05/mcf. Spikes over US$5/mcf could be seen if there is another lengthy Polar Vortex over the next few weeks of harsh winter.
We recommend buying the very depressed natural gas stocks during periods of market weakness. Natural gas stocks are very cheap now. We see much much higher gas prices in 2H/25 as quite a number of new LNG plants come onstream over the next 12 months; one in Canada and two more in the US. In Canada the first train of LNG Canada comes on during Q2/25 and in the US Corpus Christi Stage 3 begins production of LNG (1.5 Bcf/d). In 2025, Golden Pass LNG is bringing on the first two trains of this new three train export facility. The new Plaquemines LNG plant shipped 1.6 Bcf/d last week and is ramping up to its 3.2 Bcf/d capacity. Last week US exports of LNG reached a new high of 16.5 Bcf/d.
LNG tankers are being redirected from Asian customers to Europe as prices are much higher there and drawdowns are happening very quickly due to the cold winter weather. European natural gas prices are around US$15/mcf as storage is depleting quite quickly. Inventories are now at 49% of capacity versus 67% last year at this time.
Baker Hughes Rig Data
In the data for the week ending February 21st, the US rig count rose four rigs to 592 rigs. Rig activity is now 5.4% below the level of 626 rigs working last year. Of the total US rigs working last week, 488 were drilling for oil and this is 3.0% below last year’s level of 503 rigs working. The natural gas rig count is down 17.5% from last year’s 120 rigs, now at 99 rigs. This decline in drilling and production should continue for a few more months as the industry waits to see Trump’s industry support especially on the regulatory side. Approval of new infrastructure will also be closely watched. Weak WTI prices at this time have slowed energy companies drilling plans for early 2025.
In Canada, there was a 1 rig decrease to 244 rigs. This rig activity rate was above last year’s 231 rigs, or up by 5.6%. As we get closer to LNG Canada ramping up in July 2025 (Petronas – recent forecast by one of the owners) and natural gas fills the Coastal GasLink pipeline, prices should lift. AECO prices are now around $2.45/mcf.
World Outlook Financial Conference Special Deal:
We have extended our special World Outlook Financial Conference offer to all our readers of Eye on Energy until the end of this week. New subscribers can get $100 off the first year ($899) with coupon code WOFCA25 or $50 off the first quarter ($249) with coupon code WOFCQ25. Get it before the deal is gone at the end of day on Friday. All subscribers will receive the pdf of my presentation from the conference. Subscribe now! https://schachterenergyreport.ca/subscriptions/
Our Q1/25 quarterly webinar will take place this Thursday at 7PM and last 90 minutes.
Topics include:
- Stock Market Weakness – How Far Down – 20 minutes
- InPlay Transformational Deal – 15 minutes
- Overview Q&A – 15 minutes
- Top Picks for Upcoming BUY Signal – 20 minutes
- Final Q&A – Prior Questions Sent in & Webinar Questions – 20 minutes
If interested to join the live broadcast or listen in the archives after posting one needs to become a subscriber. https://schachterenergyreport.ca/subscriptions/
Energy Stock Market
The S&P/TSX Energy Index today is at 263 (down 9 points over the last two weeks). Trump’s potential tariffs are weighing on the energy sector which is Canada’s largest export. Our downside target for this Index remains below 240 (range 230-240 which is getting closer) and we see this happening over the coming weeks (window March 2025) if the Tariff politics get very ugly. We like to BUY when stocks are cheap and being ignored. Bargains are clearly being seen now in our focus for new recommendations. WTI has traded between US$65.27/b and US$79.39/b (last week’s high) over the past few months.
Investors should decide what you want your energy weighting to be for this long energy super cycle. Our BUY List includes ideas from the Pipeline/Infrastructure/Royalty area, Canadian oil and natural gas ideas, energy service ideas and companies working internationally. Our list includes large Conservative ideas and small to large caps in our Growth and Entrepreneurial categories. Add to your current ideas or add new ideas. We expect that WTI should lift above US$90/b in 2H/25 and demand should exceed supplies at that time. We see WTI prices above US$100/b consistently during 2026.
We expect we are close to another low risk entry point like we saw on September 10th and in December during tax loss selling season. In the next few weeks an oversold condition should give us the next bargain BUY window. Keep an eye out for this Action Alert in your email inbox.
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