Global Economic, Political & Military Update
President Trump teased the markets last week with misdirection of when he planned to put on his tariffs. He mentioned early April to add stiff tariffs to China, Mexico and Canada and then the next day changed again. We hit all three on Monday March 3rd with various high tariffs. This shocked the stock markets and retaliatory measures were announced by China and Canada. Mexico plans on adding theirs on Sunday March 9th. Strong announcements in defense of Canada were made by Premier Ford and Prime Minister Trudeau. Even the NDP were seen calling for a return of Parliament to discuss the tariffs and come up with a united front. Conservative Leader Pierre Poilievre was nowhere to be seen. This is a failure of the conservative leadership to not show up on a critical matter to Canadians. If he keeps such a busy work schedule and is seen as an absentee leader (possibly still in first place for the election) he will have handed it to the Liberals for his no comment leadership. This is the time we need our leaders and the Provincial Premiers are doing the hard work. Kudo’s to them.
The US Commerce Secretary is trying to get a more measured tariff program from President Trump today for Canada and Mexico but the measures may not entice both sides to end the trade battle that Trump started. More pain on the US economy and consumer frustration calls to their Congressperson or Senator will be needed before cooler heads look for solutions. I am concerned about Mexico’s moves on Sunday and then the March 12th US tariffs on Canadian aluminum and steel. More stress will come on April 2nd, when reciprocal tariffs are placed across the world by the US with the main target being the EU.
The US economy is showing mixed results at this time but seems to be deteriorating. Some of the recent releases show:
- US Durable Goods Orders rose 3.1% compared to a forecast of up 2.0%.
- Core PCE for January 2025 came in at 2.6% – right on forecast.
- US Q4/24 GDP appears to have grown 2.3%. However the Atlanta Fed sees Q1/25 falling at a 3% pace.
- M2 Money Supply is growing at a 3.9% pace which means that monetary inflation is not being tackled seriously by the Federal Reserve.
- Target has mentioned that Mexican tariffs will lift food costs for Banana’s, Strawberries, Avocados etc. in the coming days. They are already seeing a slowdown in store traffic.
- ADP today announced new non-farm jobs rose a bleak 77K jobs in February way below the 141K job increase forecast. Maybe the DOGE job cuts hit these numbers. We will get more data this Friday from the Department of Labour.
- Trump is getting pushback from the Supreme Court which ruled today that he could not hold back payment of US$2B of foreign assistance money.
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. The general US Indices are now flat to down for 2025 and it is likely an overall 10-15% correction is underway.
The fiasco in the Oval office with Trump, Vance and Zelenskyy was a terrible event for Ukraine. It increased the gulf between Ukraine and the US and Zelenskyy was shown the door. No trade deal was signed to develop Ukraine’s critical minerals. In his anger President Trump cancelled all new weapons sales agreed to by President Biden and weapons already in Poland will not be allowed to cross the border. Trump today suspended intelligence sharing with Ukraine. This two by four has woken Zelenskyy to the seriousness of US anger and he has reportedly agreed to sign the minerals deal and sit down for peace talks with Russia and the US. It is clear that his meetings with EU members did not come up with sufficient military support to keep the stalemate with Russia on the battlefield. It has been reported that Ukraine has munitions that can last until June. Diplomacy better start fast.
Regarding energy,
Our WTI BUY price target of US$66-69/b was reached today and we are sending out to our subscribers an Action Alert today with new ideas. Today WTI is at US$65.51/b (down over US$3/b over the last week). We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (lowered to US$64-66/b). The forecasted breach of US$70/b has now occurred and more downside is ahead. Subscribers please watch your emails.
If you want to see our new Action Alert BUYS, 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 rose 3.6 Mb to 433.8 Mb and the SPR was unchanged at 395.3 Mb. Motor Gasoline Stocks fell 1.4 Mb while Distillate Fuel inventories fell 1.3 Mb. Overall Stocks fell 4.6 Mb to 1,600.6 Mb. Refinery Utilization fell 0.6% to 85.9% but was above the 2024 level of 84.9%.
US Production remained at 13.5 Mb/d and is 308 Kb/d above 2024 levels. Exports fell 52 Kb/d to 4.14 Mb/d. Overall demand fell 300 Kb/d to 20.54 Mb/d, as Propane demand fell 861 Kb/d to 1.06 Mb/d. Motor Gasoline rose by 423 Kb/d to 8.88 Mb/d while Jet Fuel consumption rose 48 Kb/d to 1.58 Mb/d. Cushing Inventories rose 1.1 Mb to 25.7 Mb. However this is below the 2024 level of 31.7 Mb.
Overall US demand is now up 3.3% from last year while Gasoline demand is up 0.4% from last year.
EIA Weekly Natural Gas Data
Cold weather across South Central and the Midwest helped to draw storage down materially last week. Storage fell 261 Bcf to 1.84 Tcf with the largest decline in the South Central with a 111 Bcf usage. This compares to a decrease of 96 Bcf last year and the 5-year average withdrawal rate of 135 Bcf.
US Storage is now 23.4% below last year’s level of 2.40 Tcf and 11.5% below the five year average of 2.08 Tcf. This comparison in the negative for the five year comparison is really bullish for prices. NYMEX is today priced at US$4.38/mcf. Spikes over US$5/mcf could be seen if there is another lengthy Polar Vortex over the next few weeks of harsh winter. The withdrawal season ends at the end of March and the injection season starts in April historically.
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.
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 <49% of capacity versus 67% last year at this time.
Baker Hughes Rig Data
In the data for the week ending February 28th, the US rig count rose one rig to 593 rigs. Rig activity is now 5.7% below the level of 629 rigs working last year. Of the total US rigs working last week, 486 were drilling for oil and this is 4.0% below last year’s level of 506 rigs working. The natural gas rig count is down 14.3% from last year’s 119 rigs, now at 102 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 4 rig increase to 248 rigs. This rig activity rate was above last year’s 231 rigs, or up by 7.4%. 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 $2.00/mcf due to the moderate weather in western Canada.
Our Q1/25 quarterly webinar took place last Thursday at 7PM and lasted 90 minutes.
Topics included:
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 listen in the archives one needs to become a subscriber. https://schachterenergyreport.ca/subscriptions/
Energy Stock Market
The S&P/TSX Energy Index today is at 241 (down 22 points over the last week and down >5 points today) and is nearing triggering a BUY signal below 240. We suspect the S&P/TSX Energy Index will fall into the mid-230’s and we will then trigger an SER Action Alert BUY report with new BUY ideas. We have talked about crude falling to the US$66-68/b for some months. Today WTI is at US$65.51/b (low today US$65.43/b). This is a great time to subscribe as there are many bargains during this market decline!
We like to BUY when stocks are cheap and being ignored. Bargains are clearly being seen now in our focus of recommendations.
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.
Today we have entered another low risk entry point like we saw on September 10th and in December during tax loss selling season. We sent to subscribers an Action Alert today and we expect another signal to be triggered in the next week or two and we will add additional BUY names at that point. Keep an eye out for this Action Alert in your email inbox.
If you would like to receive future SER Action BUY Recommendations, become a subscriber. https://schachterenergyreport.ca/subscriptions/
