Global Economic, Political & Military Update
A partial ceasefire in Ukraine where both Russia and Ukraine committed to stop attacking each other’s energy infrastructure for 30 days is the best that the US could get from the current negotiations to a long term de-escalation and towards a peace agreement. One additional move was a deal to exchange prisoners. Now 175 prisoners from each combatant will be going home to their countries today.
Why Putin did not go further is that the situation in Kursk is going his way. Of the 10,000 – 12,000 front line Ukrainian soldiers still in Russia, the situation is getting desperate. They are now surrounded on three sides by Russian and North Korean troops and President Putin wants them to use the corridor to Ukraine to depart and end the bloodshed. President Trump wants to see this Kursk situation resolved and Putin wants no more Ukrainian troops on his land before he agrees to more discussions. Just a few more days could give Putin what he wants and show his forces (Russian and North Korean) were able to recover Russian territory.
A war premium has returned to crude as Israel has gone back to destroy Hamas after the recent hostage deal and ceasefire fell apart. In addition the US is going after the Yemeni Houthis with continuing and unrelenting degrading attacks so that the Red Sea waterway will not be attacked going forward. They destroyed command and control facilities, missile and drone bases and killed a number of the Houthi military and political leaders. Trump on his social media favourite Truth Social stated “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of Iran, and Iran will be held responsible, and suffer the consequences, and those consequences will be dire.” Iran is on the ropes economically and if Trump adds sanctions that end Iranian energy exports that would cripple their economy. A shut-in of 1.0 – 1.5Mb/d alone would drive crude prices up US$10/b+, if that occurs.
The US now has one aircraft carrier sending planes to attack Houthi facilities and degrade their war fighting efforts. Two more US carrier groups are heading to the area. These forces may be required to force Iran to end their nuclear program and end supporting their terrorist proxies (Hamas, Hezbollah and the Houthis). If the US attacks Iran directly the war premium for crude will lift sharply. If Iran or the Houthis attacked any of their Arab neighbours, especially those producing oil (UAE, Kuwait and the biggie Saudi Arabia) a large crude price spike could occur especially if key export infrastructure was destroyed. These Iranian neighbours produce 12 Mb/d or 11% of global demand.
The US economy is showing mixed results at this time but seems to be deteriorating. Some of the recent releases show:
- US Consumer Confidence nosedived as Trump trade policies cause unease among Americans. The Michigan index fell to 57.9 in mid-March from 64.7 last month.
- US consumer inflation expectations jumped from 4.3% to 4.9% for 2025. This is not what the Fed wants to see.
- US February Retail sales rose only 0.2% versus the forecast of a 0.7% increase. The January number was revised to a decline of 1.2%.
- Federal revenues for February came in at US$296B. The deficit was larger than this at US$307B. A US$2T deficit is in the cards this year despite whatever cuts DOGE is making.
Regarding energy,
Our WTI BUY price target of US$66-69/b was reached and we sent out to our subscribers an Action Alert with new ideas. We expect a period of backing and filling for WTI crude in the coming weeks and another test of the lows (maybe even as low as US$64/b). 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 mostly bearish report. We are now past peak winter demand and into the seasonally slow spring demand season and when inventories are replenished for the summer driving season (the second strongest consumption period). Commercial Stocks rose 1.7 Mb to 437.0 Mb and the SPR rose 0.3 Mb to 395.9 Mb. Motor Gasoline Stocks fell 0.5 Mb while Distillate Fuel inventories fell 2.8 Mb. Overall Stocks rose 1.9 Mb to 1,596.8 Mb. Refinery Utilization rose 0.4% to 86.9% but was around the 2024 level of 87.8%.
US Production fell 2 Kb/d to 13.57 Mb/d but is 473 Kb/d above 2024 levels of 13.1 Mb/d. Exports rose 1.35 Mb/d to 4.64 Mb/d. Overall product demand fell 2.18 Mb/d to 19.42 Mb/d, as Other Oils demand fell 1.26 Mb/d to 3.51 Mb/d. Propane demand also fell 678 Kb/d to 931 Kb/d. Motor Gasoline consumption fell by 365 Kb/d to 8.82 Mb/d. Jet Fuel consumption rose 70 Kb/d to 1.85 Mb/d. Cushing Inventories fell 1.0 Mb to 23.5 Mb. However this is below the 2024 level of 31.4 Mb.
Overall US demand is now up 2.9% from last year while Gasoline demand is up 0.5% from last year. These are good indications that the US consumer and the economy remain healthy despite the recession chatter.
EIA Weekly Natural Gas Data
Cold weather in the East helped to draw storage down last week. Storage fell 62 Bcf to 1.698 Tcf with the largest decline in the East with a 33 Bcf usage. This compares to a no change last year and the 5-year average withdrawal rate of 52 Bcf. We are nearing the end of winter drawdowns and the commencement of the injection season which officially starts April 1st.
US Storage is now 27.0% below last year’s level of 2.3265 Tcf and 11.9% below the five year average of 1.928 Tcf. This comparison in the negative for the five year comparison is really bullish for prices. NYMEX is today priced at US$4.17/mcf.
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 summer 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 recently shipped 1.6 Bcf/d 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 quickly. European natural gas prices are around US$15/mcf as storage is depleting quite quickly. Inventories are now <50% of capacity versus 67% last year at this time.
Baker Hughes Rig Data
In the data for the week ending March 14th, the US rig count was unchanged at 592 rigs. US Rig activity is now 5.9% below the level of 629 rigs working last year. Of the total US rigs working last week, 487 were drilling for oil and this is 4.5% below last year’s level of 510 rigs working. The natural gas rig count is down 13.8% from last year’s 116 rigs, now at 100 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 <US$70/b at this time have slowed energy companies drilling plans for early 2025. Current oil and gas prices are not sufficient to justify incremental drilling. Companies remain financially disciplined despite the Trump administration edict to ‘ drill baby drill’. WTI will need to exceed US$80/b for some time before drilling activity will pick up for crude and needs to be over US$4.50 for NYMEX to incentivize natural gas drilling.
In Canada, there was a 35 rig decrease to 199 rigs as breakup comes to more areas. This rig activity rate was below last year’s 207 rigs, or down by 3.9%. Natural gas rigs working are 60 down 24.1% from 79 in 2024. The oil rig count is up 8.6% to 139 rigs compared to 128 working in 2024 as oil volumes can be moved via the TMX line west and there is still capacity to move crude south to the US.
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 $2.20/mcf due to the moderate weather in western Canada.
Energy Stock Market
The S&P/TSX Energy Index today is at 268 (up 11 points over the last week) as quarterly results for Q4/24 and 2024 Annual results for many E&P companies were better than forecasted. The US$2/b WTI increase (to US$67.10/b) over the last two weeks and a bounce from the March 5 oversold level (and when we sent out new Action BUYS) should get some credit. Also a sigh of relief that trade talks will occur between Canada and US trade representatives has lifted the negative sentiment. We still expect a bit lower crude prices and a decline in the S&P/TSX Energy Index to below 240 (range 235 – 240) in the coming weeks. The low two weeks ago at 240.14 should be tested in the coming weeks. If it breaches this level I see us adding additional new BUY recommendations.
We like to BUY when stocks are cheap and being ignored. Bargains are clearly being seen now in our focus of recommendations. More should show up shortly. Early April should provide a great window to add to favourite positions.
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 Q4/25 and global demand should exceed supplies at that time. We see WTI prices above US$100/b consistently during 2026.
We expect another BUY signal to be triggered in the next few weeks and we will add additional BUY names at that point. Keep an eye out for this Action Alert in your email inbox. Possibly three or four great BUY ideas could be sent to subscribers.
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