Summary:

President Trump wants to sign his ‘BIG, BEAUTIFUL BILL” on Independence Day – July 4th but the alternative Senate and House bills need to be reconciled and then voted upon again before being sent to the President. Big differences on Medicaid access, the SALT deduction for high tax states (I.e. Blue Democratic States with some Republican House members worried about losing their seats) etc. It is quite the ‘Big Messy Bill’.

Crude oil is holding in despite increased supplies from Azerbaijan and Iran. We currently have a surplus to global needs and we still feel that we will see WTI prices below US$60/b in the coming weeks. Today the price of WTI is at US$65.81/b (up from US$64.90/b last week). More on this below.

Tariff day is coming on July 9th and it appears that only a few deals will be completed and many of these not even papered. I expect President Trump to take a sledge hammer to some countries not on his good books with 50% or larger tariffs. Just more pressure on countries to come to the table with deals that end (or shrink) their trade surpluses. Fed Chairman Powell noted that the Fed would have cut rates if not for the unknowables of the tariffs. President Trump has raised the issue of appointing a “shadow Fed Chair” before Powell’s term is up. This will be a short against the Fed. Today the ADP reported job losses for June were 33K (a positive reading was expected). We get more job data this Friday.

The recent US stock market rally has been focused on the AI and tech sectors and is very narrow in leadership. We saw this same picture in early February 2025 just before the Dow fell from 45,100 to 36,600 or a decline in 2.5 months of 19%. With sluggish economic data especially in the consumer areas, we suspect we could see a 20%+ general stock market correction (led by tech) over the coming weeks. Caveat Emptor! More on this below.

This week’s Eye On Energy Details:

Current Challenges:

Challenges for President Trump and his administration over his second 100 days will be tough: He needs success on these issues before the end of this timeline:

• Get the Senate and House to agree to the extension of the debt ceiling and raise it by US$4T to US$41T.

• Be able to fund the current deficit and renew maturing Treasury issues when foreign investors worry about US trade policy and support of NATO. China and Japan have been selling some of their substantial Treasury issues. Near term rates have come down due to the success in Iran and crude prices retreating.

• It may take into August to get the budget bill to President Trump’s desk for signing. This could be a stock market problem (smackdown potential) if delayed further or a deal is not done between the Senate and the House. The State and Local tax issue (SALT) is a battle between high tax Blue and low tax Red States.

• Show that he can cut wasteful government spending. The current deficit looks to be US$2.2T for this fiscal year and could go higher in coming years if the growth forecast assumed by the bill does not occur. The current deal looks to add US$30T to the deficit over the next 10 years. The Moody’s rating downgrade from ‘Triple A’ was a blow but so far has not raised interest rates to get required funds. Markets are watching to see how upcoming Treasury offerings do. So far so good! But interest rates payments are now over US$1T and rising as much of the debt raised 2,3 and 4 years ago was at much lower cost and the renewal will add to the rising interest cost to the budget.

• Get Congressional approval to close down government departments, regulations and staffing. So far President Trump’s moves have been halted by Judge rulings. Congress passing such legislation would allow for contraction of the Federal force and departments.

• President Trump’s volatile moves on tariffs have had a strong impact on stock markets. The latest on-off of 50% for the EU is just one such market mover. The delay to July 9th means that 27 EU countries need to agree to harsh trade changes. For Germany that means for autos and for France food and wine. We are skeptical that this can be done. So far no tariff deal has been made and signed. The one that has initial agreement is with the UK but insufficient papering of the deal. His threat against Apple of 25% tariffs on imported cell phones to force them to move manufacturing to the US awaits Apple’s response. Other cell phone manufacturers may face the same increase in tariff rates.

• Get peace negotiations started between Russia and Ukraine and a ceasefire implemented to end the weekly death toll exceeding 5,000 personnel from both sides (military and civilian). The US is cutting back its support and pushing NATO countries, especially in Europe to cover the needed funds and military equipment.

• Negotiations with China are not moving well and China has put a six-month limit on its ease of rare-earth export licenses to keep pressure on the US. China’s economy is weakening at a fast pace. Industrial profits have fallen 9.1% in May, Mining down 29% and Auto profits down 11.9%.

I remain concerned that other Geopolitical Challenges could take place and be the ‘Black Swan’ to take the general stock markets to our downside targets.

Our expected downside targets are:

• Dow Jones Industrials Index 35,000 (now 44,368)

• S&P 500 4,800 now (now 6,203)

• NASDAQ 13,000 (now 20,295)

• S&P/TSX Energy Index 230 (now 266)

• WTI US$57-59/b (now US$65.81)

We see WTI having the potential to rise again and the potential issues that could drive prices upward are:

• If Iranian sleeper cells make an attack within the US.

• Russia has gathered 110,000 troops near the strategic city of Pokrovsk, a major logistic hub for rails and roads needed by Ukrainian forces in the east of the country. An expansion of the war would bring back a war premium to crude oil.

• Global growth in late 2025 into 2026 exceeds supplies (Venezuela sanctions impacting as well).

• Lack of production growth from the non-OPEC world.

The Trump tariffs have still not been seen by customers as inventories of current stock need to be sold and then new imported items will carry the tariffs and become relatively expensive. This is now expected to hit stores during July/August. Both Walmart and Target have warned of the cost of new inventory. Some economists see tariff prices impacting households by US$2,800 by year end. Just think about the cost of cereals and berries as easy items to see the tariff price impacts.

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