Trump picks Tuesday to start tactical tariffs….

Another bizarre week!

There was no respite from Donald Trump’s smiling visage staring out into the World via every AI driven bot this week. The proud architect of more and more new plans to make America great again left everyone baffled by the latest announcements, all delivered under the umbrella of “common sense”!? Whilst the oil market gently weakened, during the week, Donald’s verbal winds gathered pace so quickly that by Wednesday it was easy to forget there was an oil market in existence!

It seemed every country with a U.S. border was about to be hit with something or other that could change the direction of their economies and trade flows (and those of oil prices too) just as soon as Donald’s signature flowed creatively over the next set of rules applicable to his own country’s neighbours and eventually the World!

Note: In a World soon to become engulfed by Artificial Intelligence it’s interesting to see America’s new laws being written on paper held in a hardback folder and signed with a nice fountain pen by a man surrounded by piles of more files ready and waiting to be eagerly graced with his presence and signature.

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We digress…. On Sunday, he signed into law (effective Tuesday 4th February at 1 minute after midnight) new import tariffs for goods coming from “the neighbours”! All have vowed to respond with a few of their own…. But! Canada and Mexico will inherit oil import tariffs in the main, (25% each) and China (especially their main EV exporter BYD) will be taking a severe blow to their already struggling economy with a huge 10% tariff, thus damaging their hopes of global domination of the electrically driven car industry.

America seems intent on protecting their steel and car industry but also protecting Donald’s Tesla owner buddy Elon Musk from the encroaching Chinese who it would seem are able to produce elegant and stylish cars in a way few others can match.

From an?old-fashioned oil perspective, Canadian crude will face a lower 10% import tariff which at least shows some level of understanding from the USA, but their chances of receiving a plentiful supply of maple syrup in future are starting to diminish just as fast as Donald can talk.?However, whichever way you cut it such a move against Canada’s Energy business seems counter productive for the U.S. given?4 million barrels a day of Canadian crude oil is processed by U.S. refineries, whilst Mexico supplies just 500,000 barrels a day to the U.S. oil complex in theory.?Donald’s logic to?impose the import taxes reportedly surrounds those countries who have not addressed his concerns about illegal immigration and drug trafficking.

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It’s not easy to find the relationship between future oil prices and the new President’s daily activities , but for sure he hasn’t forgotten us as he continues to yank at OPEC’s and Saudi Arabia’s coat tails requesting them to lower oil prices. In that connection next?week could be wild as the new American rules on tariffs begin on Tuesday….the burning question, how will the new tariffs affect oil flows, infrastructure, and operations? ?…. Whilst interestingly OPEC meet the day before, to discuss Donald’s request and the current state of the oil markets.?Note: We should also remain mindful that such apparent hip shooting by Donald is usually just a part of “the art of the deal” which follows the rodeo ride!!

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Meanwhile , putting Donald to one side, the physical oil markets are presenting some clues as to where we go from here !! The excellent OB reports drone strikes have damaged major Russian refineries in recent days halting between 400,000-600,000 barrels per day of production capacity.?The Ryazan refinery stopped gasoline, diesel, and fuel oil sales on January 24th after damage to rail infrastructure , a crude oil pumping station and a crude unit disrupted operations. This refinery processed 13.1 million tonnes last year (roughly 270,000 barrels a day) versus a capacity of 17.1Russia’s 6th largest refinery at Volgograd was also damaged in a second drone attack. During 2024 of the 44 oil refineries in Russia, 14 were damaged during the war with Ukraine.

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The attacks are partly responsible for Russia’s seaborne crude exports (3.07 million barrels?a?day) being at their highest since mid-December, supported by strong Asian demand and recent sanctions-driven stockpiling. Trying to figure how the drone strikes will impact oil prices isn’t much easier than predicting Donald’s next move but in a nutshell 5-7% of Russian product exports will likely be lost during the coming weeks because of them. Joe Biden’s final shot of upgrading US sanctions against Russia has ?driven India and China away from buying Russian crude oil being carried on U.S. sanctioned vessels (some 183 ships are affected, traders sanctioned, and some insurance companies have been stifled). The “ban” begins at the end of February through early March 2025. To compensate for the soon to be lost sanctioned Russian supply, India and China have been mopping up Middle East crudes.

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So much so the knock-on effect of their keen buying has forced the Brent- Dubai spread to its?highest level in 10 years (Dubai is trading $2 a barrel above Brent). Their demand is expected to slow a little as we head towards March, however.?There are so many elements in play in this market that finding the actual price driver on a weekly basis remains elusive but as the new POTUS settles in and becomes less erratic and more consistent it is more than likely all will be revealed…. kind of!!!

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In other news…..?

Protesters Seek to Block Libyan Exports Again.

Oil loadings from two key Libyan ports, Es Sider and Ras Lanuf with a combined capacity of some 450,000 b/d, have been brought to a standstill after protesters blocked the sites, demanding that the state oil firm NOC relocate to the country’s east. If true, this is an important move right in front of an opec meeting.? Chinese Teapot Refineries Halt Runs as Losses Deepen.

As market premiums for Middle Eastern grades spiral out of control and import tariffs on fuel oil tripled, at least four Chinese teapot refiners with a?combined?capacity of 320,000 b/d have halted refinery operations in Shandong province this month. Chevron Officially Starts Kazakhstan Megaproject.?

US oil major Chevron first oil from its $48 billion expansion project of the giant Tengiz field in Kazakhstan, hoping to reach peak output of 960,000 b/d by the end of Q2 2025, a 25% increase compared to previous output rates. Kazakhstan is in economic expansion mode where oil is concerned looking to expand production, not something that will please OPEC+!? Europe Eases Sanctions on Syria.?

EU foreign ministers have?agreed?on a roadmap to ease sanctions on Syria following the fall of the Assad regime and the emergence of former al Qaeda commander Mohammad al-Julani as the country’s new leader, who is seeking to lift energy-related restrictions.

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This week’s closing guide prices:

ICE Brent 75.67 (-2.50)

WTI 72.53 (-1.75)

Ice gas oil 711.25 (-1.75)

Euro Mogas swaps 711.25 (-1.75)

Euro naphtha swaps 643.00 (-13.00)

Nymex gasoline 2.0588 (+1.28 cents per gallon)

LPG swaps 579 (-3.50)

Opec basket 79.38