“In Washington… there is a new sheriff in town” J.D Vance Munich 13th February 2025

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A very messy end to the week for oil markets, with crude oil seemingly finding stability for three days, until Thursday morning when the might of America made a call to Russia , and the American administration hierarchy arrived for a Global defence gathering in Munich. “America” in the form of the deputy president JD Vance and defence secretary Pete Hegseth came to Europe to discuss World security. European leaders and politicians eagerly awaited the two deputy sheriffs’ words of wisdom, but instead were left in disappointment and confusion after the American’s speeches left them in no doubt Europe must stand on its own two feet.?The slap in the face was very precise as JD Vance told the assembly “There’s a new Sheriff in town”, and Uncle Sam would no longer tolerate being “Uncle Sucker” demanding Europe spends more of it’s GDP on defence and to quit relying on America for financial support in times of economic strife…. and wars.?

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The feathers of the European powerhouses were well and truly ruffled as they pondered whether their decades long partnership with America had just fallen down the cracks forever.?

Vance went on?to tell the assembled European hierarchy that “Russia’s not the problem”:?“The threat that I worry most about vis-à-vis Europe is not Russia, it’s not China, it’s not any other external actor,” Vance said. “What I worry about is the threat from within: the retreat of Europe from some of its most fundamental values.”?It?appears the Wild West is back, but this time there are no good guys !!Coincidentally those words had followed on from those of Donald Trump when he announced he had had a 90 minute telephone conversation on Wednesday with Vladimir Putin on how to end the war in Ukraine, that announcement sent chills through Europe, whilst Russia sensed their time had come.?

To balance Vance’s points, it’s worth watching the film by Ron Howard called?Hillbilly Elegy which?recounts J.D. Vance's powerful origin story...From a former marine and Yale Law School graduate then serving as a U.S. Senator from Ohio to becoming the Republican Vice Presidential candidate for the 2024 election, an incisive account of growing up in a poor Rust Belt town that offers a broader, probing look at the struggles of America's white working classes. The rest, as they say, is history !

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Meanwhile, President Zelensky of Ukraine’s presence during any discussions was not required, although Donald beginning the conversation with Russia does seem the right place to start the chess game.?All of this makes a complex backdrop for oil markets to work with, the implications for a struggling Europe are laid bare for all to see after such a speech, and to make things even more cuttingly comedic “ J.D “ threw in the line “trust me, I say this with all humour”…if American democracy can survive 10 years of Greta Thunberg’s scolding, you guys can survive a few months of Elon Musk”?Not a murmur ?could be heard from that European assembly, a laugh was nowhere to be found.

Oh and just before you begin to think we’ve become political commentators instead of oil traders we should say that inside all of this goading and threats to the European code of governance, lay many traps for the oil industry. The implications, questions and level of uncertainty for oil markets was undressed in front of all of us, uppermost is that which asks could Russian oil exports be allowed back into the fold as part of any arrangement to end the Russia/Ukraine war and would Europe accept such an act, one which would surely crash the market (something Donald Trump has on his wish list) and leave OPEC reeling?

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Will gasoline exports from Europe to America come under import tariff rules, and will Europe continue to import the huge volumes of light American crude oils brought about by Russia’s forced entry into Ukraine??Many more questions will spring from edicts from the “Sheriff’s office” but these three will do to start the ball rolling!?As one example, let’s consider a snapshot of the state of the gasoline market and it’s future….…America imported 43 million barrels of finished gasoline in 2023 (Statista research Oct 2024),that’s 5,162,065 metric tonnes or 140 cargoes of 37,000 mt each, some of which will have come from Europe….: under this war of words will all of this become too uneconomical for the exporter and completely reshape the destination of the World’s gasoline pools.

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European Gasoline is already on the rack, primarily since Nigeria’s Dangote refinery started to produce enough to keep the country moving versus buying a million metric tonnes a month, much of which came?from Europe. The follow up to that is the rapid growth of EV’s in Europe, slowing gasoline demand, although hybrid gasoline vehicles are becoming a popular middle ground as more and more consumers turn away from diesel powered cars. The spin off from that is the eventual resignation that small oil refineries could be forced to close leaving the World with only vintage American refineries , super modern Middle Eastern refineries, and giant Indian and a Nigerian refinery to fuel the world’s gently declining gasoline demand, not to mention government legislation that is designed to quicken it’s demise and send us all down the EV route!?In the oil markets, one thing very often leads to another!

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Meanwhile, as we all try to understand and interpret America’s new ever-changing look and plans for us, ?in the tangible oil market, supply/ demand seems reasonably balanced and remains in good shape. Whilst crude prices quiver and shake with the next sentence from America, petroleum products are holding the line, especially naphtha which traditionally has its?best time during the first quarter. One other point in the “tangible” bracket, Argus Media reports?Iraq's oil ministry has officially asked the Kurdistan Regional Government (KRG) to start delivering crude oil to state marketer Somo as part of a deal reached between Baghdad and Erbil, restarting north Iraqi crude oil exports through the Turkish Mediterranean port of Ceyhan.

"The Turkish and Iraqi governments are taking the steps to prepare the Iraq-Turkey pipeline [ITP] to export crude through the port of Ceyhan," Iraq's oil minister Hayan Abdulghani told state news agency INA. He said that no less than 300,000 b/d of the Iraqi semi-autonomous Kurdish region's crude will be exported once the pipeline is back in operation. "The debts owed by the Kurdistan region are being agreed upon between the two parties," he added. This pipeline has been out of action for 2 years, due to a dispute between the parties. Iraq claims to have lost $19 billion in revenues since the dispute began. Should the operation restart, this will put some downward price pressure on the market albeit most likely in the second quarter.

It’s?been a worrying week for Europe, Germany is just a few days from an election. The French government is struggling within and that’s diverting their attention from the World stage, and in theory at least Europe has been warned the hand holding is over. However, French President Macron has found time to call a meeting of European leaders on Monday to discuss the situation in Ukraine. Leaders from France, UK, Germany, Poland, Italy, Spain, and Denmark (representing the Baltic states and Scandinavia) will attend.?As for the oil market, we can read every viewpoint and forecast published, twitch at every comment but we can be sure whatever we think is important today, it won’t be by tomorrow. The year 2025 is in for a rough ride, even the algorithms are confused!

This week’s closing guide prices:?

Ice Brent 74.74 (+0.08)

WTI 70.74 (-0.026)

ICE gas oil 714.50 (+8.50)

Euro Mogas swaps 716.00 (-1.50)

Euro naphtha swaps 655.00 (+5.50)

Nymex gasoline 2.0899 (-1.51 cents per gallon)

Opec basket 76.24