July 9, 2025 | Crude Prices Vulnerable Due To Weak Demand And Growing Global Stocks (Especially In The US).

Summary:

President Trump got to sign his ‘BIG, BEAUTIFUL BILL” on Independence Day – July 4th with many positives in the bill. There are still areas of cuts for poor and lower middle income households that will give the Democrats lots of ammunition during the mid-term elections in November 2026. Republicans in swing districts will be targeted to get the Democrats control of the House. It remains quite the ‘Big Messy Bill’. So with that out of the way, tariffs and company earnings (Q2/25 results) have now come back as the uncertainty for the markets.

Crude oil is holding in despite OPEC announcing continued monthly production increases and global inventories growing during a normal summer withdrawal season. Demand is also weaker this year due to the economic uncertainties and tight wallets for stretched consumers. We feel that we will see WTI prices below US$60/b in the coming weeks. Today the price of WTI is at US$67.92/b (up from US$65.81/b last week) as the tariff uncertainty and worries about greater fighting between Russia and Ukraine add to the war premium. More on this below.

Tariff day is here (July 9th) and it appears that only a few deals will be completed and many of these not even papered. Lots of letters have been sent out to smaller countries but no concrete deals have been made. So, Trump has announced tariffs of 25% on S.Korea and Japan and 20% on Vietnam but doubles this to 40% for transhipped goods from China. Other countries being used by China to get around the high tariffs against their country will see this same transhipment extra tariff. Some companies with negotiations underway have been given a date of August 1st to conclude deals or the steep April tariff rates will be applied.

The recent US stock market rally has been focused on the AI and tech sectors and is very narrow in leadership. NVIDIA crossed a market cap of US$4T today (beating Apple and Microsoft), a new record market cap for any stock. We saw this same gapping up 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:

• 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.
• 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.
• 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. Trump yesterday said he would impose a 50% tariff on copper imports as he works to get more of this critical metal produced in the US (now only 50%). Canada gets smacked down again as Canada exports $4.8B of copper concentrate (99% of US imports). Copper prices jumped to US$5.90 per pound from US$4.23 per pound just a month ago. Next on Trump’s hit list is the pharmaceutical industry where he plans at a “very, very high rate, like 200%,” if deals are not done to lower US prices significantly.
• With US Consumer Sentiment very weak, Amazon Prime Day saw volumes down >10%. While Jeff Bezos needed funds for his wedding in Italy, selling $666M of Amazon stock may be a warning.
• 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 pushing NATO countries, especially in Europe to cover the needed funds and military equipment. This war just gets uglier and more deadly. Russia is attacking civilian targets and the Ukraine military targets deep into Russia. Putin seems to be tone deaf that President Trump is now very angry at the lack of progress to peace.
• 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%. Recent PPI data for China showed deflation as it plunged 3.6% in June from a year earlier. China is now signalling to the US that no trade talks are possible without US concessions on Taiwan.

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 44,334)
• S&P 500 4,800 now (now 6,246)
• NASDAQ 15,000 (now 20,547)
• S&P/TSX Energy Index 230 (now 270)
• WTI US$57-59/b (now US$67.92)

We see WTI rising after the near term dip and the potential issues that could drive prices quite high 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. China is now feeling the tariffs and weaker exports of products, hurting energy demand.

Josef Schachter July 9th, 2025

Posted In: Schachter's Eye On Energy

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