July 16, 2025 | US Total Stocks Rise 9.0 Mb/d Last Week And Total US Demand Fell 1.68 Mb/d To 19.2 Mb/d. Pressure On Crude Prices Increases

Summary:

President Trump is sending out his unilateral tariff deals. He is giving time for counterparties to come forward (by early August) with better deals that might provide some relief from exorbitant tariffs that would kill or end trade. Any tariff deal over 25% changes trade relations and makes trade nearly impossible.

Crude oil is weakening as demand is sluggish. OPEC’s June increase was not 411 Kb/d but a much lesser number of 220 Kb/d. Global demand is 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$65.62/b (down from US$67.92/b last week) as global demand wanes and global inventories are building. More on this below.

President Trump is now very frustrated with President Putin for not working to end the war in Ukraine. Instead more deadly drone and missile attacks against Ukrainian civilians are occurring and diplomacy is seeing no progress. Trump thought he had a deal weeks ago and now is making scathing attacks against Putin. Earlier this week he gave him 50 days to move towards a peace deal and ceasefire. If there is no progress he plans on putting 100% secondary tariffs on countries (China and India) that are buying Russian oil. This would remove the funds to keep Russia’s war economy humming. In the meantime North Korea is planning to send 30,000 specialized troops (sappers and construction workers) to Russia to aid it in its war with Ukraine.

The ongoing US stock market rally (new highs for S&P 500 and NASDAQ but not the Dow Jones) has been focused on the AI and tech sectors and is very narrow in leadership. NVIDIA crossed a market cap of US$4T), 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 risen from 4.19% for the 10-Year Treasury to 4.46%. The 2025 high has been 4.82% so if it exceeds that rate market troubles are likely.
• Show that he can cut wasteful government spending. The current deficit looks to be US$2.2T for this fiscal year, despite June’s US$26B surplus due to tariff revenues. Markets are watching to see how upcoming Treasury offerings do. So far so good! US Interest rate payments are now over US$1T and could rise much more as the debt raised 2, 3 and 4 years ago was at much lower cost. The renewal will add to the interest cost of this budget.
• Trump has announced that 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 and were at US$5.50 per pound yesterday up 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.
• 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 has pushed NATO countries to cover the needed funds and military equipment for Ukraine. The US will provide the weapons and NATO countries will pay the US for them. Over US$2T of new weapons for Ukraine are being talked about, including Patriot defensive missiles.
• 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. With China agreeing to sell more rare earth scarce critical minerals needed for high tech equipment built in the US, Trump has reversed his decision to hold back sale of NVIDIA and AMD high end semis to China. Those stocks have added to their runs due to this reversal. A bit of progress but not enough

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 44,104)
• S&P 500 4,800 now (now 6,250)
• NASDAQ 15,000 (now 20,683)
• S&P/TSX Energy Index 230 (now 266)
• WTI US$56-59/b (now US$65.62/b – down over US$2/b from last week)

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. New US secondary sanctions could harm Russian oil sales.
• 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 are just being seen this month and will be more readily apparent in the stores over the next few months as the tariff levels are firmed up. Both Walmart and Target have warned of the cost of new inventory and much higher prices. Some economists see tariff prices impacting households by US$2,800 by year end. Just think about the cost of clothing, 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 16th, 2025

Posted In: Schachter's Eye On Energy

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