August 28, 2025 | WTI Remains Below US$64/b With A Tug Of War Over Possible Secondary Sanctions On Russia Or Sanctions Removal. Trump Using The Stick Or The Carrot

WTI Crude oil prices are steady at US$63.66/b (low today US$62.95/b) compared to US$62.83/b last week at this time. President Trump’s two week window for Russia to agree to peace talks with Ukraine (trilateral talks with the US as mediator) are gyrating energy prices. If Trump uses the stick as many US Senators want, then more direct and indirect sanctions would be applied on Russia when the deadline passes. On the other hand if he prefers the carrot then he could loosen sanctions and not put higher tariffs on countries importing Russian oil. It is President Putin’s move now. Will he join the peace talks?

We expect that WTI will breach US$60/b in the coming weeks and bottom in the US$57- US$59/b area. When this occurs we expect another BUY signal to be triggered and we plan to add additional BUY ideas for SER subscribers. The window for weaker prices is until winter arrives when we expect prices to rise over US$70/b and maybe see days over US$80/b in very cold periods during winter 2025 – 2026. The upcoming low and BUY signal will be the second opportunity to buy energy stocks at great bargain prices. The first 2025 signal occurred in April and was a wonderful period to add to energy positions.

The ongoing US stock market rally (new highs for S&P 500, the NASDAQ and the Dow Jones) has been focused on the AI and tech sectors and is very narrow in leadership. NVIDIA earnings later today are now going to either support this upward move or surprise with some disappointing results that tip the group over. 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 months. Investors should have cash reserves and be ready for a material market correction. It could get very nasty in September/October! Caveat Emptor! More on this below.

This week’s ‘Eye On Energy’ Important Details:

• Fed Chairman Powell at his last central bank conference in Jackson Hole, Wyoming, gave hints that the focus may move to employment concerns over inflation. If the Fed approves a 25 BP decrease in rates that would go OK for the markets. If he cuts by 50 BP, as some economists are forecasting, then the Fed is worried that recession is around the corner. If the jobs and inflation data out before the Fed meeting are hotter than expected then no change in rates is possible and the market will not like this rate decision.
• US consumers are watching their wallets and not going out to restaurants and bars compared to last year. Many are expected to close this fall if household budgets remain tight.
• Walmart has warned that tariffs are now hitting more and more goods sold in its stores. Tariffs on goods it imports from the EU are now at 15% and from India 50%.
• Today US 50% tariffs took effect on India. Originally it was supposed to be 25% but because India was a big buyer of Russian oil (2 Mb/d) an additional 25% was tacked on. This is also a warning to Russia to get to the table on negotiating an end to the war in Ukraine (the carrot choice). If Russia acquiesces then the incremental 25% would be removed. India needs a deal as the US is its largest export market. In 2024 India exported US$87B to the US. India in the meantime continues to buy cheap Russian crude to keep domestic product prices low.
• To get financial support from the US government going forward US companies will be required to give the government equity interests. Intel has given 10% of its equity for the massive support it received. Defense contractors are now in discussion over the same support and equity deal. Potentially a very nice win for US taxpayers.
• A shortage of farmworkers is lifting vegetable prices in stores. The ICE crackdown on illegal migrants and raids on farms has driven workers away. An example is that eggplant has risen 50% to US$1.50 from US$1.00 three months ago.
• Hungary has threatened Kyiv with electricity cuts after Ukraine attacked the Drushba oil pipeline on Russian territory that stopped oil deliveries to Hungary and Slovakia. Hungary provides 40% of Ukraine’s electricity needs. Ukraine continues to hit Russian oil refineries creating a shortage of gasoline and diesel in some areas of Russia. Some reports say that Ukraine has knocked out 17% of Russia’s oil refining capacity or roughly 1.1 Mb/d. Offsetting this Russia seems to be gaining ground in eastern Ukraine. Its attacking forces were bolstered by North Korean and Cuban troops.
• As part of the carrot side for Russia, the US government has permitted Exxon Mobil to have negotiations with Russia’s Rosneft oil company about reentering the Russian oil business if peace is achieved. Exxon had been a 30% partner with Rosneft in the large Sakhaline project in Siberia. A senior Exxon executive met with Rosneft’s CEO Igor Sechin in the Qatari capital Doha to open discussions.
• Iran is talking about war with Israel and showed off some new longer range missiles. In the meantime it has provided the Yemini Houhthis with cluster bomb ballistic missiles which the terrorist organization fired at Israel. This was the Houthis’ first use of cluster bombs. Israel retaliated against the Houthis for this escalation.

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 45,524)
• S&P 500 4,800 now (now 6,479)
• NASDAQ 15,000 (now 21,582)
• S&P/TSX Energy Index 230 (now 278)
• WTI US$57-59/b (now US$63.66/b)

We see WTI rising after the current dip and the potential issues that could drive prices quite high in coming years are:

• Global growth in late 2025 and from 2026 thereon should exceed global supplies.
• Lack of production growth from most of the non-OPEC world.
• OPEC production nearing effective capacity versus published potential capacity.
• US crude production levels are not growing as they have in the past.

Josef Schachter August 28th, 2025

Posted In: Schachter's Eye On Energy

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