Oil heads for third straight weekly gain amid US tariffs and curbs on Iran supply
Energy
US to levy 25 per cent tariff on all goods from any country that imports Venezuelan oil starting next week
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Zawya
25-07-2025
- Zawya
Trump unlikely to enforce tariff threat on Russian oil
U.S. President Donald Trump is unlikely to follow through on his threat to place 100% tariffs on countries that buy Russian oil because it would worsen politically-damaging inflation pressures and his similar threat against buyers of Venezuelan oil has had limited success, especially in China. Trump said this month he would put 100% secondary tariffs on countries that buy Russian exports unless Moscow agrees to a major peace deal with Ukraine in 50 days, a deadline that would expire in early September. The threat mirrored an announcement in March that the U.S. would slap tariffs on buyers of sanctioned Venezuelan oil. No such tariffs have been imposed since, even though Venezuela's exports of oil have jumped. "We find that secondary tariffs may be too blunt of an instrument for the administration to use," on Russia, said Fernando Ferreira, the director of geopolitical risk service at consultancy Rapidan Energy Group. "If you're willing to go with the nuclear option by removing 4.5 plus million barrels a day from the market, and you're willing to cut off commercial ties with other countries because they're importing Russian oil, you're going to risk massive oil price spikes and a meltdown of the global economy." Clay Seigle, senior fellow and James Schlesinger chair in energy and geopolitics at the Center for Strategic and International Studies, said that if the 100% tariff is fully enforced on countries that receive Russian barrels, it has the potential to cut global supplies and drive prices higher. Analysts and traders are deeply skeptical that Trump will allow that to happen for two reasons, Seigle said. "First, he is very sensitive to high oil prices and will want to avoid that outcome." Second, Trump prefers consummating bilateral deals more than adhering to any strict formulas that would tie his hands in negotiations. "Some U.S. trade partner nations may, just like oil traders, dismiss this as grandstanding," Seigle said. On July 16, two days after issuing the tariff threat, Trump said the oil price of $64 a barrel was a great level, that his administration was trying to get it down a little bit more, and the low level was "one of the reasons that inflation's in check." Since then oil prices have stayed in the mid-$60s range, shrugging off the threat of imminent supply disruptions. Seigle said Trump's existing trade war, particularly his tariffs on steel, could push commodity prices higher for oil drillers in the United States, the world's top crude producer. That could raise prices for oil just as the midterm U.S. Congress elections get underway next year. Trump's Republicans hold razor-thin majorities in both the U.S. House and Senate and the president will likely avoid actions that spike oil prices during the campaigns, the analysts said. White House spokesperson Anna Kelly said Trump has proven he follows through on his promises. "He has been extremely tough on (Russian President Vladimir) Putin and smartly left all options on the table while leaving existing sanctions in place – and recently threatened Putin with biting tariffs and sanctions if he does not agree to a ceasefire." The Treasury Department, which administers sanctions, said it was ready to act. "As President Trump announced, Russia has 50 days to agree to a deal to end the war, or the U.S. is prepared to implement biting secondary sanctions," a spokesperson said. HESITANCY TO TARGET RUSSIA The Trump administration's lax enforcement of the 25% tariff threat in March on buyers of Venezuelan oil and the failure so far to impose effective energy sanctions on Russia are two other reasons why market participants are skeptical. China, Venezuela's top oil customer, has been adapting to U.S. sanctions on the oil exports since they were imposed in 2019. Over the last year, China has been buying more than $1 billion of Venezuelan oil rebranded as Brazilian, according to tanker tracking companies. Venezuela's exports surged in June as the loss of U.S. and European buyers was offset by cargoes sent to China. Indian oil refiners, major buyers of Russian crude, do not believe that Trump will follow through on the threat, and there are no plans to stop purchases of Russian oil, three sources at Indian refiners said. India's imports of Russian oil rose about 1% in the first half of this year, with refiners Reliance Industries and Nayara Energy making almost half of the overall purchases from Moscow, according to data provided by sources. Oil Minister Hardeep Singh Puri, however, said the world's third-largest oil importer and consumer was confident of meeting its needs using alternative sources if Russian supplies are hit. Trump's Treasury Department has designated about 19 Russian nationals since January 20 under counter-terrorism, cyber, and North Korea sanctions programs, actions mostly not related to the war in Ukraine, said Jeremy Paner, a partner at law firm Hughes Hubbard & Reed and former Treasury Department sanctions investigator. By comparison, the U.S. has designated about 75 Iranian nationals and entities and imposed 109 such measures on China since Trump began his second term, he said. "Based on the administration's apparent hesitancy to target Russia through trade sanctions, I do not see the Russian oil tariff threat as particularly effective," Paner said. Action is also not likely to come from Congress even though the U.S. Senate has strong bipartisan support for a bill that would impose 500% tariffs on buyers of Russian oil. The Senate's Republican leaders are waiting for Trump's go-ahead and have given no indication that they intend to take up the bill before they leave Washington for the August recess. Even if the bill passes, it will likely allow the president to waive tariffs, letting lawmakers claim they are tough on Russia but rendering the legislation mostly symbolic. "It all makes sense from a political messaging perspective, but from the perspective of what's needed for the legal authority on sanctions, it's a bit of a head scratcher," Paner said. (Reporting by Timothy Gardner; additional reporting by Patricia Zengerle in Washington, Nidhi Verma in New Delhi and Siyi Liu in Singapore Editing by Marguerita Choy)
Zawya
25-07-2025
- Zawya
US Gulf refiners seek Middle East, South American oil to offset Venezuela, Mexico losses
U.S. Gulf Coast refiners are snapping up higher volumes of Middle Eastern and South American crudes to offset the loss of Venezuelan and Mexican barrels, according to ship tracking data, a workaround solution that might be short-lived if the U.S. allows some sanctioned Venezuelan crude to return to the market. The shake-up in trade flows reflects a shortage of medium and heavy crude grades at the key Gulf Coast refining hub which has struggled in recent months to secure adequate supplies amid Mexican production and quality challenges, and Washington's pressure strategy on Venezuela's sanctioned energy industry. The U.S. Treasury Department in March revoked key licenses that allowed some companies to export Venezuelan oil and fuel to the U.S. after President Donald Trump criticized the OPEC nation's record on migration and democracy. However, the administration is now preparing to grant new authorizations to key partners of Venezuela's state-run PDVSA to allow them to operate with limitations, which could include oil swaps, five sources close to the matter said this week. The U.S. imported about 175,000 barrels per day (bpd) of Venezuelan crude on average this year before the licenses were revoked, accounting for about 16% of Gulf Coast oil imports, according to data from research firm Kpler. Meanwhile, imports of popular Mexican heavy grade Maya have fallen to 172,000 bpd so far in July, the lowest on record due to declining output and quality issues that have cut interest in the grade. To replace those volumes, Gulf Coast refiners are resorting to other South American producers such as Colombia, Brazil and Guyana, with imports in July reaching the highest in over five years. Shipments of heavy, high-sulfur crude from Colombia, including Castilla and Vasconia grades, more than doubled to 225,000 bpd so far in July, the highest monthly level in three years. In the same period, some refiners also stepped up imports of medium, lower sulfur, crudes from Guyana such as Unity Gold and Payara Gold to about 95,000 bpd, while heavy, high-sulfur oil from Brazil, including Peregrino, rose 58% to 57,000 bpd. Gulf Coast imports of oil from the Middle East, mainly Iraqi Qaiyarah, Kuwait's Eocene and Saudi Arabia's medium sour Arab Light, also ramped up sharply this month to 212,000 bpd, the highest since January. The bulk of the crude oil produced in the United States is light and low in sulfur, not ideal for refineries in the U.S. Gulf that typically prefer to process heavier oil. Switching to crude grades of vastly different characteristics can be operationally challenging and limit production, shrinking margins. If sanctioned Venezuelan oil returns to the U.S. market through the Washington-authorized swaps, many Gulf Coast refiners might again switch to their preferred heavy grades, which helps their margins. (Reporting by Arathy Somasekhar in Houston Editing by Marguerita Choy)
Arabian Post
01-06-2025
- Arabian Post
Oil Market Waiting For Clear Signals As Pushes And Pulls Exert Divergent Pressures
By K Raveendran Brent crude oil futures continue to hover around the $65 per barrel mark, a level that reflects the push and pull of market forces clouded by a cocktail of geopolitical tensions, environmental disruptions, and strategic production decisions. As prices hold steady, the broader sentiment among traders and analysts leans toward caution, with a slightly bullish undertone given the confluence of supply-side constraints and persistent demand recovery hopes. Much of the current price resilience can be traced to heightened uncertainty regarding OPEC+'s intentions and external shocks to global oil supply. The oil market has been keenly watching the moves of OPEC+, the coalition of the Organization of the Petroleum Exporting Countries and its allies, including Russia. Speculation about further output increases has gripped the market, especially with an expected announcement at an upcoming meeting this week. OPEC+ has already raised output in the past two consecutive months, signalling a gradual easing of the production curbs that were initially implemented to balance the market in the wake of the pandemic-induced demand collapse. While such actions may appear rational from the perspective of maintaining market share and responding to rebounding global consumption, they have also introduced a layer of uncertainty. The question remains whether the additional barrels will be absorbed smoothly or lead to a supply glut, especially if demand falters or economic growth slows in major oil-consuming regions. Layered atop these production developments are supply disruptions and geopolitical constraints that have bolstered bullish sentiment in recent weeks. Chief among them is the United States' decision to ban Chevron from exporting crude oil from Venezuela. This policy move, while targetted at maintaining pressure on the Venezuelan government, has effectively choked off a potential stream of supply to the international market, thereby tightening global crude availability. Venezuela's oil sector has been under pressure for years due to sanctions and underinvestment, and Chevron had served as one of the few remaining Western oil companies operating in the country. Cutting off exports from that channel amplifies the scarcity narrative that's become increasingly prominent in market discussions. At the same time, wildfires in Alberta, Canada, have further disrupted supply dynamics. Canada is one of the top global crude producers, and Alberta's oil sands represent a significant portion of that output. Wildfires in this region pose a dual threat: direct production halts due to damage or evacuation and logistical delays as transportation routes are impacted. These fires are not a one-off event but part of a growing trend of climate-induced challenges to oil production. Their recurrence and increasing intensity underscore the vulnerability of fossil fuel infrastructure to environmental risks, which is feeding into longer-term risk assessments and price expectations in the crude futures market. While these events tighten current and anticipated supply, they occur against a backdrop of broader transformation in the U.S. oil production landscape. Gone are the days of the 'drill baby drill' mantra that once dominated energy discourse in the United States. The shale revolution, which propelled the U.S. to become the world's largest oil producer, has hit a wall of investor skepticism, environmental scrutiny, and capital discipline. Production growth has plateaued, and the appetite for aggressive expansion has waned considerably. The lack of reinvestment, combined with mounting operational and regulatory hurdles, suggests that U.S. output may struggle to fill the gap left by other supply disruptions. This restraint from the U.S., once a swing producer capable of responding swiftly to market signals, has added another layer of tightness and unpredictability to global supply forecasts. In response to these multifaceted uncertainties, many countries are recalibrating their downstream strategies. Refiners are likely to maximize throughput to take advantage of margins that remain relatively healthy amid the tight crude market. With product inventories at historically low levels in several key regions, the incentive to run refineries at full tilt is strong. This move serves not only to meet immediate fuel needs but also as a hedge against future volatility. In a market where supply chains can be disrupted by policy or natural disaster overnight, stockpiling refined products becomes a strategic imperative. Moreover, building inventories now may offer a buffer as the market braces for further uncertainty in the second half of the year. Seasonal factors, such as increased travel during summer months in the northern hemisphere, typically boost gasoline and jet fuel demand. On the other side of the equation, supply risks persist—not just from the geopolitical and environmental fronts but also from the potential for OPEC+ discord. While the alliance has held together remarkably well since the pandemic, cracks could emerge, especially if price trajectories diverge significantly from the interests of individual members. Countries like Saudi Arabia and Russia may have differing tolerance levels for price volatility or production ceilings, and any sign of disunity could rattle markets. Complicating the picture further is the lack of clarity around Chinese demand. As the world's largest crude importer, China plays an outsized role in determining global oil balances. While there have been signs of recovery in Chinese industrial activity and mobility, the pace and sustainability of that recovery remain uncertain. Should China's demand ramp up more slowly than expected, the additional barrels from OPEC+ could depress prices. Conversely, if the Chinese economy rebounds more sharply, it could absorb much of the additional supply and further tighten the market. In such a finely balanced environment, sentiment can swing rapidly. Traders are closely monitoring inventory data, refinery throughput rates, and shipping flows for any signal that might provide clues about the trajectory of supply and demand. The tightness in product inventories across regions is especially significant. Low diesel, gasoline, and jet fuel stocks indicate that any hiccup in refining or logistics could lead to local shortages and price spikes, even if crude prices remain stable. This bifurcation between crude and product markets reflects structural bottlenecks and underscores the complexity of energy market dynamics today. (IPA Service)
