On Tuesday, U.S. President Donald Trump threatened to double his planned tariffs on Canadian steel and aluminum from 25% to 50%. Trump said his latest move comes in response to a threat by the province of Ontario to put a 25-percent surcharge on electricity exports to some U.S. states. Whereas Trump delayed most of the tariffs he had imposed on Canada and Mexico, Canada has responded forcefully, with the Canadian government announcing on Monday it would match American tariffs on roughly $30 billion worth of U.S. goods initially, and another $125 billion 21 days later, for a total of $155 billion. Meanwhile, Ontario Premier Doug Ford announced he will move forward with a 25% surcharge on electricity exports to three U.S. states starting Monday, and turn off access completely if the United States adds new tariffs on Canadian goods.
However, the tariff war took yet another turn after the provincial government of Ontario suspended its planned surcharges on electricity sold to the United States, prompting Trump to withdraw his threat to double Canada’s tariffs.
The back and forth tariff wars and the ensuing market confusion about the potential effect of various U.S. energy and foreign policies have been acting as a severe drag on oil prices. Brent crude for May delivery rebounded 2.1% to trade at $70.98 per barrel at 11.50 am ET on Wednesday after Trump withdrew his threats while WTI crude climbed 2.3% to change hands at $67.74 per barrel.
Oil prices have cratered over the past month with Brent prices well off its one-month high of $77 per barrel. Front-month Brent settled at a six-month settlement low of $69.28 per barrel on 10 March, and sank to a three-year low of $68.33/bbl intra-day on 5 March. All of the first 15 months on the Brent curve fell w/w by more than $2/bbl; the w/w fall for the front month was $2.34/bbl and the largest move was the $2.45/bbl w/w fall in the August 2025 contract. Further along the curve, Brent for delivery five years out fell by $0.63/bbl to a 20-month low of $66.37/bbl. Of the 35 trading days since President Trump’s inauguration, Brent has settled lower on 20 and has recorded a lower intra-high on 25 days, with the cumulative price fall reaching $10.01/bbl at settlement on 10 March.
According to commodity analysts at Standard Chartered, the price undershoot has been exacerbated by a further deterioration in speculative positioning. StanChart’s combined crude oil money-manager positioning index has fallen by 6.9 w/w to -35.0, while the equivalent indices have fallen w/w for all the main products (heating oil, gasoil, and gasoline blendstock). The experts note that while the balance of speculative positioning has shifted towards the short side, both shorts and longs have been cutting risk. Over the past week, longs across the four main Brent and WTI contracts fell 44.7 million barrels (mb) to a 12-week low of 467.5mb, while shorts fell by 21.8 mb from the previous week’s six-month high to 249.8 mb.
Europe’s Gas Withdrawal Season Ends
Meanwhile, the rate of Europe’s gas draws decelerated sharply over the past week, with the EU gas inventory withdrawal season almost over. According to Gas Infrastructure Europe (GIE) data, Europe’s gas inventories stood at 43.04 billion cubic metres (bcm) on 9 March, with the w/w draw clocking in at 1.54 bcm, or just 59% of the five-year average and less than half the previous week’s 3.11 bcm draw. The draws over the past weekend were particularly low due to warm weather, with inventories falling by just 28 million cubic metres (mcm) on Saturday and 32 mcm on Sunday; the lowest draws since the start of the withdrawal season in early November. On both days, gas inventories actually increased in France and Germany.
European natural gas futures fell toward €42/MWh on Wednesday after Ukraine accepted a U.S-proposed 30-day ceasefire with Russia, ending three days of gains. The truce raised hopes for a potential easing of the conflict and the possibility of increased Russian gas supplies. There’s growing speculation that some Russian gas could soon return to Europe, which continues to struggle with high energy costs. Europe has cut Russian gas imports dramatically, with imports of Russian gas declining from about 450 million cubic meters per day (mcm/d) at the end of 2021 to about 150 mcm/d currently. There were plenty of discussions on the subject during the latest London’s International Energy (IE) week. The Financial Times has reported about a plan by the former head of Nord Stream 2’s parent company to start up Nord Stream 2 with U.S. businesses buying the pipeline so as to act as middlemen between Russia and European consumers in the hope that would make flows seem more reliable.
However, StanChart has pointed out that such a plan would need approvals from multiple jurisdictions, with the injection of U.S. interests not necessarily improving the reliability and supply security of Russian flows. The other suggestion is that perhaps some Russian flows could resume into power generation as long as there is sufficient coal-fired capacity to fully cover should gas flows be constricted or cease. Similarly, StanChart has dismissed this plan as unlikely to work saying that such an arrangement would allow Russia to exert influence on Europe’s gas prices in the same way it did in the year leading up to the invasion of eastern Ukraine. In any case, increasing exposure to a hostile supplier with a track record of using gas supplies as political leverage would be unwise.
By Alex Kimani for Oilprice.com