Energy Prices Struggle as Tariff Uncertainty Looms: Brent Breaks Below $70/bbl
As demand concerns continue to weigh on energy prices, sentiment in the oil market remains negative. ICE fell close to 2.5% yesterday, settling below US$70/bbl after hitting a three-year low. The market is facing pressure from rising OPEC supply, potential tariff impacts, and overall uncertainty.
The recent price weakness is making it challenging for US producers to increase drilling activity. With prompt WTI trading below $67/bbl and future values even weaker, the incentive to drill new wells is diminishing. The average price level needed for profitable drilling is around $64/bbl, according to the Dallas Federal Reserve Energy Survey.
US inventory data also added to the bearish sentiment, with a significant increase in crude oil inventories reported by the US Energy Information Administration. Lower refinery rates and decreased crude inputs contributed to the build-up in stocks, with Cushing inventories reaching their highest level since November.
In Europe, prices were volatile with TTF settling 4.5% lower on the day. Investment funds reduced their position in TTF amid uncertainty surrounding Russian fossil fuel phase-out plans. The delay in the European Commission’s release of a plan raised concerns about a possible resumption of Russian pipeline gas under a peace deal.
Metals Surge as Tariff Talks Heat Up
Comex copper futures jumped over 5% following US President Donald Trump’s proposal of a 25% tariff on copper imports. The news pushed LME copper prices higher and widened the COMEX/LME arb back towards $1,000/t. China’s National Development and Reform Commission also pledged to enforce production cuts in the steel and oil industry to improve profitability and reduce pollution.
Analysis: The current market conditions are challenging for energy producers, with falling prices and uncertainty impacting drilling activity. Investors are closely monitoring tariff talks and geopolitical developments that could further influence market dynamics. For consumers, lower energy prices could translate to reduced costs, while investors may need to reevaluate their portfolios in light of changing market conditions.