Fox News reported that President Donald Trump will pause additional tariffs on Canadian imports for 30 days after a call with Prime Minister Justin Trudeau, who made some concessions to temporarily stave off the levies. Trump and Trudeau spoke via phone on Monday, hours before additional 25% tariffs were to take effect on Canadian goods coming into the United States. In a post on X, Trudeau said Canada will implement a $1.3 billion border plan and appoint a fentanyl czar according to Fox News. Now Maybe Senator Schumer can enjoy his party.
The markets breathed a sigh of relief after the pause reversing an upward spike in oil and gas and crude and a downward spike in stocks. The reality is the tariff drama is just getting heated up. Stocks got shaky after China retaliated against the Trump 10 percent tariff.
According to Barrons, China announced import taxes of 15% on U.S. crude oil, machinery, and some cars, as well as a 10% increase of tariffs on coal and liquified natural gas. In a move that wasn’t explicitly tied to Trump’s tariffs, China also said it was starting an antitrust probe into Alphabet’s (NASDAQ: GOOGL ) GOOGL. It is interesting that, unlike the leader of Canada’s most populous province of Ontario, Doug Ford) said that he’s ripping up a contract with Elon Musk’s Starlink. China is seemingly leaving Tesla (NASDAQ: TSLA ) and Musk alone. I would also expect the internet and broadband service in Ontario to get worse if Doug Ford has his way.
As far as commodity trading goes, the swings because of the drama have been exciting. We saw oil prices surge and then drop to nearly a one-month low and a little bit of everything in between. With all the excitement we really didn’t get out of any major trading ranges either to the upside or the downside.
As expected, the biggest surge came in heating oil and products but as soon as it was announced that Canada was going to get a reprieve from tariffs, we saw those prices start to come back down. And while China is going to tariff US oil that’s only going to mean that they’re going to buy more illicit barrels of oil from Iran and Russia. But China better be careful because the Trump Administration is bound to crack down on Russian oil exports to China and Iranian oil exports to China.
The OPEC almost was ignored during the wild action. Reuters reported that, “OPEC+ agreed to stick to its policy of gradually raising oil output from April on Monday and removed the U.S. government’s Energy Information Administration from the sources used to monitor its production and adherence to supply pacts. OPEC+ and Donald Trump clashed repeatedly during his first administration in 2016-2020 when the U.S. President demanded it raise production to compensate for the drop in Iranian supply that resulted from U.S. sanctions. We’d better keep an eye on Truth Social to see what President Trump thinks of that.
Natural gas prices surged in part because of the tariff drama but also because winter is making a big comeback. Despite the forecast earlier, Fox Weather is reporting another cold blast hitting the US that is party causing a rally in the natural gas market. Yet in the big picture when you look at natural gas prices in the United States when you adjust for inflation last year we saw some of the lowest natural gas prices in history due to the prolific production of the US energy producer. So, I think you could say that oil and gas production is deflationary.
The EIA reported that average natural gas spot prices at most major trading hubs in the Lower 48 states declined in 2024 compared with 2023 in real terms, according to data from Natural Gas Intelligence.
Inflation-adjusted natural gas prices in the Northeast at Algonquin Citygate and Eastern Gas South averaged 32 cents per million British thermal units (MMBtu) and 6 cents/MMBtu lower in 2024, respectively, and western prices at Northwest Sumas and SoCal Citygate averaged $2.51/MMBtu and $4.55/MMBtu lower compared with 2023, respectively.
In West Texas, prices at the Waha Hub near Permian Basin production activities traded below zero for 42% of trading days in 2024 as natural gas production from the Permian Basin outpaced available pipeline takeaway capacity. The Matterhorn Express Pipeline, capable of carrying 2.5 billion cubic feet per day from the Permian Basin to demand centers on the Texas coast, entered service in October 2024 and helped clear some of the regional production bottlenecks. Since mid-November the price at the Waha Hub has been more than zero.
Prices at regional trading hubs decreased last year primarily because of relatively high natural gas inventories in each of the storage regions, sustained U.S. natural gas production, and mild winter temperatures. Because of relatively warm winter temperatures, particularly in the Northeast and Midwest (the largest consumers of natural gas for space heating), regional natural gas storage levels remained above the five-year (2019–23) average for most of 2024. Spot natural gas prices at the Henry Hub in Erath, Louisiana, which serves as the U.S. benchmark, averaged $2.22/MMBtu in 2024, the lowest average annual price in inflation-adjusted dollars ever reported.