Volatility reigns with tariff uncertainty
April 11, 2025
The energy markets pulled back off the highs from yesterday’s rally on the 90-day pause of tariffs. These last few days are a reminder of how volatile these markets can be and how quickly many are willing to call a bottom in the market. It also gets complicated by the fact that it is very difficult to know what President Trump may do next. I do not think anyone can sit by comfortably and think nothing will change on these tariffs for 90 days. President Trump could come back to the market two weeks from now and put all the tariffs back on just as quickly as he paused them. This makes it incredibly difficult to make decisions and plans for the longer-term time frame.
Energy prices have seen a very sizable correction lower, and with more of a push lower or some stabilization at a lower level in this market, it could be offering a longer-term opportunity. This would be for diesel only. Currently, there are some spec changes taking place in the gasoline market, and it has forward prices jacked up above normal levels because it is unclear at this point how things shake out. But because of this, it is better to sit out on gas until this picture gets a clearer outlook going forward.
Energy prices fell in yesterday’s trading by more than 3%, giving back most of the prior days’ gains. The fall in prices was mainly driven by world economic growth fears being Impacted by trade wars between the world two largest oil consumers, the US and China.
The US imports 5 times more from China than it exports to it. Therefore, pressure will be on the US to quickly build out manufacturing capabilities to make the things here or find other sources. China will be looking for other countries to take the products it once sent to the US.
The EIA said recent developments in global trade policy and oil production are set to lower global oil and fuel demand growth through 2026. In its Short Term Energy Outlook, the EIA reported that it sees 2025 world oil demand at 103.6 million bpd, down from a previous forecast of 104.1 million bpd and sees 2026 world oil demand increasing by 1.1 million bpd on the year to 104.7 million bpd, down from a previous forecast of 105.3 million bpd. US oil output in 2025 is forecast to total 13.51 million bpd, down 100,000 bpd from the previous forecast, while output in 2026 is estimated at 13.56 million bpd, down 200,000 bpd from a previous forecast.