New Potential Trade Weapon Revealed

The cautious rally continues for energy markets, with RBOB and WTI both trading modestly higher for a 5th consecutive session.

RBOB gasoline futures had their highest settlement of the year at $2.2066 yesterday and are ticking up again this morning but are still about 3 cents below the intra-day high of $2.2489 established on the first trading day of March. That level appears to be a pivotal resistance layer that may determine if prices head towards $2.50 as we move through April or pull back towards $2.

While stock markets cheered what appeared to be a step back from the brink of the tariff wars Monday, a new potential trade weapon was revealed that could either be a game changing way to create de facto sanctions or simply go away if the administration rethinks the idea.

The new threats to add an incremental tariff of 25% on any country that buys oil from Venezuela was a new wrinkle in the tariff war, and could create a new way to plug a sanctions loophole with buyers like China and India. The fact that the new threat happened the same day the U.S. Treasury granted Chevron a 2 month extension on its exports from Venezuela Monday only added to the confusion.

The administration is hearing testimony from various industries this week who are mostly trying to explain why a new fine on Chinese-made ships could be the worst idea since the Jones Act.

The EIA Monday highlighted how Jet fuel production reached a record high yield % in the U.S. last year as air travel continued to recover – although it hasn’t yet returned to pre-pandemic levels – and margins for other distillates had a weak year. Meanwhile, Reuters is highlighting how U.S. imports of jet fuel have reached a 2 year high so far in March as the new Dangote refinery ramps up its production and sends barrels West.