Fiscal fear hits ANS

Oil off on demand fear, trade wars, potential end to Russia/Ukraine war

Steve Sutherlin

Petroleum News

Alaska North Slope plummeted $3.84 over a week, from its Wednesday Feb.19 close of $71.64 per barrel to its Feb. 26 close of $71.64.

ANS was down 40 cents on the day Feb. 26, while West Texas Intermediate shed 31 cents to close at $68.62 and Brent fell 49 cents to close at $72.53 -- taking crude prices to the lowest level of 2025.

Those losses were atop more dramatic losses Feb. 25 on which ANS plunged $1.81 to close at $72.03, WTI plunged $1.77 to close at $68.93 and Brent plunged $1.76 to close at $73.02.

The losses reflected jitters concerning the global economic outlook and the specter of trade wars that could raise prices and retard consumer and business spending, dealing a blow to global crude demand.

The potential for an end to Russia's war against Ukraine and an easing of sanctions on Moscow threatens to boost crude supplies, piling an additional bearish factor onto markets.

Crude prices were affected by additional bearish supply news reported by Barchart Jan. 26. Iraq's oil minister said Iraq had reached an agreement with Kurdistan to resume exports of crude via pipeline through Turkey.

Pipeline shipments of some 185,000 barrels per day have been paused for the past two years due to a payment dispute, but the ministry said Iraq would remain within its OPEC production cap, according to the report.

On a bullish note, crude supply may take a hit due to President Trump's announced reversal of concessions to Venezuela by former President Joe Biden in 2022, which allowed Chevron to expand production in Venezuela and ship crude to the United States. Venezuelan production averages some 220,000 bpd.

U.S. Energy Secretary Chris Wright, however, dismissed concerns that rescinding the Venezuela concessions will raise U.S. oil prices.

"America is, by far, the largest producer of oil and natural gas," Wright told the Washington Examiner Jan. 26 at the White House. "If we can grow that production, small interruptions from other nations will not (result) in a net reduction in supply."

A possible recession

Traders may be positioning for "a possible slowdown on maybe even a recession," he told MarketWatch. "If consumer sentiment continues to get weak (and) inflation stays sticky, that could hurt demand for energy."

Asian crude oil demand may not ride to the rescue of prices. According to Chinese customs data, China's 2024 crude imports fell 1.9% year over year.

U.S. Energy Information Administration data released Jan. 26 for the week ending Jan. 21 showed that commercial crude oil inventories -- excluding Strategic Petroleum Reserve supplies -- dropped by 2.3 million barrels to 430.2 million barrels -- 4% below the five-year average for the time of year. It was the first such decrease in five weeks.

A survey of analysts conducted by S&P Global Commodity Insights had predicted a rise of 1.4 million barrels on average.

The bullish crude data was offset by bearish fuels data, however.

Total motor gasoline inventories increased by 0.4 million barrels for the period, to 248.3 million barrels -- slightly below the five-year average for the time of year, the EIA said. Distillate fuel inventories surged by 3.9 million barrels to 120.5 million barrels, 8% below the five-year average for this time of year.

The S&P survey forecast an inventory decline of 700,000 barrels for gasoline, and a decline of and million barrels for distillates.

ANS added 43 cents Feb. 24 to close at $73.84, as WTI added 30 cents to close at $70.70 and Brent added 35 cents to close at $74.78.

The biggest drop of the week was seen Feb. 21. ANS plummeted $2.18 to close at $73.42, WTI plummeted $2.17 to close at $70.40 and Brent plummeted $2.05 to close at $74.43.

On Feb. 20, ANS rose 44 cents to close at $75.60, WTI added 32 cents to close at $72.57 and Brent rose 44 cents to close at $76.48.

On Feb. 26, ANS closed at a $3.02 premium over WTI and at an 89-cent discount to Brent.

WTI and Brent were up 0.89% and 0.95% respectively in Asian trading as Petroleum News went to press early morning Feb. 27, possibly on news of restrictions on Venezuelan exports to the United States.

Commodity dominance may support prices

Goldman Sachs said the Trump Administration -- in competition with China -- is prioritizing commodities in trade and foreign policies, to boost the U.S. oil and gas trade surplus for geopolitical power and decrease reliance on net imports of critical metals, Reuters reported.

The bank expects that a modest 10% tariff on all U.S. oil imports likely will shift revenues from ex-U.S. producers and U.S. consumers to the government and refiners.

The tariff would slightly raise WTI and Brent prices, lifting the annual cost of refined oil products by $170 per U.S. household, it said.