Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Crude oil: Sanctions threat counters tariff-driven demand worries
Ole Hansen
Head of Commodity Strategy
Key points
From a weakening economic outlook hurting demand, crude traders have recently switched their focus to sanctions, that may reduce the overall level of output
In the past week, the US administration has tighten sanctions on the Iranian oil trading network, while President Trump has threatened the US will enforce a 25% tariff on any nation importing Venezuelan crude
With US sanctions back in focus, it is worth noting that Iran and Venezuela have increased their crude oil production by 1.6 million barrels per day over the past four years
Overall, we maintain our USD 65 to USD 85 range for the year, with the near-term upside potential being limited by resistance near USD 74
Crude oil futures continue to recover from a USD 14 selloff that began in January following Trump's combative inauguration speech, which signalled an inward political focus combined with aggressive trade policies, including tariffs, that were meant to Make America (not the world) Great Again. His speech and subsequent action, including his "drill, baby, drill" focus, saw the Brent and WTI crude oil futures slump back into the USD 60s per barrel before eventually stabilising, with the focus turning from a weakening economic outlook to sanctions, potentially reducing the overall level of output despite OPEC+ plans to begin tapering production cuts from next month.
In the past week, we have seen the US administration tighten sanctions on the Iranian oil trading network, and this was followed up yesterday when President Trump declared that the US will enforce a 25% tariff on any nation importing Venezuelan crude. Although the immediate market impact might be minimal, apart from supporting additional short covering from underinvested hedge funds, this action indicates a definite change, potentially signalling the White House's willingness to sacrifice low oil prices to achieve wider strategic objectives—isolating Iran and Venezuela and increasing pressure on China.
In the latest reporting week to 18 March, managed money accounts held a 262k contract net long in the three major crude oil futures contracts, down from a 500k peak eight weeks prior, and below the five-year average of around 425k contracts.
With US sanctions back in focus, it is worth noting that Iran and Venezuela have increased their crude oil production by 1.6 million barrels per day over the past four years. Meanwhile, other OPEC+ members, particularly in the GCC, have reduced output to maintain stable and high prices. As a result, Iran and Venezuela's market share has risen from 11% to 16%. The planned OPEC+ production increases starting next month may, in the coming months, be fully offset by declines not only from these two countries but also from other producers adjusting output to comply with allocated quotas.
Brent crude's current momentum has taken prices to a three-week high, with the latest move being supported by a combination of underinvested hedge funds, improved risk sentiment following a softening in the tone regarding tariffs after Trump indicated some nations could receive breaks from "reciprocal" tariffs starting next week on 2 April, and not least, the mentioned secondary tariffs on buyers of Venezuelan crude, which, together with Iran sanctions, may help tighten supply.
Overall, we maintain our USD 65 to USD 85 range for the year, with the near-term upside potential being limited by resistance now seen in a band between USD 73.80, the 0.382 Fibonacci retracement of the January to March selloff, and USD 74.10, a level that provided support on several occasions last month before the eventual break triggered a slump extension to near USD 68.
Recent commodity articles:
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
Podcasts that include commodities focus:
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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