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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Heat on Venezuela. The Energy Report 03/25/2025

Keep that heavy oil flowing but at a price. President Trump devised a strategy to maintain pressure on Venezuela while continuing the flow of Venezuelan oil. President Donald Trump said Monday that he will impose tariffs of 25% on any nation that buys oil from Venezuela.

Chevron, having invested significant time, money, and commitment into Venezuela, has been lobbying the Trump Administration to allow them to continue exporting the essential heavy Venezuelan oil. President Trump complied with Chevron’s request by extending its export permit but simultaneously imposed a tariff on any entity purchasing Venezuelan oil. The Trump administration extended until May 27 the wind-down of a license that the U.S. had granted to Chevron since 2022 to producer and allow Venezuela to export its oil, only to the United States. This tariff is in addition to existing tariffs; effectively, anyone wishing to buy Venezuelan oil must pay a premium.

China’s response to this development has been one of discontent, urging the Trump administration to refrain from intervening in Venezuela’s internal affairs. However, Venezuela agreed to conduct an open and free election in exchange for the United States permitting Venezuela to sell its oil without tariffs. Sadly, that didn’t happen and besides many people believe that Venezuela President Maduro is not a legitimate leader of Venezuela anyway.

On Truth Social President Trump said that, “Venezuela has been very hostile to the United States and the Freedoms which we espouse. Therefore, any Country that purchases Oil and/or Gas from Venezuela will be forced to pay a Tariff of 25% to the United States on any Trade they do with our Country,” Trump said in a post on Truth Social.” The news of new sanctions on Venezuelan oil boosted the market, which was already poised to rise with the summer driving season approaching. Refiners need to catch up on supply. Meanwhile, a Reuters report indicated that OPEC plans to continue raising production in May while some members compensate for previous overproduction. This means any production increase is unlikely to affect inventory levels significantly.

Oil prices are watching with interest President Trump’s maximum pressure on Iran start to take hold. The Trump Administration sent a letter that was an ultimatum to Iran which basically said give up your nuclear program or face the consequences. Zero Hedge reported that, “While continuing to closely tie the recent US attacks on the Houthis in Yemen to Iran, National Security Adviser Mike Waltz confirmed that the Trump Administration is demanding “full dismantlement” of Iran’s nuclear program, including its capacity to enrich uranium for civilian use.

Waltz made the comments on CBS Face the Nation, and when asked what full dismantlement meant and to clarify the distinction between it and the verification deal the US had with Iran before President Trump pulled out of it in 2018, he made it clear this is far broader, covering everything, including enrichment, “weaponization,” and strategic missile programs. Iran’s enrichment program, which is under IAEA monitoring, has no military component in the first place. Enrichment was purely for making fuel rods for the Bushehr nuclear power plant along Iran’s coast and for making somewhat higher enriched fuel for its medical isotope reactor. Iran has a long history of having a substantial nuclear medicine program, and supplied its own isotopes for that.

The long-abandoned nuclear deal was meant to give Iran a design to produce isotopes without 20% enriched uranium through a heavy-water reactor. Like most of the promises to Iran under the deal this was never honored, and Iran is left with the old research reactor. Higher levels of enrichment were also done to try to encourage new negotiations, though Iran promised the IAEA that they would not go above 60% levels, and weapons-grade uranium is a minimum of 90%.”

The oil market is percolating on the reduced likelihood of a recession. Despite concerns that government worker layoffs could harm the economy; the private sector remains strong and may benefit from reduced federal waste. Over time, this could lead to business tax cuts and lower regulations, which are disinflationary.

President Trump has suggested the possibility of giving tariff breaks to several countries, or smart tariffs so to speak. Do unto your neighbor as they do unto you. This caused the stock market to rise along with the risk on optimism. Trump wants focusing on reciprocal tariffs, which would match the rates imposed by other countries on the U.S. Or the real leveling of the playing field. Trump’s aggressiveness is paying off with more companies vowing to invest in the US and create jobs. These are real jobs and not replacement jobs like we had after shutting down the economy after a pandemic.

Johnson & Johnson announced manufacturing, research and development, and technology investments of more than $55 billion in the U.S. over the next four years. SoftBank: announced a $100 billion investment over the next four years with a promise to create 100,000 jobs focused on artificial intelligence and related infrastructure. The United Arab Emirates committed to a 10-year, $1.4 trillion agreement with the U.S. that will sustain existing investments in AI infrastructure, semiconductors, energy, and American manufacturing, Taiwan Semiconductor Manufacturing Company TSMC announced it would invest another $100 billion into its U.S. operations, with new chip fabrication plants, two advanced packaging facilities, total investment in its so-called Phoenix to $165 billion. Trump announced a $500 billion private investment in AI infrastructure led by OpenAI, Oracle and SoftBank. Apple committed to a $500 billion investment in the US. Nvidia said they plan to invest hundreds of billions of dollars over the next four years in U.S.-based manufacturing operations.

Lightning is striking again, Lightning is striking again, And again and again and again. Freeport LNG export facility has faced several setbacks. Previously, it disrupted the market due to management-related issues and a fire. Recently, a lightning strike damaged a pipeline, causing Gulf S Pipeline Company to halt gas deliveries to Freeport LNG. According to Reuters, Freeport LNG can process up to 2.4 billion cubic feet of natural gas daily, with a minimum capacity of 700 million cubic feet if operating at full capacity.

Natural gas seems to be getting a bid after the big sell-off and the market is trying to bottom for another run. The markets are going to be keeping an eye on the weather reports to see if there’s any extremes as we get into shoulder season. Fox Weather reports that, “A stark temperature divide splits the U.S. this week with record-breaking heat and dryness scorching the West while the East grapples with cold and unsettled conditions. “We’ve got a lot of warm conditions starting to pick up,” FOX Weather Meteorologist Craig Herrera said. “In fact, that warmth is spreading not only from portions of West Texas but all across the West. “The FOX Forecast Center said a ridge of high pressure is expected to build by Tuesday, as some 235 million Americans will experience warmer-than-average temperatures with a surge of 10-20 degrees above typical levels.

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