March 2025 DDD | Aussie Stock Forums

The US-China trade war escalated over the past week with the White House signing off another 10% hike on Chinese imports to the country, raising the overall level to 20%, all the while postponed tariffs on Canada and Mexico took effect March 4.

– Canadian crude flowing to US Midwest refiners will be subjected to a 10% tariff, most probably leading to a 2-3% increase in gasoline prices, whilst Mexico’s 25% levy would force refiners in the US Gulf Coast to look elsewhere for heavy barrels.

– Canada immediately retaliated by imposing 25% tariffs on some $30 billion of US imports, potentially followed by another levy targeting $125 billion in 21 days’ time, with the province of Ontario also threatening to stop electricity flows to the US.

– The discounts on Canada’s main export grade WCS widened massively this week, with the grade back to trading at -$14 per barrel to the prompt WTI futures contract, the same level it dipped to a month ago.

Market Movers

– UK-based energy major Shell (LON:SHEL) is considering selling some of its chemical assets in Europe and the United States, including the Deer Park chemical plant next to the refinery it sold in 2021 to Pemex.

– UAE’s national oil firm ADNOC merged its polyolefin assets with Austrian company OMV (VIE:OMV), which combined with its $13.4 billion Nova Chemicals acquisition will create a $60 billion petrochemical giant.

– Eni-backed Norway-focused upstream firm Var Energi (FRA:J4V) has reported the first oil discovery in Norway’s Barents Sea this year, finding some 15-45 MMboe of oil with its Zagato exploration well.

Tuesday, March 04, 2025

OPEC+ has been apprehensive ever since it started telegraphing its readiness to unwind production cuts, but the market now believes it will happen, prompting a slump in oil prices. So far, ICE Brent has shed $4 per barrel this week alone. Balancing on the edge of $70 per barrel, oil has remained immune to Trump’s tariffs on Canada and Mexico, fearing the US-China trade war much more.

US-China Trade War Escalates. Following President Trump’s tariffs on Chinese consumer electronics, Beijing announced its retaliatory tariffs on U.S. agriculture goods, slapping a 15% levy on U.S. imports of chicken, beef and cotton, 10% on beef and pork as well as adding 15 US firms to its Export Control List.

Speculators Are Shorting Crude Futures (Again). Hedge funds and other money managers have increased their short positions on WTI Nymex crude futures by a whopping 20% week-over-week to some 133,000 contracts, all the while long positions have remained unchanged at 330,000 lots.

Chinese LNG Demand Cools Down. China’s LNG demand dipped to its lowest since February 2020 as February arrivals totalled only 4.5 million tonnes amidst warm weather, high stocks and weak manufacturing growth, making Japan the world’s largest LNG importer for the second time in a row.

Johan Castberg Gets Delayed Again. Europe’s largest upstream project that is still yet to be launched, Equinor’s (NYSE:EQNR) 220,000 b/d Johan Castberg field located in the Barents Sea, has been delayed once again due to bad weather, initially expected to come online in December 2024.

Mexico’s Oil Industry Is Bleeding Money. Mexico’s national oil company Pemex reported a $9.1 billion Q4 2024 loss, a stark contrast to net profits posted a year ago amidst declining production, ending last year with $97.6 billion in financial debt and another $24.2 billion owed to service providers.

Kazakhstan Breaches OPEC+ Compliance. Buoyed by booming production from the Tengiz field, oil and condensate production in Kazakhstan soared to 2.12 million b/d last month, which would put crude-only output in the country some 350,000 b/d above its OPEC+ quota of 1.468 million b/d.

Libya Prepares First Upstream Auction Since 2007. Masoud Suleman, the acting chairman of Libya’s NOC, announced that the North African country plans its first exploration bidding round in more than 17 years, seeking to garner the $3 to $4 billion required to reach output of 1.6 million b/d.

China Takes Over Ecuador’s Main Field. The government of Ecuador has vowed to transfer the operation of its highest producing asset, the 75,000 b/d Sacha field, to a consortium led by China’s Sinopec (SHA:600028) as Quito seeks to reverse production declines.

Trade War Risks Depress Iron Ore. Heavily affected by the deteriorating U.S.-China trade war, iron ore futures have been declining for seven consecutive trading sessions with China’s benchmark Dalian May contract dipping to ¥780 per metric tonne ($107/mt).

India Wants Billions from Reliance. India’s Petroleum and Natural Gas Ministry has raised a demand of $2.81 billion vis-a-vis the country’s largest private energy firm Reliance Industries, citing gas migration to its offshore KG D6 block from the acreage run by state-controlled ONGC.

Saudi Aramco Slashes Its 2025 Dividend. Saudi Arabia’s national oil company Saudi Aramco (TADAWUL::2222) announced that it expects to pay an annual dividend of $85.4 billion, a 30% decline year-over-year, a much bigger cut than the 12% dip in annual net profits last year.

Chinese Copper Smelters Prioritize Market Share. Chinese copper production is set to rise by 5% in 2025 to 12.45 million tonnes, squeezing smelting margins to the lowest reading ever with processing fees currently being $20 per metric tonne negative, preferring to retain market share at the expense of profit.

Iraq Rushes to Bring Kurdish Oil Back. Iraq failed to reach a comprehensive deal with international oil firms operating in the semi-autonomous Kurdistan region, agreeing on the initial volumes of 185,000 b/d but seeking to introduce a third-party consultant to oversee future transactions.

From JC:

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Trump:

President Trump’s decision last night to pause all military aid to Ukraine is the latest in a string of moves that could have been plucked from Vladimir Putin’s personal wish list, Axios’ Dave Lawler writes.

• “President Trump has been clear that he is focused on peace,” a White House official said of the aid suspension. “We need our partners to be committed to that goal as well. We are pausing and reviewing our aid to ensure that it is contributing to a solution.

Why it matters: Trump is also considering sanctions relief for Moscow and hinting at regime change in Kyiv. The Moscow-friendly streak comes as he seeks to foster peace in Ukraine and better relations between nuclear-armed superpowers.

• But his treatment of Putin as a partner and Ukrainian President Volodymyr Zelensky as a foe has rung alarm bells for NATO allies and even some fellow Republicans.

Breaking it down: Trump has made at least five Moscow-friendly moves in the past two weeks.

1. The White House asked the Treasury and State Departments to identify sanctions on Russia that could be loosened as part of the process of improving relations, Reuters reports. Trump didn’t deny that yesterday, telling reporters: “We want to make deals with everybody.”
2. Defense Secretary Pete Hegseth reportedly ordered U.S. Cyber Command to suspend offensive cyber and information operations against Russia.
3. Trump has called for elections in Ukraine, and he and his allies suggested after the Oval Office spat that Zelensky might need to go. Regime change in Kyiv was one of Putin’s original objectives for invading.
4. The U.S. voted with Russia and 16 other mostly authoritarian countries to oppose a UN resolution last week that condemned Russia’s “aggression” in Ukraine.
5. Suspending weapons shipments, which the Trump administration had already dramatically slowed, is the latest dramatic step.

Trump’s view: Asked yesterday about the Kremlin comment that U.S. foreign policy approach “largely coincides with our vision,” Trump said it “takes two to tango, and you’re going to have to make a deal with Russia, and you’re going to have to make a deal with Ukraine. … The fact is that I just want fairness. I want fairness.”

Democratic lawmakers are discussing a litany of options to protest President Trump’s speech to Congress tonight — including through outright disruption, a half dozen House Democrats told Axios’ Andrew Solender and Hans Nichols. Why it matters: Some of these tactics go beyond their leaders’ recommendation that members bring guests hurt by Trump and DOGE. This sets up a potential clash between party traditionalists and its more combative anti-Trump wing. What we’re hearing: Some members have told colleagues they may walk out of the chamber when Trump says specific lines they find objectionable, lawmakers told Axios. Criticism of transgender kids was brought up as a line in the sand that could trigger members to storm out, according to a House Democrat. “The part that we all agree on is that this is not business as usual and we would like to find a way — productively — to express our outrage,” a House Democrat told Axios. Props — including noisemakers — have also been floated: Signs with anti-Trump or anti-DOGE messages — just as Rep. Rashida Tlaib (D-Mich.) held up a sign during Israeli Prime Minister Benjamin Netanyahu’s speech last year that said “war criminal.” Eggs or empty egg cartons to highlight how inflation is driving up the price of eggs. Pocket Constitutions to make the case that Trump has been violating the Constitution by shutting down congressionally authorized agencies. The intrigue: In closed-door meetings and on the House floor Monday night, lawmakers were specifically discouraged from using props. ​ Photo: Julia Demaree Nikhinson/AP Above: First Lady Melania Trump was at the Capitol yesterday for a roundtable discussion on the “Take it Down Act,” legislation against revenge pr0n. Go deeper.

More Trump:

The US president announced at 2:42 p.m. Eastern Time that tariffs on Canada and Mexico would commence Tuesday. Many had complained that the market had grown too complacent about tariffs. Judging by the instant reaction, they were right. The vertical lines in the chart indicate the timing of the announcement:

The S&P 500’s worst day this year showed markets disliked it, though both bonds and stocks bounced after initial selloffs. For an administration that has targeted lower 10-year Treasury yields and crude prices and a weaker dollar, the day wasn’t necessarily so bad. Stocks matter a lot for Trump, and their fall could be concerning. There’s a widespread theory that markets will act as the most important guardrail for economic policy; we should soon find out if that’s right.

The pro-growth Trump trades that took hold after the election are almost all in reverse. The following chart is indexed for Election Day and follows stocks relative to bonds, US stocks relative to the rest of the world, US growth stocks relative to value, and Bitcoin. All have turned around since January in a way that must have lost a lot of money for a lot of people. But it would be unwise to take it much further than that. The Trump trades are back where they were Nov. 5. Some extreme enthusiasm has been knocked off the top. Where they are in a year or two will depend on the impact Trump policies actually have on the economy:

It’s noticeable that the biggest losers have been the investments that had the greatest profits to be taken. Nvidia Corp.’s market cap is now down by about $800 billion from its peak, and back to a level it first reached last May. That said, it’s still double the size it started from last year. This is consistent with a correction of excess, and a somewhat indiscriminate retreat from risk:

The deregulatory and tax-cutting parts of the Trump agenda remain as popular as ever on Wall Street. It’s hard to find anyone who likes tariffs. Two comments from today are typical. This is from JPMorgan’s David Kelly:

The trouble with tariffs, to be succinct, is that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity and increase global tensions. Other than that, they’re fine.

Carl Weinberg, chief economist at High Frequency Economics, said:

If they are imposed as threatened, US industrial activity will fold at once, and we will not have to wait until the next ISM survey to know about it. Critical sectors of the economy face existential threats from the Trump tariffs and likely retaliation. Autos, energy, and aerospace are three that come to mind very quickly. Appliances, electronics goods, furniture, and clothing come to mind next.

It’s possible that Wall Streeters are overreacting. In Trump 2.0 trade policy, as in foreign policy, this is as big a shift as has been seen since the Second World War, and the opposition to tariffs may reflect a failure of imagination. This reaction could reverse just as the post-election euphoria reversed, once we all have some evidence to work with. But it’s quite a chorus of disapproval.

For the Bulls:

“Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.” Warren Buffett, Chairperson at Berkshire Hathaway

Welcome to March and good riddance to February! In the end, February was a choppy and frustrating month, but this wasn’t a big surprise, as we wrote about and discussed all month. Are better times ahead? We think so, and March is the month of St. Patrick’s Day so maybe we should expect some green. Let’s get into it.

Not a Surprise, Don’t Panic ​

The second half of February was rough, as worries over the economy, tariffs, Washington drama and geopolitical concerns, and big cap tech weakness dominated the conversation. Here’s the thing. Yes, the year-to-date gains we saw in January might have mostly vanished, but as we’ve noted before, early in a post-election years things tend to be choppy. Not to mention February is a weak month historically, especially in a post-election year. So in a way, this is normal and not a reason to panic. Here’s one way of showing this.

Here’s another angle on the same thing that shows the first quarter of a post-election year is the second weakest quarter out of the entire four-year presidential cycle. In other words, after back-to-back 20% gains the past two years, maybe a well deserved break to kick off 2025 is perfectly normal.

Here Comes March​

In the end, the S&P 500 fell 1.4% in February, but not before a 1.6% jump on the last day of the month, which checked in at the best last day of February since Leap Day in 1988. If things feel choppy, that’s because they have been. The S&P 500 was up in September, down in October, up in November, down in December, up in January, and now down in February. That is the first time in history we’ve seen those six months alternate between green and red and it is the longest such streak of alternating up and down months since seven in a row from February through August back in 2022.

We continue to think the bull market is alive and well and the economy is on solid footing, but that doesn’t mean we won’t have scary headlines or worries. Just two weeks ago we were writing about new highs. That may feel like a long time ago, but really it just happened.

As poor as February is historically (and that played out), it is worth noting that March and April are two of the better months of the year. The past two decades March is the fourth best month and April is the third best month. You should never blindly invest in seasonality, but just as February was ripe for potential trouble, be open to the possibility of a nice Spring bounce.

Looking at March the past four years, the S&P 500 has gained more than 4%, 3%, 3%, and 3%. Of course, in 2020 it lost more than 12% for the worst March ever and worst month since October 2008. Here’s another closer look at election years, which shows February is weak (check), but these next three months tend to be strong.

Panic Is in the Air​

How are you feeling about markets right now? Hopefully because you’ve been reading our blog you know that even the best years have scary headlines and volatility and that volatility is the toll we pay to invest. But we’ve seen historic levels of fear in various investor sentiment polls over the past week, even with stocks less than 5% away from all-time highs.

The American Association of Individual Investors (AAII) Sentiment Survey showed more than 60% bears for only the seventh time in history (going back to when the poll started in 1987). Here’s the catch—those other times we saw this level of fear were times like the 1990 recession and accompanying near bear market; October 2008 and March 2009 during the Great Financial Crisis; and the end of the bear market in 2022. In other words, stocks were down substantially before fear truly spiked, making what we are seeing now truly rare and uncharacteristic.

jog on
duc