Trump targets Russian oil

By Liz Hampton, U.S. Energy Editor 

Hello Power Up readers! Donald Trump's tariffs are dominating headlines again, this time with the U.S. president potentially targeting buyers of Russian oil. The S&P and Nasdaq are at over six-month lows as the trade war sparks fears of a recession. Oil prices, however, are steady, with global benchmark Brent futures trading up about 43 cents to $73.19 a barrel, and U.S. West Texas Intermediate crude 47 cents higher at $69.83 a barrel. Trump also this weekend threatened Iran with bombing and secondary tariffs if it did not reach an agreement over its nuclear program. Henry Hub natural gas prices were up about 2.5% on Monday, trading at $4.169 per million British thermal units. 

Oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk/File Photo

Markets are digesting a fresh round of tariffs headlines to start the week. Over the weekend, Trump threatened to hit buyers of Russian oil with tariffs, a move that could hurt Chinese and Indian importers.

Trump, who said he was "pissed off" at Russian President Vladimir Putin, proposed slapping a levy of between 25% and 50% on buyers of Russian oil if he feels Moscow is blocking his efforts to end the war in Ukraine. 

The oil market appears relatively unfazed by the latest tariff announcement, as many traders are waiting to see if Trump actually follows through with his promises. 

Russian oil made up about 35% of India's total crude imports last year. Chinese state oil companies have pulled back on importing Russian oil, though the country's top importers were independent refiners with limited ties to the U.S. financial systems. 

Reuters columnist Clyde Russell has a nice take on the latest tariff threat, which you can read here. 

In other news, Brookfield Asset Management is nearing a $9 billion-plus deal to purchase the Colonial Pipeline, a key fuel conduit that runs through the southeast United States to the northeast. 

The pipeline has been the center of controversy with some customers who have said proposed changes to its fuel shipping terms will hurt their margins and drive up prices at the pump. Exxon Mobil was among those who have asked regulators to block those changes.

Colonial has said the proposed change to shipping rules, which includes approval to stop shipping different grades of gasoline at the same time and reducing the total number of grades it moves, would streamline its operations and minimize slowdowns.

The pipeline company in mid-March asked the U.S. Federal Energy Regulatory Commission to reject shippers' protests. 

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Saudi Arabia may lower its crude prices for Asian buyers to a three-month low as benchmark prices have fallen, Siyi Liu reported. This comes as OPEC+ is likely to raise oil output for a second straight month in May. The official selling prices (OSP) for Arab Light crude may dip by $1.80 to $2 a barrel from April, sources said. 

Oil and gas drillers cut the number of rigs operating for the first time in three weeks last week, energy services firm Baker Hughes said on Friday. The rig count fell by one to 592. It is off by 29 rigs, or 5%, from year-ago levels. 

The Haynesville shale of northwest Louisiana and east Texas is hot again, with producers and investment firms gearing up for more activity amid increased LNG demand as Trump expedites export plant approvals. Gas from the Haynesville is easier to convert into LNG because it has fewer impurities that hinder liquefaction. It is also located near many U.S. Gulf Coast export plants. 

India is considering a proposal to scrap import taxes on U.S. LNG to boost purchases and help cut the trade surplus with Washington, Nidhi Verma and Manoj Kumar report. There is currently a 2.5% basic customer duty and an additional 0.25% social welfare tax on LNG. The same tax is not levied on supplies coming in from the United Arab Emirates and Australia. 

The governor of U.S. state Alaska is planning to brief Trump this week on progress in securing Asian backing for a $44 billion gas export project, Reuters exclusively reported on Friday. Trump wants Japan, South Korea, and Taiwan to join the project.  

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