While the US President enjoys a berating of allies, his attitude to international trade is causing concern within the US Federal Reserve. The minutes of the January policy meeting, published yesterday, showed that members are now taking a rather cautious approach to how a future world beset with tariffs will play out on the US economy. The worry of inflation dominated proceedings. The various districts represented told of a similar pattern of future behaviour from their constituents’ business leaders where any increase in import prices and bottleneck supply squeezes which hiked corporate costs would be passed on to consumers. The committee indicated that it would be in no rush to adjust its still-restrictive policy stance. Pricing for unchanged US interest rates in March and May increased on the CME FedWatch tool and some commentators now fear there will only be only one rate cut for calendar 2025. The muted reaction from US stocks and the US Dollar was due to further revelation in the minutes that the balance sheet run off (existing FED holdings) might be paused to counter any possibly downturn in the economy.

With such news to digest and more fervent tariff talk from the White House ranging from semiconductors to lumber, interspersed with international political mudslinging, investors are cowed. Bourses trickle lower, the USD peps up and oil prices flatline. The API builds of 3.3mb in Crude, 2.8mb in Gasoline and 1.7mb in Cushing against a Distillate draw of 2.7mb ought to have seen more of downward reaction. However, the cold snap in the US, the CPC issues and new sanctions from the EU on Russia, touched on below, are enough to keep oil price interest slightly warm.

While politics churn, oil prices are patient

In true blustering style, when Donald Trump was questioned Tuesday evening on the misgivings of Volodymyr Zelensky concerning the bilateral discussions between Russia and the US over his (Zelensky) country’s future he descended into a rambling huff. Answering a question posed by the BBC on what his message to Ukrainians feeling betrayed might be, the US leader sparked, "I hear that they're upset about not having a seat, well, they've had a seat for three years and a long time before that. This could have been settled very easily.” Later, and clearly peeved, he accused Ukraine of starting the war and turning to Russia, with a final flourish of insult for Zelensky’s ears, “Russia wants to do something. They want to stop the savage barbarianism."

President Volodymyr Zelensky pointedly responded on how at least 160,000 people in the city of Odesa are now without heating and electricity, following Russian attacks on power infrastructure. Russia had assured those that would listen, it had not deliberately targeted sources of energy for civilians. Addressing Russian media after the talks in Riyadh, the Foreign Minister, Sergei Lavrov said, "we explained that we have never endangered the civilian energy supply and only target what directly serves Ukraine's military". Hollow words, and another example of why Zelensky will not accept any sort of peace deal or ceasefire negotiated in a room where he is not present.

Meanwhile, and although a little conspiratorial, it is interesting timing on how the EU has just agreed on new sanctions for Russia. Targeting Russia’s aluminium imports, the new restrictions should be ratified by ministers on Monday. However, where this is oil-sensitive is the listing of 73 new ‘shadow fleet’ vessels. These ‘dark’ vessels are estimated to total 600 and with the extension, the EU has now sanctioned over 150 ships. Increasing the number of boats under sanction serves initially three main purposes. Firstly, the obvious being Russia’s ability to move oil. Secondly, it takes away the threat of environmental damage by vessels that are described the EU as in very poor condition. They serve Russia well by adopting the nefarious practices of ship-to-ship transfers while operating under falsified data, but their age and lack of maintenance has every chance of leading to an horrific leak with all the environmental damage that comes from thousands of tonnes of oil slick. Lastly, and a practice that is taking place in the Baltic Sea, such ships are accused of dragging anchors in attempts to sabotage undersea cables or even gas pipelines.

There is no point listing the further insults Donald Trump levelled at Volodymyr Zelensky, they have had headline enough and are too depressing. The idea of the current US administration is one that ‘gets things done’ does not currently sit well as Europe becomes more alienated and Ukraine will become more obdurate to any overtures of settlement. Oil prices, suffering a bout of selling because an end to the war would bring Russian oil back to the market, just lost a bearish pressure. Since the beginning of the year, and under the initial reaction to the Biden administration’s announcement of new Russian sanctions the scramble for Asian crude as replacement to Russian was well represented by the Dubai/Brent arbitrage. The first trading day of 2025 saw Dubai holding a premium in April25 futures of $1.14/barrel. This then increased to $2.26 just before the inauguration of President Trump. Since his deal rhetoric and subsequent overtures to Moscow, that premium has collapsed to under $0.50/barrel. With even less ships able to conduct the dark arts of sanction circumvention and a Ukrainian President that will not kowtow to bullying, it will be fascinating to see whether the lofty premiums in Asian crude will again resume. That is of course such pressure exerted on Zelensky does not topple his presidency. A notion not unmerited bearing in mind the fate of Justin Trudeau of Canada.

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