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First Look - Middle East crude prices weaken

Oil prices fell to $67.00 on Wednesday morning, continuing their downward trend this week
- The decline deepened after U.S. Commerce Secretary Howard Lutnick indicated the potential for tariff relief on Mexico and Canada under the Trump administration, creating added uncertainty in global markets
- Canada imposed retaliatory tariffs on Tuesday, and President Sheinbaum of Mexico announced that the details of their own retaliatory tariffs would be revealed on Sunday
Middle East oil prices decline due to expectations of increased supply from OPEC+
- Oman crude on the Gulf Mercantile Exchange dropped below Brent on Tuesday for the first time since late 2024 (Bloomberg)
- Key timespreads, which track the health of Dubai crude, also saw a sharp decline
  - The difference between the second- and third-month contracts shrank to just 38c on Tuesday, down from $2.55 in late January (PVM Oil Associates)
  - This shift suggests easing concerns over supply tightness and indicates that the significant premiums in the Middle East markets, driven by U.S. sanctions on Russian and Iranian oil earlier this year, are no longer holding
- Weaker timespreads have impacted Dubai crude more severely than Brent, widening the price differential between the London and Middle East benchmarks to 84c a barrel, compared to just 31c last week

Natural gas prices are trading higher again this morning after rising 23c yesterday
- The Summer ’25 strip is up 3c to $4.56/MMbtu, and Winter ‘25/’26 is higher by 5c to $4.98/MMbtu
- Lower 48 gas production fell again today, sliding below 103 Bcf/d
- Canadian imports have been down the last two days, but it is due to maintenance and milder temperatures, not the recent tariffs
Northeast power markets grapple with tariff uncertainty (S&P)
- Grid operators and market participants in the US Northeast are looking for clarity on whether President Trump’s new tariffs will apply to US imports of Canadian electricity
- ISO New England and NY ISO recently said they do not believe it is their role to implement or collect the tariffs
- According to an attorney at Vinson & Elkins who specializes in energy markets, “it is extraordinarily difficult to really determine what electricity is crossing the border and who really has title to it,” and “Electricity is very much considered a service, not a good in many legal aspects.”