Brief: Policies Hit Heavy Crude Supplies, Refiners' Margins

Mobius Intel Brief:

U.S. refining margins will face new pressure in March after President Trump reaffirmed plans to place tariffs on imports from Canada on March 4 and revoke Chevron’s special license to operate in Venezuela on March 1.

Key Intel:

• Capacity utilization at Midwest refineries has remained higher than normal through the first two months of 2025 ahead of the Trump administration’s tariffs on Canadian imports. According to President Trump’s Jan/Feb commentary, Midwest refiners will face a 10% levy on Canadian crude supplies that represent roughly three-quarters of refinery inputs. Energy Shots #123 covers U.S. energy imports from Canada in detail for interested readers.

• President Trump’s decision to revoke Chevron’s special license to operate in Venezuela beginning March 1 will directly impact over 200 kb/d of Venezuelan output. Indirectly, the move will limit total PDVSA production and curb Venezuelan heavy crude exports to the U.S. and Asia. Venezuelan oil production averaged 1.03 MMb/d in January, its first 1+ MMb/d month since June 2019 and +338 kb/d since President Biden granted Chevron’s special license in November 2022.

Looking Ahead

• Tariffs on Canadian imports and the revocation of Chevron’s special license in Venezuela will have a concentrated impact on U.S. refiners’ heavy crude slate. Alternative supplies from other South American producers, such as Columbia, Ecuador, and Guyana, can offset some of these impacts for Gulf Coast and West Coast importers.

• Pressure on Venezuela’s oil industry follows the reinstatement of the Trump administration’s maximum pressure campaign on Iran. U.S. Treasury Secretary Scott Bessent told interviewers in mid-Feb that the administration aims to cut Iranian exports to 100 kb/d or less than 10% of current flows.

• OPEC (Saudi) spare capacity could more than offset lost supplies from Venezuela and Iran but remains contingent upon the group’s decision to begin unwinding output cuts in April.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation with respect to the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is exclusively intended for Mobius clients and is not considered promotional material.