| Katusa's Investment Insights | | Oil’s 2025 Surge: Echoes of 1973 or the Calm Before the Storm? By Marin Katusa | | | In 1973, the oil embargo caught the world by surprise.
Drivers faced long lines at gas stations and panic spread.
The events showed how fast oil markets can flip from calm to crisis. Fast-forward to 2025, and many fear history could repeat itself.
This time, the stakes are even higher. Investors are watching every tick in oil prices, eager to know if this year’s surge will last—or if we’re on the brink of something bigger.
The Early Spike: Can It Last?
At the start of January, oil soared. U.S. WTI crossed $74 per barrel, and Brent crude neared $76.55. That’s the highest since October 2024.
Two triggers lit the fuse: a sharp drop in U.S. inventories and a vow from Chinese President Xi to keep economic growth alive.
On the surface, those headlines hint at a bull market for crude. Yet look closer, and you’ll see reasons to stay cautious.
Recession Watch: Why Job Openings Matter
If you want an early glimpse of trouble, watch job openings.
When new job openings drop, a recession often follows. History proves it.
Over the last 25 years, falling openings have spelled doom for the economy more than once.
- Recent data shows job openings have slipped by 8.2% since Q3 2024—the steepest drop in nearly five years.
Right now, the data hints that we could be teetering on the edge again.
The Fed hoped to wrap up its fight against inflation by late 2024. Instead, inflation dug in around 2.5%–2.7%. Surging public spending and talk of tariffs forced Jerome Powell to change course.
In December 2024, he slashed his plan for four rate cuts down to two. That’s a clear sign the Fed isn’t confident.
They see storm clouds ahead... | | | When businesses stop hiring, consumer spending slips. That’s a red flag for oil demand because less consumer spending means fewer goods shipped and fewer trips made.
To make things more complicated, there’s talk of potential tax breaks and new trade tariffs from the Trump administration. That forced Fed Chair Jerome Powell to revise his plans. Instead of four rate cuts in 2025, he announced only two.
Less stimulus can throttle economic growth—and oil demand.
Trade Tariffs: A Boomerang in the Making?
Add in the looming possibility of tariffs, and you have an even bigger puzzle.
The Trump administration wants stiff tariffs on Chinese goods. The idea is to bolster U.S. manufacturing—but at what cost? Slapping tariffs on Chinese imports risks sparking a global trade brawl. That would send the U.S. dollar even higher.
Before diving into how these forces collide, let’s look at another worrying sign: shrinking manufacturing.
The U.S. Purchasing Managers’ Index (PMI) has stayed under 50 for over two years, pointing to a contracting factory sector.
A stronger dollar makes U.S. exports more expensive, from cars to crude oil. With the U.S. PMI stuck below 50, our manufacturing sector is already contracting.
| | | A stronger dollar drives up the cost of U.S. goods and oil overseas. That curbs demand, enlarges stockpiles, and pressures prices.
Already, U.S. inventories aren’t shrinking as forecast, raising fears of a glut that could break oil’s delicate stability. | | | Cheaper alternatives appear more attractive to foreign buyers.
You’d think shrinking stockpiles would support higher prices, yet the recent inventory declines have underwhelmed analysts. | | | When stockpiles don’t drop as projected, it signals demand isn’t as robust as expected—or that supply is outpacing consumption.
Then there’s the China factor…
China’s Tightrope Walk
China was supposed to save the day.
For years, China’s roaring economy propped up global oil demand. But its problems run deeper now.
An $18 trillion property crisis rocked consumer confidence. Local government debt exploded, accounting for nearly half of the country’s GDP. Analysts worry about a wave of bankruptcies and abandoned projects if the pressure grows.
To top it off, the Trump administration just hinted at a 60% tariff on Chinese goods. If those tariffs materialize, manufacturing could shift away from China to lower-cost hubs in Southeast Asia.
That means fewer factories in China, less industrial output, and—most important for oil bulls—slumping demand.
- China’s economic slowdown could drag global demand down with it.
When the world’s top oil importer stumbles, prices usually respond. China was the main engine of demand growth for more than a decade. A major slowdown there ripples through the entire market, pressuring oil prices in a way not seen since the 2014 crash.
OPEC is Also in the Mix…
You’d think OPEC would prop up prices by cutting production. But their moves tell a different story.
Historically, the cartel adjusted production to keep prices stable…
Instead, they just delayed a planned boost in output of 180,000 barrels per day until April. Yet OPEC’s total production still rose in November, hitting 27 million barrels per day.
With China’s demand faltering, the stage is set for an oversupply that could pummel prices.
| | | If China’s hiccups become a crisis and the U.S. economy slows, the extra oil supply could flood the market. Prices might tumble, turning today’s rally into tomorrow’s retreat.
It’s About to Get Interesting…
So, what’s the upshot for all 195,000 of you tuning in?
It’s a classic tug-of-war.
Prices keep climbing, driven by inventory dips and China’s pledge for fresh stimulus. Yet signs of fragility are everywhere: a cooling U.S. job market, slowing manufacturing, volatile export data, and looming trade disputes.
If tariffs spike or if China’s property woes intensify, oil could follow the script of 1973—or 2014—and plunge faster than most imagine.
Could we see a true revival instead? Sure, if the Fed surprises everyone by cutting rates more aggressively, or if China floods its economy with stimulus.
But that’s a risky bet in a landscape full of political uncertainties. Any single factor, from a sudden tariff to a new COVID variant, could twist the narrative.
In 1973, the world learned how a single event can turn oil markets on their head.
In 2025, it might be a combination of factors—from recession fears in the U.S. to debt overload in China, from OPEC’s cautious maneuvers to a surging dollar—that signals the next tipping point.
Nobody can say with certainty which way it’ll break.
But we do know the stage is set for fireworks.
- Subscribers to my premium newsletter - Katusa’s Resource Opportunities - are up over 30% (and getting paid handsomely while holding) on my favorite oil play.
- And we just profiled another major energy company that’s up 128% in the last year.
We’re keeping a close eye on job openings, U.S. exports, and China’s property sector. Looking for any shift in OPEC policy or a sudden currency swing.
If all these signals start blinking red at once, look out.
But if even one bright spot—like a major Fed pivot—takes the reins, we might see oil hold strong.
Until then, the memory of 1973 should remind us that oil markets don’t just drift along.
They lurch, spike, and crash—often when we least expect it.
And that’s where we’ll be waiting, like alligator investors.
Regards,
Marin Katusa | | | For Real-Time Market Alerts, Follow Us: | | | |
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