What to Watch

U.S. to Consider Tariffs on Additional $100 Billion of Chinese Goods

 In a situation some investors are likening to  a tennis match, President Donald Trump volleyed back against Beijing on Thursday by threatening additional tariffs on $100 billion of imports from China.

The move would triple the amount of Chinese goods facing levies when entering the U.S., up from the tariffs on $50 billion in imports from China that the president announced last week, writes the WSJ’s Bob Davis.

After the U.S. threatened tariffs on Tuesday, China quickly came up with its own $50 billion hit list of U.S. exports to China, including aircraft and soybeans. That retaliation has led to outcries from agricultural interests and lawmakers for Washington to back off its hard-line stance to China.

Beijing has also hinted that it may come after U.S. oil exports as the country put U.S. petrochemicals and liquefied propane on its list of goods to target. U.S. oil net exports to China reached about 435,000 barrels a day last year, up from about 180,000 barrels a day in 2016, Bloomberg reports.

Markets are seesawing from the competing announcements from the world’s two largest economies.

The Stoxx Europe 600 was down 0.5% in Friday morning trading, following Asian markets broadly lower, while S&P 500 and Dow Jones Industrial Average futures dropped 0.7% and 0.9% respectively.

“The Street realizes this isn’t in effect and this is more ‘Art of the Deal’ from Trump,” said Gavin Parry, chief executive at Parry Global Group

Energy News

Oil Slips Amid U.S.-China Trade Tensions

 Meanwhile, oil prices eased further on Friday after an escalation of trade tensions between the U.S. and China pressured markets lower. Brent crude, the global oil benchmark, fell 0.4% to $68.09 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.4% at $63.30 a barrel.

Despite New Tariffs, Aluminum Is Actually Cheaper

 U.S. aluminum prices are falling despite a tariff aimed at boosting domestic production of the metal, reports the WSJ’s Bob Tita.

That’s good news for manufacturers of products such as beer cans and car hoods, who are paying 4% less for aluminum than they were before the Trump administration announced the tariff on March 1.

The measure also caused some energy executives to voice concern that the barriers to trade on steel could hurt the oil industry due to the coming need for the metal to build new pipelines and other infrastructure. Temporary exemptions for many of the top aluminum-making countries including Canada, Argentina and Brazil have lessened the squeeze the tariff could put on aluminum.

“Hopefully, the president is just blowing off steam again…But, if he’s even half-serious, this is nuts.”

–  U.S. Senator Ben Sasse, (R., Neb.).

 Russia Says Oil Alliance with OPEC Could Continue Past the Expiry

 Russia’s Energy Minister Alexander Novak said the deal with the Organization of the Petroleum Exporting Countries to curb global supplycould become indefinite, Reuters reports.

Mr. Novak also left the door open for other big producers to join the oil alliance, although he did not cite any specific countries. U.S. oil production is projected to reach 11 million barrels per day in late 2018, rivaling the world’s top producers such as Saudi Arabia and Russia.

WSJ Energy In-Depth

Activist Investors Try to Wake Up a Slumbering Energy Sector

 A private-equity firm with a large stake in Houston explorer Carrizo Oil & Gas Inc. is calling on the company to sell assets or combine with a rival, the latest sign that activist investors are focusing more on the energy sector, writes the WSJ’s Ryan Dezember.

Kimmeridge Energy Management Co. has built up an 8.1% stake in Carrizo, according to a securities filing. The firm previously disclosed that it owned 4.9%.

The New York investment firm said in the filing that it wants Carrizo to sell its south Texas drilling fields and use the proceeds to pay down debt, buy back stock or invest more in its prolific fields in the state’s western desert.

The firm also said it wants Carrizo to explore the possibility of merging with rivals in West Texas.

Big Number

3.5%

An escalating trade war between the U.S. and China could trigger additional inflation, writes Richard Barley for Heard on the Street.

“While tariffs are still a threat, not a reality, disruptions to trade could ultimately prove inflationary, as they represent a shock to the supply side of the economy. That would add to the inflation worry that is already weighing on bond investors,” notes Mr. Barley.

U.S. import inflation picked up to 3.5% in February, having dipped close to 1% in 2017. Prices of Chinese imports are up just 0.3% over the past year. A trade spat could give them room to rise further.

FutureCurve

Today: Oil-services firm Baker Hughes Inc. releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

April 18–19: IQPC hosts the Oil & Fuel Theft Summit in Geneva. Speakers include Mahmoud Al-Bayati, the director general for counter-terrorism for Iraq, William J. Waggoner, the chief executive of the Mexico Petroleum Company and Daniel Gianfalla, a member of the national maritime security advisory committee at the U.S. Department of Homeland Security.

Reporter’s Notebook

The WSJ’s Dan Molinski on constraints to U.S. shale output.Sharply-rising crude oil production in the Permian basin of West Texas and not enough pipelines to haul it away is bad news for some, good news for others, says RBN Energy. “The lack of new pipeline takeaway projects in the area has left [oil producers] without committed pipeline space high and dry,” it says, noting Midland crude is now about $4 cheaper than WTI in the Cushing, Okla. hub, and $7 cheaper than oil in Houston. This could mean some Permian producers “are in for a rough 2018,” RBN says, but adds marketing companies and shippers are “licking their chops,” and notes a “huge opportunity for creative midstream companies.”

WSJ reporter Rhiannon Hoyle on how mining firms view coal’s future. Glencore PLC is confident about the outlook for coal, and recent investments including the purchase of Rio Tinto PLC’s Hail Creek stake last month will help it meet growing demand for the commodity, says coal chief Peter Freyberg. He says “that fossil fuels, including coal, will continue to play a critical role in Southeast Asian economies.” He is optimistic about Chinese demand, adding that “last year the Chinese economy supported total electricity growth of 6.5% and thermal-power generation growth of 5.1% year-on-year.”

The WSJ’s Tim Puko on the future of U.S. electricity prices.President Trump, at an event Thursday in West Virginia to talk about the new tax law, promised to review a new proposal that has big implications for coal country. FirstEnergy is asking for an emergency declaration on behalf of coal-fired and nuclear plants in the Midwest and Mid-Atlantic states that would ensure the plants are shielded from competition from cheaper fuels that have caused many to close already. It could also raise consumer electricity prices and hurt rivals in natural gas, wind and solar. FirstEnergy made the request under section 202(c) of the 83-year-old Federal Power Act, claiming a national-security threat. “We’ll be looking at that 202,” the president said.