AI Energy Demand Panic Extends Crude's Losses, As China Continues To Disappoint

Meanwhile, Trump shows the true intent behind his tariffs: File Image/Pixabay

Oil, prices continued their losing ways on Monday, this time spurred by DeepSeek’s low-cost artificial intelligence model that challenged the long-held assumption of massive amounts of energy being needed to power data centres in the future.

This, combined with weak economic data from China, caused Brent to settle down $1.42 at $77.08 per barrel, and West Texas Intermediate to settle down $1.49 at $73.17.

Jeffries analysts summarized the fear gripping the investment community by stating, "The DeepSeek model is (reported to be) more energy and capital efficient, which calls into question the significant electric demand projections for the U.S.," adding that AI represents about 75 percent of most U.S. demand forecasts through 2030-2035, and that the 20 percent year-to-date rally in power companies suddenly looks exposed.

Still, one fear that has driven crude trading of late – U.S. president Donald Trump’s threat to impose tariffs on a host of countries – seemed to fade with the realization in some quarters that the brash billionaire regarded tariffs as more of a bargaining chip to affect policy.

This was demonstrated on Monday when he ordering tariffs against Colombia because of a dispute over illegal aliens and then paused the actions after the country’s president agreed to his conditions.

As for Washington’s latest round of sanctions against Russia, Jon Byrne, an analyst at Strategas Securities, said market participants are realizing that “although the Trump administration won’t be able to meaningfully lower prices from drill-baby-drill, they certainly won’t pursue a policy agenda which proactively raises oil prices vis-a-vis sanctions.”

For its part, Bloomberg pointed out that WTI is still higher for the year, and that Asian refiners purchasing alternative barrels to the supply they enjoyed from Russia prior to the sanctions has “left key market gauges known as timespreads flashing strength, with the nearest contracts markedly higher than the ones further along.”

Finally, in Russia, refineries are reportedly processing more crude in the hope of boosting fuel exports; Russian refining runs rose by 2 percent, or by 108,000 barrels, to 754,800 metric tons per day on Jan 15-19 from the first week of the year, according to sources.