The Big Pause. The Energy Report 05/12/2025

Put another win in the Trump column. The Art of the Deal is being played out in real time. Oil prices are surging this morning along with the stock market as Treasury Secretary Scott Bessent under promised and over delivered a deal.

The U.S. and China agree to slash tariffs for 90 days reducing them to  30% from 145% while China reduces tariffs on the U.S. to 10% from 125% causing the markets to shake off trade war pessimism and embrace a new landscape with a more level global trading playing field. WH Press Secretary Karoline Claire Leavitt said that not only was the deal about just tariffs but also unfreezing rare earth minerals that China has a monopoly on. Treasury Secretary Scott Bessent said this morning that it is unlikely that tariffs on China and the United states will go below 10.

The trade deal immediately raises demand expectations for oil and gas and it will allow China to stop shutting down factories at least for the near term. Over the next 90 days China is going to find a way to cut a deal with the US because if they don’t their economy will fall back into a deep recession. On the flip side of that if they do cut a deal with the US demand expectations for oil will continue to rise. This comes as the US oil rig count is starting to fall.

Scott Disavino from Reuters reported that the U.S. gas rig count has reached its lowest level since January. U.S. energy firms have reduced the number of oil and natural gas rigs operating to their lowest since January, according to Baker Hughes (BKR.O), as stated in their report on Friday. The oil and gas rig count, an early indicator of future output, fell by six to 578 in the week ending May 9. Baker Hughes noted that this week’s decline puts the total rig count down by 25, or 4% below the level at this time last year.

The Trump Administration worked hard on peace efforts this weekend, securing a ceasefire between India and Pakistan, and has pushed for peace talks between Russia and Ukraine. Reuters reported that Ukrainian President Volodymyr Zelensky agreed to meet Russian President Vladimir Putin in Turkey on Thursday, following U.S. President Donald Trump’s public recommendation for direct talks. Zelensky proposed a meeting with Putin after European leaders called for a 30-day ceasefire. Putin countered with an offer for direct talks, the first since early 2022.

Prime Minister Benjamin Netanyahu says that negotiating with Iran is a waste of time and yet the Trump Administration continues to try to find a way to avoid war and an attack on Iran. The Wall Street Journal reports that the U.S. said it was encouraged by talks with Iran on Sunday after a meeting here, but the two sides remain divided on key questions, including whether Tehran will be allowed to enrich its own uranium. The Wall Street Journal says that U.S. chief negotiator Steve Witkoff and Iranian Foreign Minister Abbas Araghchi met for three hours in the Omani capital, the fourth round of negotiations since April 12. President Trump, who is embarking on a Middle East tour this week, laid down a two-month deadline for talks in a letter to Iran’s Supreme Leader Ayatollah Ali Khamenei in early March.

After the meeting, the U.S. cast the latest talks, which were mediated by Omani officials, as positive, and said the diplomacy would continue “in the near future.” Iran’s foreign-ministry spokesman said talks were “difficult but useful” in better understanding the U.S. position. “Agreement was reached to move forward with the talks to continue working through technical elements,” a senior U.S. administration official said.

Gas prices are still of interest, and we finally had a break in price. Some cite the Energy Information Administration (EIA) that reported a drop in U.S. gasoline demand from 9.09 million barrels per day (b/d) to 8.71 million b/d last week, while supply increased slightly. Despite a small decrease in production to 9.7 million b/d, strong overall supplies have helped lower prices. AAA said the national average of gasoline fell to $3.15 per gallon from $3.18 a week ago. Last month, prices were at $3.24 per gallon and a year ago they were at $3.64.

Don’t  forget that OPEC+ plans to increase oil output in June, which could reduce crude oil and gas prices throughout summer. Gas prices are expected to drop, offering drivers lower costs during the peak travel season. However, global oil market changes and regional supply variations might cause local price fluctuations.

Breakthroughs of course on trade will help natural gas demand expectations not only here but in the United states it opens the door for more long-term deals for US natural gas exports and we would assume that this is going to be part of these trade deals coming up.

The other key for the natural gas market will be the weather. Fox Weather reports that Millions of people in the Midwest and Ohio Valley are likely to see increasing chances of severe weather this week after portions of the U.S. were rocked by weeks of deadly storms and flooding. There’s been an eerie lull in severe weather over portions of the country recently, especially in the central U.S..

Download The Fox Weather ap to keep up with the latest weather moves and stay tuned to the Fox Business Network Invested in you!

Call to get the wildly popular Phil Flynn Daily Trade Levels and to open your futures trading account! Just call 888-264-5665 or email me at pflynn@pricegroup.com.