Making Oil Demand Great Again. The Energy Report 05/13/2025

The surging stock market and a deal with China and perhaps movement towards trade deals with the rest of the world, is igniting a major stock market rally and increasing demand expectations for the oil market.  Oil prices are higher as more progress on the trade war, especially the progress with China on the 90 day pause with China are raising demand expectations in oil. And while many on the left are trying to project President Donald Trump’s trade deal as a loss, David Asman from the Fox Business Network pointed out that China accepted a 30% tariff on their goods while the tariffs on the US goods will be just 10%.

The Chinese trade deal’s progress and increased oil demand have kept oil prices high. President Trump suggested that negotiations with Iran are going well, noting Iran’s reasonable and intelligent actions. He also believes Russia will agree to a 30-day ceasefire, while Hamas shows readiness for a comprehensive ceasefire.

The Trump administration’s new budget seeks over $1.5 billion to buy back oil for the Strategic Petroleum Reserve (SPR). The US House Energy and Commerce Committee proposed a $2 billion budget to replenish and maintain the SPR, the world’s largest emergency oil stockpile. This includes $1.32 billion for oil purchases, $218 million for maintenance, and funds for the buyback of previously mandated sales from the SPR. Energy secretary Chris Wright has complained that not only did the Biden Administration cause damage to the economy by using the strategic petroleum reserve for political purposes, they also damaged the infrastructure in doing so. I guess by getting more money to fix that damage would be a definition of building back better. 

Bloomberg also is reporting that China has removed a month-long ban on airlines, taking delivery of Boeing Co. planes, according to people familiar with the matter, following a breakthrough in trade talks with the US that temporarily slashed tariffs on each side. Officials in Beijing have started to tell domestic carriers and government agencies this week that deliveries of US-made aircraft can resume, the people said, asking not to be identified because the information is confidential. Discretion has been given for airlines to organize delivery on their own timing and terms, one of the people added.

The market is currently debating peak oil production in the US as oil prices have fallen. Diamondback Energy predicts that oil production will decline due to lower prices. Conversely, Wood’s Mackenzie report suggests that oil production will remain steady despite the price decrease. Bloomberg reports that a sharp decline in production is unlikely at this point.

Additionally, the Financial Times has published an article stating that Saudi Arabia is frustrated with cartel members who exceed their production targets and may cease supporting energy prices. This narrative has surfaced before but lacks substantial evidence. Despite private complaints from Saudi Arabia about overproduction, they have increased their selling price for oil, which contradicts the notion of a price war.

According to the Financial Times, Saudi Arabia reduced its output by one-fifth last year to approximately 9 million barrels per day, the lowest level since 2011, excluding the coronavirus situation. It appears the press is attempting to create a narrative around a production conflict that has not materialized and likely will not.

There are indications that President Trump’s policies are having an effect. Zero Hedge reported that the US Treasury announced the second-largest budget surplus in history. They wrote, “that Two weeks ago, as part of its quarterly refunding announcement, the Treasury surprised the market when it unveiled a funding need for the current quarter that was $53 billion lower than it had initially forecast in February, and which we said, “indicates that DOGE is indeed working and the US funding needs are actually declining.”  For a market that was habituated to Joe Biden’s debt-funded drunken sailor spending ways, the news that the US would need less – not more – spending than previously expected, came as a shock, and yields slumped as less debt than expected would be required to fund the world’s most indebted government.

Yesterday we got the reason why the borrowing need of the US was surprisingly lower than previously expected, and it was revealed in the latest Treasury Monthly Statement laying out the US government’s monthly deficit… or rather surplus. Yes, we are so used to describing the sum-total of the US government’s monthly income statement as a deficit (i.e., more spending than revenue) that it has become automatic to assume that every month the US will spend more than it brings in. Only this time that wasn’t the case. Presenting Exhibit A: in April, the US Treasury generated a $258.4 billion surplus after last month’s $160.5 billion deficit; this the second biggest surplus on record, with just the $308 billion bumper surplus in 2021 bigger.

Today’s momentum will be influenced by inflation data. A spike in oil prices is likely unless strong inflation discourages risk-taking. The market senses oil is undervalued considering crack spreads and global demand, with a potential rise to $65 a barrel soon. Gasoline and diesel may also bottom out, leading to supply squeezes and falling inventories if we see 2 million barrels in these products.

Natural gas is still searching for a bottom. We’ll be watching the weather forecast closely. Download the Fox Weather app to stay updated on market-moving weather news. Unexpected inventory increases and warmer-than-normal temperatures in March and April have reduced residential and commercial heating demand for natural gas.

Make sure you stay tuned to the Fox Business Network because they’re the only network in America that’s truly invested in you.

 It’s time to open your account today. Call Phil Flynn at 888-264-5665 or e-mail me at people@apricegroup.com.