Absolutely Crazy. The Energy Report 05/27/2025

It’s hard to handicap crazy, it’s even harder to handicap absolutely crazy. Oil prices seemed dazed and confused after a crazy week of news. Oil has an upward bias, as indicated by strong gasoline demand over the Memorial Day holiday based on a solid gasoline crack but also on the fact that we see more tariffs on Russia. President Trump called Vladimir Putin “absolutely CRAZY” after Russia launched its biggest drone and missile attack on Ukraine since the war began.

While President Trump continues to work towards peace and a cease fire in the Russian Ukraine war, Vladimir Putin and his army went on a drone and missile launching spree. Reportedly 355 drones and 9 missiles were shot off in a single night killing at least 12 people mainly civilians in a stupid display of revenge and egotism by the crazy Valdimir Putin.

Ukraine did report that they have intercepted most of the attack, but damage to infrastructure and innocent civilians are mounting. Yet the attack was stupid as it gained nothing for Russia militarily or in terms of good will. The attack will make it more difficult for them to secure better terms as they are not acting like they want a peace agreement. It angered German Chancellor Friedrich Merz who now has raised the stakes by saying that Western allies will now allow Ukraine to strike as deep into Russia as it can, removing a ban on weapon ranges. The war between Russia and Ukraine raises concerns about potential global conflict affecting European stability.

Meanwhile, the European Union seemed to beg the US for a postponement of the 50% tariff imposed by President Trump to allow negotiations led by Ursula von der Leyen to avoid economic damage. Trump said he would delay the introduction of new EU tariffs originally to go into effect on June 1st until July 9. In they will fast track talks to try to get some type of an agreement in the EU to cut a fair-trade deal with the United States. And the key thing is Europe has not been fair with the United States in the past when it comes to trade.

The EU holds the largest trade deficit with the United States, after China, and has created considerable barriers for US goods entering their market. China currently has a $295 billion trade deficit with the United States compared to #2 the European Union which has a $235 billion trade deficit with the United States. The reason why the European Union has such a huge trade deficit is because of their trade barriers.

Even though the European Union has begged for relief, the British Pound is benefitting because they’ve already cut a deal with the Trump administration. My trading clients are watching this very carefully and we are allowing the opening for new clients as well to position on this. 

The surging stock market, influenced by the tariff delay, is expected to be positive for oil prices. The main issue is whether OPEC will raise production, as previously leaked. Russian Oil Minister Alexander Novak stated that no increase in oil output has been discussed, specifically the 411,000 barrels per day mentioned in the press. HFI Research points out that, “OPEC+ truncated production increase incoming for July on May 28 (+411k b/d). But guess what? OPEC+ crude exports are lower in May than in April. Brazil is down 427k b/d m-o-m. Most importantly, US crude exports are down 276k b/d m-o-m, and down 738k b/d y-o-y!

In terms of production, another important aspect is the current rig count. Producers are experiencing some stress at the current price levels. This is not believed to be a long-term issue; rather, the rapid decline in oil prices has taken some producers by surprise. The drop in rig counts suggests that the market may stabilize soon. The US rig count, as of May 23, 2025, is 566, according to Baker Hughes. This includes 465 oil rigs and 98 gas rigs. The total rig count has decreased compared to the previous week and one year ago.

Crude still seems to be locked in a trading range as the demand for oil continues to be solid. Gasoline demand obviously has been extremely good. Yet just because we’re breaking records in miles driven doesn’t mean we’re using more gasoline. As we get caught into these ranges here it’s probably a good idea to have the Pill Flynn Daily Trade Levels at your fingertips. It provides key support and resistance levels that can help you position in these types of volatile markets.

John Kemp Energy reports that U.S. traffic volumes have been rising by about 1% annually over the past year. In March 2025, highway volumes set a record with 276 billion vehicle-miles, up from 272 billion in March 2024 and surpassing the pre-pandemic peak of 271 billion in March 2019. However, gasoline consumption remains below pre-pandemic levels due to improved vehicle fuel economy and the growing adoption of electric vehicles.

Last week we continued to cheer the fact that the Senate voted to end the green energy tyranny coming out of California. California’s plans to encourage the adoption of electric vehicles are facing significant challenges. Many Americans are resisting the transition to electric cars, citing concerns about practicality and personal preference. Despite pressure from the California government, the initiative is struggling to gain widespread acceptance.

Reuters reported that the U.S. Senate voted last Thursday to block California’s plan to end the sale of gasoline-only vehicles by 2035, a policy adopted by 11 other states. This vote sends President Donald Trump a measure repealing a waiver granted by the EPA under Biden in December, which allowed California to mandate that at least 80% of vehicles be electric by 2035.

The vote is regarded as a triumph for automobile manufacturers such as General Motors and Toyota, who objected to the regulations. Conversely, it represents a setback for California’s environmental organizations. Of course, the question becomes is California the worst run state in the union. It’s got to be right up there.

Natural gas popped on some forecasts for summer like temperatures overnight before settling back. The one thing that we do know with natural gas is that the cooling season is right around the corner and we’re going to get ready to get those air conditioners humming. We still like gas spreads and bullish option strategies and we can go over those with you.

The Trump Administration is making significant progress toward energy sustainability as the United States endeavors to become the global leader in artificial intelligence and data centers. The administration has taken substantial steps to eliminate barriers and promote nuclear power, the only carbon-free emission energy source. One of the criticisms of nuclear energy is its high cost, and modular reactors remain years away. However, the Trump Administration is working to reduce these costs and make nuclear energy a more viable option. 

On Friday, Trump ordered the independent nuclear regulatory commission to reduce regulations and expedite new licenses for reactors and power plants to 18 months. This was part of his executive orders to increase U.S. nuclear energy production due to rising demand from data centers and artificial intelligence.

Climate change activists should be thrilled because this is going to be one of the ways to meet demand for electric power without any carbon emissions from the actual process. It’s also going to open up the door to module reactors, but the key thing is to get the cost down, which has been prohibitive mainly because of the lack of uranium and the regulatory aspects of this industry.

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Call to open your futures trading account at 888-264-5665 or email me at pflynn@pricegroup.com.