Grab Your Barrels. The Energy Report 05/30/2025

Oil dipped after it was reported that OPEC+ may discuss an oil output hike larger than 411,000 bpd for July at a meeting scheduled for this Saturday.

Still if you look at the adjustments in compensation cuts by the OPEC cheaters, the increase is going to be barely enough to keep up with global oil demand growth. In fact, if you look the most recent oil demand from JODI-reporting countries, global oil demand increased in March by 1.8 million barrels per day year-on-year, primarily driven by higher crude oil demand from the United States, Italy, Nigeria, and Saudi Arabia.

Oil demand in JODI-reporting countries also rose in March by 793,000 barrels per day month-on-month, mainly due to increased demand in the United States, Italy, and Saudi Arabia.

Now JODI failed to mention China’s demand because generally China doesn’t report to move down but if you look at the big picture of China demand, it’s probably better than expected.

The reason why I say that is that International Energy Agency Executive Director Dr. Fatih Birol said that oil demand in China is ‘considerably weak’. Given the fact that Dr. Birol gave no data supporting his statement about low demand and reports of falling oil inventories and increasing traffic in China, Dr. Birol’s comment seems questionable, especially considering his history of underestimating demand.

In fact, based on China’s oil inventories, while they were slightly above year ago levels, they’re still below the five-year average. In fact, if you look at Chinese oil inventories, they’re at their lowest level since March of 2020.  Currently according to some data, they are only 50 million barrels above their pre-COVID numbers.  That is based on data from Kpler. Even the International Energy Agency all owned data suggest that in December 24 Chinese oil inventories fell by 39.3 million barrels.

Bloomberg News seems to suggest that Chinese traffic demand was bouncing back after some weak data released earlier in the week as road congestion was above 2024 levels in every major city. Energy Tidbits has observed a year-over-year decline in congestion levels on Chinese roads, noting a 6% decrease in March, an 11% reduction in April, and a 5% decline month-to-date as of May 28th. This represents an improvement from the earlier 9% decrease reported in early May.

The patterns of Chinese traffic miles driven, especially concerning oil demand, are intricate. These patterns are influenced by economic factors, the adoption of electric vehicles, and recent trade dynamics between the United States and China.

Yet it appears right now that OPEC is not feeling as much pressure with the lower prices as they have in the past. Even as Kazakhstan’s oil minister has stated that an oil price above $70 to $75 per barrel would be suitable for all countries, it remains uncertain whether consuming countries will agree with this assessment.

US shale producers would love to see that, and the market will be focused on today’s Baker Hughes rig report last week. The total US rig count dropped by 10 to 566 and then went down from 576 in the previous week and it’s the lowest level in recent months. U.S. oil rigs have declined by approximately 5% and are at the lowest level since 2022.

Producers have been scaling back due to low prices and the increasing cost of steel. Shale producers like Diamondback Energy, Cotera energy and Matador Resources or cutting rigs due to low prices and Diamondback is planning to drop 3 rigs in the second quarter.

Of course when we start to hear about these rig count tops we raise concerns about falling oil production in the US even though we saw oil production actually rise last week. Shale producers are still nimble and can produce more with less but make no mistake about it, this drop in rig counts signals that we’re probably getting close to a solid bottom for oil.

We use a combination of futures and options for our clients to leverage market opportunities. For most traders, utilizing daily trade levels has been the most effective strategy for trading these markets.

Oil prices are also going to be on wildfire watch in Canada. There are reports that indicate that wildfires are within approximately 20 kilometers (12 miles) of more than 245,000 barrels a day of oil production in Alberta, affecting the oil sands region.

Oil prices are also getting a little bit of a bid this morning because the potential for an Iran nuclear deal may not be as close as some of the market participants believe. In fact, Iran said a nuclear deal isn’t imminent.

Yet at the same time President Trump is suggesting he’s holding back the hand of Israel from attacking Iran’s nuclear facilities. The Wall Street Journal suggests that Benjamin Netanyahu is President Trump’s best bargaining chip. In other words, is President Trump the good cop with Iran and Benjamin Netanyahu the bad cop? Stay tuned.

Natural gas continues to struggle with the weather but the longer term outlook for natural gas continues to be solid as we expect to see a big surge in LNG exports later in the summer. LNG Exports hit a record high this year and that record is meant to be broken.

Natural gas sold off after reports that gas flows to Freeport LNG declined potentially due to a production issue but yesterday’s reports from Reuters said that the terminal was back on track to resume full operations . If you remember earlier in the month Freeport experienced a brief shutdown on May 7th due to a power feed interruption. Freeport’s history changed when natural gas features shifted after a long shutdown due to major problems. Freeport is key because it has a capacity of 2.2 billion cubic feet per day, which is equivalent to 16.3 million metric tons and it’s critical to the global gas market, it is known as the least reliable LNG export facility in the country.

Fox Weather is reporting that tropical storm Alvin is unraveling quickly as it churns large swells towards portions of western mainland Mexico and the Baja California Peninsula, bringing an increased risk of life-threatening rip currents.The FOX Forecast Center said land impacts are expected to be minimal as it treks over much cooler water and encounters hostile winds aloft. Alvin’s winds peaked at 60 mph Friday morning after forming in the Eastern Pacific south of Mexico the day prior, after becoming the first named storm of the 2025 hurricane season. Maximum sustained winds have since decreased to near 50 mph.

Download the Fox Weather Ap to keep up with weather developments. You can also stay tuned to the Fox Business Network Invested in you!

Call Phil Flynn to open your futures trading account 888-265-5665 or email me atpflynn@pricegroup.com.