In The Shadows. The Energy Report 06/05/2025

Who knows what evil lurks in the heart of men. Only the shadow knows. And perhaps the shadow knows who these shadowy figures are that leak questionable news tips to reporters that time after time continue to get dismissed as fabricated fake news. Yet once again the oil market fell for it and from a Bloomberg story. It was filled with credible people familiar with the matter that claimed that Saudi Arabia wants more supersized OPEC plus production hikes. And while that sounds scary to oil bulls, it is in direct opposition to what OPEC said in their meeting over the weekend. So, it’s OPEC saying one thing to the public and their OPEC press conferences and something different to these people familiar with the matter?

In fact, oil prices rallied after OPEC agreed to raise production by 411,000 barrels a day. The reason was because prior to the meeting there were unnamed sources that leaked propaganda that suggested that OPEC was going to talk about a much bigger than expected production cut. Yet the pre-signal 411,000 barrels a day is what happened in the real world. After that oil story proved not to be true, the market rallied almost 4%. Yet the gullible oil trade got sucked into again of this hypothetical story that offered no credible sources on the record. In fact if you look at the comments from the OPEC officials, this story seems to be coming out of left field or somewhere out in fantasy land. If I listen long enough to you, I’ll find a way to believe it’s all true.

This story sunk oil after an Energy Information Administration Report (EIA) had oil traders wishing that Elon Musk would come out of retirement and DOGE the EIA. Huge swings in weekly demand numbers and ridiculous numbers in weekly product supply had everyone realizing that weekly data is not that reliable and you have to wait for the monthly adjustment that you know is coming as it has almost every month for the last few years.

Perhaps the Energy Information Administration needs these tech savvy DOGE tech guys to go in and fix their computers and their data collection methods. Then perhaps we won’t have the problem of missing barrels and the huge historic swings that we’ve seen in the data over the last few years. We need to make the data better but the market trades off the data it has, not the data it should have. The EIA reported that U.S. crude oil refinery inputs averaged 17 million barrels which, was 670 thousand barrels per day more than the previous week’s average.

Refineries operated at 93.4% of their operable capacity last week. EIA said that gasoline production decreased, averaging 9 million barrels per day. Distillate fuel production increased by 183 thousand barrels per day last week, averaging 5 million barrels per day. U.S. crude oil imports averaged 6.3 million barrels per day last week, decreased by 5 thousand barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.2 million barrels per day, 9.6% less than the same four-week period last year.

Crude oil inventories fell by 4.3 million barrels from the previous week. At 436.1 million barrels, U.S. crude oil inventories are about 7% below the five-year average for this time of year. Gasoline inventories increased by 5.2 million barrels from last week and are about 1% below the five years average for this time of year. Distillate fuel inventories increased by 4.2 million barrels last week and are about 16% below the five-year average for this time of year.

Total products demand averaged 19.8 million barrels a day, down by 0.9% from the same period last year. Over the past four weeks, motor gasoline products supplied an average of 8.8 million barrels a day, down by 3.1% from the same period last year. Distillate fuel products supplied an average of 3.6 million barrels a day over the past four weeks, down by 4.3% from the same period last year. Jet fuel products supplied were down 2.2 % compared with the same four-week period last year.

Based on current observations, the crude oil market will remain strong. Fake OPEC stories typically cause brief selloffs, with recovery within two days. Crude oil is expected to hit new heights before the weekend. Due to uncertainty with Iran and rising geopolitical risks, people are likely to avoid shorting oil over the weekend.

Natural gas is looking solid as well. If the market struggles in the shoulder season the potential for some hot weather should give us some support and we could get a bounce after today’s Energy Information Administration injection report. The market’s expecting 113 billion cubic foot increase in inventory. Recent reports indicate that US natural gas production may be reaching its peak as the rig count begins to decline, coinciding with an expected rise in demand.

Production growth of US dry natural gas has been strong averaging about 106.7 billion cubic feet a day in April which was a new monthly record that was driven by production in the northeast and Texas. Yet the natural gas rig count fell to 98 rigs and that’s 16.7% below where we were a year ago. We’ve seen expanded pipeline infrastructure and the total US natural gas demand hit a new monthly high in the first quarter after a colder than average January which was the coldest in 37 years. The power sector is consuming about 38% of US natural gas and exports are averaging 6.1 billion cubic feet a day in April. That is up a whopping 36.4% from a year ago.

With this kind of backdrop, trying to get long for the summer it’s probably a good thing, especially as Fox Weather reminds us that hurricane season is already underway. For our clients we would be recommending being long natural gas protected with options for putting on some bullish option strategies for this summer. If you’re looking for ideas of how to do that, we can also help you if you want to contact me.

Fox Weather is reporting that non-tropical area of low pressure is bringing heavy rain and possible flash flooding to the Southeast coast on Thursday, including portions of South Carolina and North Carolina through the end of the workweek.

The National Hurricane Center (NHC) had previously been monitoring the system for potential tropical development, but on Wednesday forecasters determined that there was no longer a chance that it would take on tropical characteristics. However, the area of low pressure started to move up the Southeast coast after dumping more than 6 inches of rain in South Florida, including Miami, earlier this week.

To keep up with the latest on the tropical weather download the Fox weather app. If you’re ready to open your account, you should call me at 888-264-5665. Feel free to e-mail me at pflynn@pricegroup.com

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