The New China Syndrome. The Energy Report 06/06/2025

Bloomberg reported that China cut back on buying any US crude for the second month in a row that US oil exports slid to the lowest this year in April, according to US Census data. In the same month a year earlier, China bought 297,000 barrels a day from the US and three times that amount in 2023, the data shows. March and April mark the first time since the pandemic that Chinese refiners skipped buying from the US for two straight months. Turning to the Energy Information Administration last week, the US exported 3.907 million barrels of oil per day that was a drop from the week before where we exported 4.3018 million barrels a day. Yet oil in the weekly supplies report showed that oil inventories fell by 3.8 million barrels and now there is hope that China may be back in the buying U.S. oil game very shortly.

After a phone with President Xi Jinping, President Donald Trump he announced he will visit China. The President said that he will visit China and that he invited President Xi Jinping to the White House. Trump mentioned on Truth Social that the discussion focused on trade and ended positively for both countries. The US President and the Chinese President agreed to continue trade discussions in order to address issues related to tariffs and rare earth minerals. It will more than likely would lead to a resumption of oil imports into China from the United States.

The oil market edged back up yesterday after it became more apparent that the story suggesting that Saudi Arabia was ready to start a production war to resume market share was greatly exaggerated. There was more growing distrust of these unsourced stories surrounding the OPEC cartel especially because most of them turned out not to be true. Even inside the OPEC cartel, they’re getting somewhat frustrated.

If you’re outside breathing, you probably know that the wildfires in Canada are still impacting not only oil supplies but the air quality currently. We’re hearing that wildfires and Alberta disrupted about 7% of the country’s oil production which is about 350,000 barrels per day. 

President Trump continued to get a win on gasoline prices last month when gasoline futures hit $1.98. It was the lowest in two years. This week the EIA reported that gasoline inventories increased by 5.219 million barrels and while most people don’t believe that number is really that large, it could put some downward price pressure at the gasoline pump. Refinery utilization came in stronger than expected which would suggest that we could see some strength and demand going forward which should provide some pretty good support for the product market.

Natural gas futures are trying to edge up and shake off yesterday’s larger than expected 122 billion cubic feet injection into storage. The NIH shows that even with the large increase supplies are 10% below last year but they’re still 4.7% above the five-year average.

It is important to monitor the weather closely as hurricane season is active, which may affect supply or demand. The Fox Weather app can be used to stay updated with the latest information. Fox Weather did report that nearly 90 million Americans are under threat of severe weather Friday in an area covering a broad swathe of the continental U.S. east of the Rocky Mountains. The FOX Forecast Center expects damaging wind gusts and large hail to be the main hazards for those living in the area covered by the threat, as rounds of severe storms are expected to last through the weekend. The southern Plains, including the Texas panhandle, Oklahoma and Kansas, are at particular risk of large, egg-sized hail on Friday on the heels of a strong supercell thunderstorm that produced several tornadoes and flash flooding from the New Mexico state line to Lubbock, Texas.

We are entering the summer season with expectations of record demand and record US LNG exports, combined with the potential for hot weather in China and India, suggests a highly optimistic outlook for the LNG export market. Weather forecasts indicating high temperatures in Asia imply that the LNG export market will be exceptionally active. Consequently, it is advisable to consider strategic positioning with spreads and options on natural gas.

Big decisions on biodiesel is also keeping the market on edge. The Energy Information Administration reported a significant drop in U.S. renewable diesel and biodiesel production in 1Q25 due to uncertain federal biofuel tax credits and poor profit margins. They predict an increase in the production of both fuels as the year advances, although biodiesel production is expected to be lower than in 2024. Renewable diesel and biodiesel are biomass-based diesel fuels that can serve as substitutes for petroleum distillate. These fuels can also be used to fulfill renewable volume obligations under the Renewable Fuel Standard (RFS) regulated by the U.S. Environmental Protection Agency (EPA). In January 2025, U.S. biodiesel production dropped to 60,000 barrels per day (b/d), the lowest since January 2015 and 40% less than January 2024. Partial increases in February and March led to a quarterly production of about 70,000 b/d, over 30% lower than 1Q24. Poor profitability in 1Q25 contributed to production declines. Diamond Green Diesel, Phillips 66, and Marathon all reported operating losses from renewable diesel in the quarter. In addition, the trade press has suggested negative margins for biodiesel.

June 6th is the anniversary of D-Day. Let’s never forget the sacrifices that were made by so many to protect this country. Remember them in your prayers today.

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 Phil Flynn 888-264-5665. Feel free to e-mail me at pflynn@pricegroup.com.