Conflicting Optimism. The Energy Report 06/11/2025

The oil moves overnight were really driven by conflicting Iranian talk headlines. Yesterday, Iran’s parliament said that the deal offered by the United States was a nonstarter. That statement reduced the odds of a deal. Today, Iran backtracked with Iranian sources saying that a nuclear deal was “within reach and can be achieved rapidly.”

Yet President Trump in a podcast overnight said that he’s less optimistic that a deal can be reached. We all know what that means. If a deal cannot be reached, then it’s more than likely that Israel will attack Iran and their nuclear facilities.

The oil market action in the yesterday’s trade sets and was mostly rambunctious, breaking out and hitting a seven month high. It seemed like the fundamentals were generally positive with reports from the Energy Information Administration as well as comments from OPEC’s Secretary General Haitham Al Ghas suggesting that, ‘there is no peak in oil demand on the horizon.” Al Ghas said, “The fact that oil demands keeps rising hitting new records year on year is a clear example of what I am saying in fact our [OPEC] projections are that oil demand will go in surpass 120 million barrels a day by the year 2050. This ever-rising demand will only be possible with adequate timely investments in the oil industry. He also warned that lack of investment in the oil and gas industry is dangerous. He said that the oil industry needs $17.4 trillion by the year 2050.

He also criticized the International Energy Agency for their flip flopping on oil investment.  The International Energy Agency famously said a few years back that we should stop all investment in oil and gas which is a mistake that exposed their agenda quite clearly. Their agenda was not to secure energy security for Europe but to push a green energy agenda.

Yet it was a report from US Energy Secretary Chris Wright that caused oil to pause. He said the US had to pause purchases for the Strategic Petroleum Reserve because of the damage done to the salt caverns by the drawdown by the previous administration.According to energy secretary Chris Wright, the Biden administration caused over $100 million in damage to the strategic petroleum reserve.

In the Phil Flynn Energy Report, we talked about the salt caverns and the damage being done by Biden purely for political purposes. His administration drew down oil supplies at an extremely rapid pace with little regard to the damage it would do to the salt caverns that held that oil. The effort to refill the Strategic Petroleum Reserve will be paused due to infrastructure damage caused by the Biden administration. This pause may halt the weekly purchases from the reserve, affecting commercial inventories.

The Energy Information Administration’s Short Term Energy Outlook provided insights for both optimists and pessimists but overall, it was supportive. The US oil output projections by the Energy Information Administration (EIA) indicate a potential production decline in 2026, the first since 2021. The EIA forecasts world oil demand at 103.5 million barrels per day, down from 103.7 million, while predicting a record demand of 104.6 million barrels per day for 2026. They expect global oil production to reach 104.4 million barrels per day, up from an earlier forecast of 104.1 million, but estimate lower record production of 105.1 million barrels per day in 2026, compared to the initial 105.4 million barrels.

US oil demand is projected at 20.4 million barrels per day for 2026, slightly down from 20.5 million.

Natural gas output is expected to rise to 105.9 billion cubic feet per day, surpassing the previous estimate of 104.9 billion. Demand remains steady at 106.4 BCF.

US oil production is anticipated to average 13.42 million barrels per day, down from the June projection of 13.56 million. Current crude oil production stands at 13.42 million barrels per day.

With the seven-day breakout on oil we still believe that oil prices are poised to move higher. As far as the trend in the short term, the Phil Flynn Daily Trade Levels that we put out every day can provide entry and exit points that take advantage of the swings in these ranges. Sometimes these ranges are pretty well defined.

The Energy Information Administration (EIA) has indicated that U.S. retail gasoline prices are projected to decrease due to lower crude oil prices. According to the forecast, regular grade retail gasoline prices are expected to average $3.14 per gallon in the third quarter of 2025, representing a 7% reduction compared to the same period last year. It is anticipated that retail gasoline prices will decline across the United States until the end of 2026, with the exception of the West Coast, where reductions in refinery capacity are expected to result in a 4% annual price increase next year.

Regarding natural gas prices, the Henry Hub spot price is forecasted to average approximately $4.00 per million British thermal units (MMBtu) in 2025 and $4.90/MMBtu in 2026, compared to $2.20/MMBtu in 2024. The increase in natural gas prices in 2025 and 2026 is attributed to robust export growth which consistently surpasses U.S. natural gas production.

In terms of electricity demand, the EIA has revised its forecast for retail electricity sales to more accurately reflect projected demand growth, particularly within the Electricity Reliability Council of Texas (ERCOT) and PJM independent system operators. Notably, the revisions highlight significant growth in the commercial sector, driven by the expansion of data centers as a source of demand. The forecast predicts a 3% growth in U.S. commercial electricity sector consumption in 2025 and a 5% growth in 2026. Previously, the Short-Term Energy Outlook (STEO) anticipated an annual average growth of 2% in commercial electricity demand through 2026.

The EIA forecasts a 1% increase in U.S. electricity generation this summer due to rising demand from commercial and industrial sectors. Higher natural gas prices are expected to reduce output from gas-fired plants, offset by increased coal, solar, and hydro generation.

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