So Much for Weak Demand. The Energy Report 07/08/2025

Oil prices shook off the OPEC production increase as the physical market seems to be demanding more barrels. As we said before Opec’s production increase wasn’t about maintaining market share as evidenced by the fact that Saudi Arabia raised the prices for their oil but really because the market is tight.

Distillate inventories are currently at their lowest point since 1996. With the sanctions on Russia but mainly because of the Climate policies that force refinery closures leading the world to a very tight supplies of the much in demand distillate barrels.

 The diesel market prefers heavy oil though the green energy folks do not. That  has created a shortage of these barrels and the all-important diesel fuels that power our factories and our farm equipment, and our transportation equipment is getting harder and harder to find and getting more expensive.  The lighter the crude,  the less diesel they will get.

As I pointed out we saw those crack spreads explode during the US attack on Iran’s nuclear infrastructure it settled back but the underlying shortage hasn’t gone away even with Iran’s heavy oil still being produced Europe is still not getting their hands on enough supply.

John Kemp Energy pointed out that Europe’s s gasoil futures have moved into an extreme backwardation for nearly months. The calendar spread is consistent with a shortage of deliverable barrels and/or a squeeze on the futures contract.

Kemp notes that the July Gasoil contract, set to expire on July 10, closed over $7 per barrel higher than the August contract on July 7. This backwardation is sharper than in Brent and has intensified as the July contract approaches expiry.

So, in Europe it’s almost becoming a panic buying situation.

That’s one of the reasons we’ve been talking about the diesel crack spread which in the month of July historically tends to increase anyway.

Despite forecasts of peak oil demand and significant investment in alternative energies, global oil demand continues to reach new highs. We get the Energy Information Admintraion Monthly report where they will no doubt raise demand and lower US production estimates.

The Energy Institute Statistical Review of World Energy which previously produced by BP, and now with the support of our Knowledge Partner S&P Global Commodity Insights, and the continuing support of BP is sending us an energy wake up call.

  Andy Brown OBE FEI, the President, Energy Institute said that “globally the pace of renewable deployment is still being outstripped by overall energy demand growth, much of which continues to be met by fossil fuels. The world remains in an energy addition mode, rather than a clear transition. The result is a fourth consecutive year of record fossil fuel demand and CO2 emissions, highlighting the structural challenges in aligning global energy consumption with climate goals.

Dr Nick Wayth the Chief Executive, Energy Institute said that for the first time since 2006, all major energy sources, renewables and fossil fuels alike, hit record consumption levels, a reflection of surging global demand. No country has shaped this outcome more than China. Its rapid expansion of renewable capacity, alongside continued reliance on coal, gas, and oil, is driving global energy trends. The scale and direction of China’s energy choices will be pivotal in determining whether the world can deliver a secure, affordable, and low-carbon energy future.”

Natural gas got beat up on Monday but it’s trying for a turnaround Tuesday, but the reality is that the long-term outlook for natural gas is still pretty bullish even though the weather’s and the short term larger than expected increases in supplies are weighing down the market momentum.

EBW Analytics reports that natural gas re-pricing is continuing after last week’s heat wave did not bring Henry Hub spot prices above $3.51, extending through the recent EIA storage report and increased supply levels at the end of June.

It is considered premature to draw conclusions about the summer season before the 4th of July. LNG volumes are currently up 1.9 Bcf/d compared to the June average, and models indicate the possibility of another heat wave this summer, which could again test technical resistance levels.

Meanwhile, storage surpluses are expected to remain above 150 Bcf. For NYMEX futures to move higher, Henry Hub physical prices may also need to increase. Any potential upward movement could eventually stabilize.

Longer term, LNG should continue to build, pipeline constraints may limit new supply growth, and a rational market may target higher end-of-season storage.

Fox Weather is reporting that  Washington, D.C., Philadelphia and New York City will likely see periods of heavy rain in addition to potentially damaging wind gusts beginning Tuesday afternoon as severe storms fire up over more than 85 million people across the heavily traveled Interstate 95 corridor ahead of and during the evening commute.  According to the FOX Forecast Center, rain rates could reach up to 2 inches per hour on Tuesday, enhanced by the heavy tropical moisture left behind from the remnants of Tropical Depression Chantal.

The high humidity combined with a heat index over 90 degrees, will create muggy and oppressive conditions ahead of the storms. Heat alerts have been issued for most of the Eastern Seaboard.

The intensity of the rain has prompted Flash Flood Watches for parts of the Northeast and mid-Atlantic beginning Tuesday afternoon.

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