The Eighteenth Time is the Charm. The Energy Report 07/21/2025

The recent round of price caps encouraged illegal black-market trading of Russian oil, distorting the market and causing diesel shortages in Europe. You show me a price cap, and I’ll show you a shortage. Europe was dependent on Russian diesel import as it accounted for 40% of Europe’s supply in 2022 and in 2024, fell to less than 1%.

Europe’s green energy policies increased their dependence on Russian heavy oil, and this is driven by the price of diesel up by three-points, $5 per barrel in some instances. On top of that, the European refinery closures totaling about 1% of capacity because of their green energy and drive. Closures at Scotland’s Grangemouth refinery, Lyondell’s Houston facility, and Phillips 66 Los Angeles have led to reduced diesel output.

Despite efforts to reduce reliance on diesel, it made up 44% of Europe’s oil demand last year at 13.5 million barrels per day, with imports supplying about 1.2 million barrels daily, or 20% of consumption.

While Europe is obsessed with green energy to move away from diesel, the reality is that diesel still plays a crucial role in meeting the continent’s energy needs. Last year, it made up 44% of Europe’s oil demand, totaling 13.5 million barrels per day. To fill the gap, Europe currently imports about 20% of its diesel requirements—that’s approximately 1.2 million barrels each day.

The sanctions created a bit of excitement and a brief rally on the heels of the latest news but things seem to be settling down again. It looks like the focus is shifting back to the basics—good old supply and demand, along with all the usual factors that really move prices.

As far as geopolitics today are concerned, it’s free for all with news coming fast and furious about negotiations peace talks and economic talks.

Headlines reported that Iran’s foreign ministry indicated there are currently no plans for talks with the United States. However, Iran and European countries, including the UK, Germany, and France, are scheduled to hold discussions concerning Iran’s nuclear program.

Here’s where things get really interesting! There’s some buzz floating around that Russia might actually meet up with President Xi and England’s leaders because they just happen to be in China at the same time. And last week, we even heard rumblings of President Trump possibly meeting with China’s President Xi. Now, Russian sources are hinting at the wild possibility of a three-way meeting between President Xi, Russian President Putin, and President Trump in Beijing.

On top of that, state media is reporting that the next round of talks with Ukraine could happen as early as this week in Istanbul. The diplomatic chessboard is lighting up, and all eyes are on what moves these leaders will make next. With Russia trying to talk peace and Trump trying to achieve global stability and fair trade, this could be an amazing meeting and maybe we could even get our pandas back.

JODI’s monthly report indicates robust oil fundamentals, with Saudi crude production up 48 KBD to a 13-month high. Saudi crude inventories dropped sharply from 1143.534 million barrels to 140.912 million barrels in May.

According to JJODI data from 50 countries, oil demand decreased by 823.7 thousand barrels per day in May and by 493.5 million barrels year over year. In May, China’s crude imports dropped by 721,000 barrels, and crude oil production declined by 247.8 barrels per day.

Overall, JODI numbers haven’t brought dramatic changes, and the global oil market remains tight. We expect a continued upward trend despite some recent pullback in crack spreads, likely due to market stabilization after last week’s surge. Fundamentals for heating oil and diesel cracks are strong, though the market may have briefly overextended.

Natural gas prices are dropping as the anticipated heat is easing. Farmers are optimistic, with ideal growing conditions from recent rain, warm days, and cooler temperatures, boosting crop potential.

Although natural gas fundamentals remain strong with steady US production and rising demand, this weather-driven decline may reverse. Further downside will depend on clearer weather forecasts. Fox Weather said that the weekend ended on a stormy note across a large portion of the U.S., as more than 76 million Americans faced the threat of severe weather from the Northeast to the Midwest on Sunday.

NOAA’s Storm Prediction Center had posted a Level 2 out of 5 threats of severe storms for nearly 36 million people, including major cities such as New York, Boston, Indianapolis and Cincinnati.

The Fox Weather Center also reported that, “The National Hurricane Center has officially designated a new disturbance, Invest 94L, in the Main Development Region of the Atlantic Basin between Africa and the Caribbean islands. It’s expected to have a brief period of strengthening over the next couple of days before encountering unfavorable conditions.

If a tropical system forms, it could affect natural gas prices, especially if hot weather returns. According to EBW Analytics, increased heat and rising LNG exports recently boosted natural gas markets, and technical suggest further gains are likely over the next week. However, with storage levels high and production at records, softer prices may follow as summer heat fades and hurricane season begins.

Stay tuned and don’t miss a beat—download the Fox Weather app now for all the latest updates on these fast-moving stories! Plus, you’ll want to catch every minute on Fox Business Network, where we’re all about keeping you in the loop and ahead of the curve.

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