Stalled. The Energy Report 07/22/2025

 The oil market and trade talks seemed to be stalled, and traders are getting a bit nervous ahead of the August 1st hard trade deadline by the Trump Administration and the August Crude oil expiration. The market is getting prepared as Treasury Secretary Scott Bessent said that implementing tariffs on countries with this hard target date of August 1st is going to put more pressure on those countries to come up with better agreements.

The Journal says that, “Chinese officials have long worried that the U.S. and its allies could hamstring the nation’s economy by choking off its supply of foreign oil. So, China has poured hundreds of billions of dollars into weaning itself off the imported stuff by reviving domestic production and swiftly building the world’s leading electric-vehicle industry.” They say that, “China boosted oil output by 13% from 2018 to 2024, to around 4.3 million barrels a day. Crude imports fell nearly 2% last year, though they have rebounded slightly this year as some Chinese companies-built stockpiles.

The Journal Says that, “China’s biggest state oil companies and the International Energy Agency all forecast that China’s demand for oil will likely peak within two years, while gasoline and diesel demand has already topped out.” This, in my humble opinion, will be another false prediction of peak oil demand by the International Energy Agency. But the one thing you have to understand is that China is serious because they’re putting their money where their mouth is regardless. China boosted oil output by 13% from 2018 to 2024, to around 4.3 million barrels a day. Crude imports fell nearly 2% last year, though they have rebounded slightly this year as some Chinese companies-built stockpiles.

As far as today for the petroleum side of the market we will see some more volatility. Weakness today could be offset a little bit as we get past the August contract expiration. We still like the heating oil crack spread on breaks and we could get an opportunity to add to that trade. The gasoline crack also looks very attractive at this point.

Meanwhile, natural gas prices are taking a bit of a dip, even with that sizzling heat wave on the horizon—though longer-term forecasts are hinting at cooler temps ahead. Fox Weather is already sounding the alarm reporting that, “Heavy rain to swamp Gulf Coast as central US swelters under heat dome.

Yet in the big picture, the main driver for natural gas is going to be astounding, along with other energy sources, as we head towards trying to meet the demand that is coming our way. Naureen S Malik at Bloomberg writes that, “The biggest US grid has no spare supply for new data centers, meaning project developers will need to build their own power plants, according to the system’s independent watchdog. “There is simply no new capacity to meet new loads,” said Joe Bowring, president of Monitoring Analytics, which is the independent watchdog for PJM Interconnection, the grid that extends from Washington to Chicago. “The solution is to make sure that people who want to build data centers are serious enough about it to bring their own generation.”

Artificial intelligence is driving the biggest US surge in electricity demand in several decades, adding stress to grids that have proven vulnerable to extreme weather. PJM, which is home to the highest domestic concentration of data centers, has endured such tension for more than a year. 

Tight supplies on PJM led to a record $14.7 billion in an annual auction last year. The auction provides a key revenue source for generators within the system. The results of the next auction, which are scheduled to be released late Tuesday, are expected to show capacity prices match or exceed all-time highs as the growth of data centers, especially for artificial intelligence, accelerates, according to Barclays Plc.

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