It’s a Big Beautiful Massive Trade Deal with Japan. The Energy Report 07/23/2025

That is beyond bigly because Trump just announced that Japan is about to pour a whopping $550 billion into the U.S.—and he says America’s walking away with 90% of the profits. And if that is not massive enough for you, President Trump says that Japan is swinging open the doors to their markets for American cars, trucks, rice, and a shopping list of other goodies. Meanwhile, Prime Minister Shigeru Ishiba tossed another treat into the mix, promising that those auto tariffs on Tokyo will drop to 15%. Shortly after the deal announcement, Japan’s top trade negotiator, Ryosei Akazawa, said ”#Mission Accomplished,” in a post on X.

This trade deal with Japan should pressure Europe into making a deal and we could see more deals before the August 2nd deadline. Obviously more trade deals should increase demand expectations for oil and products not to mention the U.S. economic growth and have the real possibility to ease inflationary pressures for the consumers here in the United States. There’s more foreign investment into the United States that creates growth, tax revenue and reduces the governments need to print money.

The crack spread for diesel was not all it was cracked up to be after failing to take out a new high. A 3.480-million-barrel increase in inventories from the American Petroleum Institute cooled the panic buying. I had a sense and industry insiders had a sense that that number was going to be big. That’s true back-to-back big increases in distilling inventories and while supplies are still well below average the number was enough to cool the crack spread.

Data for the rest of the complex show that gasoline inventories decreased by 1.228 million barrels, which was  a larger drop than expected. Crude oil supplies declined by 577,000 barrels, while there was a slight increase of 314,000 barrels at the Cushing, OK delivery point. So you would assume that inventory should be falling at this time of year and the fact that they’re not falling dramatically is a bit of a trouble spot if you’re bullish. At the same time the market seems to be stuck in its range at least on crude and there’s still a risk that any disruption in supply could cause a diesel crack to get cracking again.

Today we get another round of Russia-Ukraine peace talks in Istanbul. This will be the third meeting, following two earlier sessions in May and June.  Obviously the diesel market is going to be watching these talks because sanctions on western diesel are one of the reasons we saw the spike in diesel today. Supposedly they’re going to be working toward solutions for the ongoing conflict—things like prisoner swaps, returning bodies, and hopefully bringing back Ukrainian children taken to Russia. It’s a serious conversation, and a lot is riding on how these talks unfold.

While there is a lot of talk in the oil patch where people are still in pulling back from production there was a big deal to be announced this week that show that the US is making moves to make energy great again. In a major development, Chevron Corporation officially completed its $53 billion acquisition of Hess Corporation, cementing a major expansion of its upstream portfolio and securing a 30% interest in the highly prized Stabroek Block offshore Guyana.

The deal, first announced in October 2023, cleared its final regulatory and legal hurdles this month following a closely watched arbitration case. Rival operator ExxonMobil and partner CNOOC had challenged the acquisition on the basis of pre-emption rights related to the Guyanese asset, but the International Chamber of Commerce ruled in Chevron’s favor.

Just this past Friday, the International Chamber of Commerce in Paris delivered a pivotal ruling: Chevron has received the green light to proceed with its all-stock purchase, effectively sidelining rival bidder ExxonMobil (XOM) and bringing a dramatic closest to one of the industry’s most intense and closely watched standoffs in the last half-century. It’s a transformative moment that’s set to reshape the landscape of global energy. Congratulations Chevron.

Still not hot enough for natural gas the heat wave that is going to that the United states is going to test the metal in the highways for buckling but it might not be enough to get natural gas out of it’s funk. The reason is that people believe that the weather is going to cool down after this heat wave.

Natural gas production has been robust averaging about 106.5 BCF per day and that was up 0.2% from the week before year to date production through last month was 2.7% higher than it was the year before this high production level is one of the reasons why natural gas has been capped and needs the extra demand.

Fox Weather reports that although high temperatures were expected, their models now indicate cooler conditions ahead. Meanwhile, liquefied natural gas (LNG) export demand has been inconsistent due to fluctuating feed gas deliveries, slowing some optimism even as exports are projected to reach 17 BCF per day. Additionally, coal continues to compete with natural gas, with increased coal usage observed.

Yet at the same time Fox Weather is reporting that National Hurricane Center flags area to watch for possible tropical development as system soaks Gulf Coast. A storm system spinning off the southeastern U.S. coastline has caught the attention of the National Hurricane Center (NHC) with a small chance of developing into a tropical system.

Much like what was previously known as Invest 93L earlier this month, a trough of low pressure at the southern end of a frontal boundary is forecast to move west-southwestward into the north-central portion of the Gulf, according to the NHC.  There, environmental conditions could allow for some slow development if the system remains far enough offshore according to Fox Weather.

Traders should download the Fox Weather app to keep up with the developments of this storm as if it could impact natural gas trading later this week. You should also stay tuned to the Fox Business Network because they are invested in you!

Also sign up for the Phil Flynn Daily Trade Levels as well as the periodic manic metals report you can also open your account today by calling me at 888-264-5665 or emailing me atpflynn@pricegroup.com.