Terrifying Diesel Scare. The Energy Report 08/05/2025

The initial concerns about the tariffs on India raised the price of diesel and the crack spread flew on concerns that any loss of Russian oil will add to the global diesel deficit. Russian oil is a critical component of the global diesel market. Russia had been one of the top exporters of diesel fuel and their heavy oil is coveted by European refiners as President Trump’s August 8th deadline for Russia to cease its war in Ukraine approaches.

India responded that they have been targeted by the United States and the European Union for importing oil from Russia after the commencement of the Ukraine conflict. In fact, India began importing from Russia because traditional supplies were diverted to Europe after the outbreak of the conflict. The United States at that time actively encouraged such imports by India for strengthening global energy markets stability.

Indian officials emphasized that these energy imports are essential for ensuring predictable and affordable fuel prices for their population, and argued that, unlike other nations, India’s trade with Russia is driven by necessity, not convenience. They pointed out that, in 2024, the European Union’s trade with Russia reached 67.5 billion euros in goods and 17.2 billion euros in services, including a record 16.5 million tonnes of LNG—a figure far surpassing India’s trade volumes.

European imports from Russia also span a variety of sectors, from energy and fertilizers to machinery and chemicals. Likewise, the United States continues to import commodities like uranium hexafluoride for its nuclear industry, palladium for electric vehicles, and fertilizers. Given this context, India asserted that singling out its trade practices is unjustified, stating that, like any major economy, it will take all necessary steps to protect its national interests and economic security.

China also faces a trade deadline of August 12 and has balked at the Trump Administration’s pressure to stop buying Russian oil and Brazil has been hit with a 50% tariff due to its persistent imports of Russian oil. As reported by AP, China’s foreign ministry posted after two days of trade negotiations and Stockholm with the US responding to the US threat of 100% tariff that, “China will always ensure its energy supply in ways that serves our National Insurance coercion and pressuring will not achieve anything China will firmly defend its sovereignty security and development interest.”

This comes as the Trump Administration moved two nuclear submarines closer to Russia after former Russian President Dmitri Medvedev ran off his mouth trying to remind the United States that Russia was a nuclear power.  I think President Trump reminded him that the United States is also a nuclear power.

All this back-and-forth between India, China, and Russia is unfolding as U.S. oil production continues to rise—though there are signs things may be slowing down. Industry experts have pointed out that the recent drop in the number of oil and gas rigs across the country suggests that onshore crude output, in the world’s leading producer, could start to decline in early 2026. It’s a trend to watch as the energy landscape keeps shifting.

Chief Executive Officer and Director Kaes Van’t Hof warned today that, “We continue to believe that, at current oil prices, U.S. shale oil production has likely peaked and activity levels in the Lower 48 will remain depressed.” Apparently, concerns about peak U.S. oil production aren’t shaking up the market too much today, as many expect OPEC to fill the void. Yet, some argue the market is too complacent, with Standard Chartered warning that OPEC may not have as much spare capacity available as many believe. Other analysts suggest that OPEC does have adequate spare capacity, but if Russian oil is lost, that assumption could be seriously tested.

After oil’s pullback yesterday, we seem to be stabilizing. The market doubts President Trump will enforce sanctions, but he often proves skeptics wrong. Deadlines often shift in international politics, but the market should remain alert for potential upside surprises. In the meantime, however, the charts look a little negative.

Last week, the US added five rigs to reach 122, marking a 13% increase over the past two weeks, with gains seen in the Eagle Ford, Marcellus, and other regions. While gas rigs have dropped significantly since 2000, production continues to rise due to improved efficiency. Last week, the EIA showed that US natural gas production came in at 106.9 BCF per day, affected by some midweek outages, and it was slightly lower for the week. Yet, last May, dry natural gas production in the United States averaged 107.3 billion cubic feet per day, which was up 5.7% compared to May of 2024. So, the market remains very optimistic about LNG exports, but the question is, are they ahead of the curve?

Natural gas is trying to rally a bit on weather factors the Fox Weather is reporting that, “Tropical Storm Dexter has started to weaken after forming off the East Coast in the Atlantic Ocean on Sunday night, but forecasters say it could restrengthen in the coming days as it continues to move away from the U.S. The National Hurricane Center (NHC) said that maximum sustained winds within Tropical Storm Dexter have dropped to about 40 mph with some higher gusts.

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