Oh, My Glut. The Energy Report 08/13/2025

According to the IEA’s monthly report, “Oil-market balances look ever more bloated as forecast supply far eclipses demand towards year-end and in 2026.” Their warning is clear: something dramatic must happen to restore balance in the market. The sheer scale of this anticipated glut is nothing short of astonishing. That’s not just the International Energy Agency—who I have said before is really a mouthpiece for the green energy industry—but also the Energy Information Administration (EIA) in the US. It is calling for a glut, not quite on the level of what the International Energy Agency is forecasting, but still a number that is raising eyebrows.

Now, according to the EIA, Brent crude oil prices are set to plummet in the coming months—from $71 per barrel in July to just $58 per barrel on average in the fourth quarter of 2025, and potentially down to $50 in early 2026. These projections, we’re told, are based on anticipated inventory builds tied to OPEC+ deciding to ramp up production. Supposedly, global inventories will swell by over 2 million barrels a day in late 2025 and early 2026—a hefty revision, up 0.8 million barrels per day from last month’s forecast.

Yet like this pessimism about economic growth, it doesn’t seem to be justified. This seems to be more based on the projections of President Trump’s tariffs that will somehow slow the global economy but the stock market absolutely doesn’t agree.

Let’s be honest: these are forecasts, not certainties. The energy market has a long history of defying expert predictions, and the notion that low prices will magically trigger supply cuts from OPEC+ and non-OPEC producers later in 2026 seems awfully convenient. The models now expect Brent to average $51 per barrel next year, down from the previous $58 estimate—yet how many times have we seen these numbers recalibrated after the fact? It’s worth taking all of this with a grain of salt until the barrels actually hit the market.

OPEC’s production increase last month was below target due to the impact of compensation cuts. This comes as OPEC lifts its demand for 2026 oil demand by 1.3b million barrels of oil per day. That demand increase doesn’t fit the bearish narrative that’s being purported by the International Energy Agency nor the Energy Information Administration. In other words, these agencies are betting on an economic malaise but the US GDP and the stock market doesn’t fit that narrative.

The EIA insists that US shale producers will keep churning out oil, supposedly driving production up to a record-breaking 13.6 million barrels per day by December 2025. We hear, almost as a mantra, that well productivity will rise just when it’s needed most. Yet, as crude oil prices slide, the EIA expects producers to suddenly speed up their pullback in drilling and completions—a trend that’s already been quietly unfolding throughout the year. Are these forecasts really grounded in reality, or just hopeful extrapolations? Now, they’re predicting US crude output will drop to 13.1 million barrels per day by the fourth quarter of 2026. On paper, the numbers for annual production—13.4 million barrels a day in 2025, 13.3 million in 2026—look neat and tidy, but history suggests these projections are revised at the drop of a hat.

I believe the International Energy Agency and Energy Information Administration mistakenly think that President Trump’s tariffs will slow the economy, but we expect the opposite and therefore don’t anticipate a major surplus. And the question I keep asking is, if we have a surplus in supplies why do the Saudis continue to raise prices?

Still these pronouncements are giving oil prices a little bit of early pressure. Though we would be looking at this sell-off to put on buying opportunities heading into winter in what is a critical situation.

The EIA warns that U.S. distillate inventories are poised to end 2025 at their lowest end-of-year level since 2000, plunging by a staggering 14% over the year. This drop is driven by surging U.S. distillate exports and relentless domestic demand for petroleum-based distillate. With decreased refinery capacity on the horizon and export pressures showing no sign of letting up, inventory levels are expected to stay dangerously low through 2026. If things don’t change, distillate margins will remain elevated, and we risk entering a period of potential shortages. The window for action is closing rapidly. And obviously, if President Trump’s peace talks with Vladimir Putin go well, this could alleviate some of the concerns about distillate supplies as we head into winter.

Natural gas seems to have no concerns about supplies going into winter, but weather still is going to be critical for this market. Fox Weather says that Hurricane Hunters are getting set to fly into Tropical Storm Erin to gather more information on the systems development after forecasters say it’s set to become the first major hurricane of the 2025 Atlantic hurricane season. This comes after the system left several people dead, including children, in the Cabo Verde Islands off the coast of Africa.

Download the FOX weather app to keep up with the latest on this storm and others. You should also stay tuned to the Fox Business Network because they are invested in you.

Call Phil Flynn to open your account today at 888-264-5665 or email pflynn@pricegroup.com.