So Much for the OPEC Cut. The Energy Report 09/09/2025

 Oil bounced off at the lower end of the trading range as the big OPEC supply increase might actually turn out to be a production cut. That is right, a cut. First OPEC+ decided to give us less, not more, compared with the rumors with their latest production hike—only 137,000 barrels a day starting in October. That’s a far cry from the robust 550,000 barrels per day we saw in September and August, sending a message to the market: supply remains tight. According to reports, OPEC is currently approximately 650,000 barrels per day below its maximum sustainable capacity, which may limit its ability to implement further production cuts.

But the cut goes away when you consider that the OPEC Cheaters have promised to amend their ways and pay restitution back in the form of more barrels. The friendly little cartel rolled out a compensation schedule that’s got the oil world’s head spinning as six cheating producers, including Kazakhstan, Iraq, Russia, the UAE, Kuwait, and Oman, must slash output to make up for earlier overproduction. These cuts kick in from August 2025 and run through June 2026, with monthly reductions ranging from 190,000 all the way up to a whopping 829,000 barrels a day. Kazakhstan’s taking the biggest hit after pumping way over its quota, followed by Iraq, Russia, and the UAE. Meanwhile, Saudi Arabia and Algeria get a free pass—no cuts for them.

All this is happening right as OPEC+ tiptoes forward with a measly production hike of 137,000 barrels a day in October, way less than the market had hoped for. The message? OPEC+ is playing it safe, keeping supply on a tight leash, and watching every move to keep prices in check. At the same time, China keeps scooping up barrels for its strategic reserves, while fresh talk of Russian sanctions adds another layer of uncertainty. And the Saudis are finally showing signs that they want at least some market share instead of raising their price for oil like they had the last two months this month, they cut it. Reuters reported that  Saudi Arabia cut the official selling price for the Arab Light crude for  October at $2.20 a barrel above the Oman/Dubai average, $1 below the September price, according to a document seen by Reuters.

Diesel crack spreads really were strong yesterday. It’s the concerns about heavy oil continuing to keep the market on edge going into winter as Ukraine attacks Russian oil and gas infrastructure and  there is concerns that if we see sanctions on Russian oil, any disruption in Venezuela’s output could lead to a supply squeeze of heavy oil causing a surge in diesel prices. In recent weeks, Russia’s oil and gas infrastructure has come under several attacks, attributed largely to Ukrainian forces as the conflict continues. Over the weekend of September 6-8, 2025, and in the weeks leading up to it, multiple notable incidents occurred.

Kursk Region Attacks: On September 7, 2025, Ukrainian forces reportedly targeted oil depots in Russia’s Kursk region, focusing on sites that supply fuel to the Russian military. Russian air defenses stated they intercepted 37 Ukrainian drones, including 14 over Kursk, though local sources acknowledged damage to some oil infrastructure. These disruptions have affected logistics and fuel supplies, which are vital for Russian operations.

Rostov Region Oil Depot Fire: On August 28, 2025, a Ukrainian drone strike set off a fire at an oil depot in the Rostov region’s Kamensky district. The blaze, sparked by explosives, spread to several fuel tanks and burned for days. Russian officials responded with firefighting foam, reporting no casualties but significant facility damage.

Perm Region Refinery Incident: Also on September 7, 2025, an explosion led to a fire at a Lukoil refinery in Perm, Russia. Initial reports suggested a possible drone attack, but Russian authorities attributed the event to a technological issue. Still, with the pattern of recent attacks, some observers remain cautious in their assessments.

Broader Campaign: Throughout August and early September, Ukraine ramped up drone and missile strikes on Russian energy infrastructure. Notably, a drone attack on an oil depot in Proletarsk, Rostov region, on August 18, resulted in a significant fire that lasted over two weeks. Other strikes targeted facilities in Krasnodar and additional regions, as Ukraine aims to disrupt Russia’s fuel supply network.

Overall, these incidents show that Ukraine is making a concerted effort to impact Russia’s energy capabilities, and each new report keeps the energy market alert to developments on this front. It also raises concerns about the global tightness supplies of distillate inventories around the globe and that’s why the crack spread is going to be very sensitive to these developments,

Natural gas is getting a bit more sensitive to the fact that we’re starting to see the expectations that supplies could tighten this winter as demand could get to the point where it will get ahead of supply. Energy Secretary Chris Wright says that he predicts his US natural gas exports will double under President Trump’s term. What’s more, Energy Secretary Wright says that natural gas will become the largest US export. Who is going to tell the corn and bean farmers?

Natural Gas Intelligence says they expect the Energy Information Administration natural gas storage report will show a 74 Bcf injection—bigger than last week and well above the five-year average. While renewable output was down, cooler temperatures kept gas demand in check. Production dipped a bit, which could keep storage numbers from going even higher. Overall, they say we’re on track to reach nearly 3,950 Bcf in storage by November, just above last week’s projection.

Fox Weather reports that, “A sprawling, stationary front has parked itself just off the Eastern Seaboard, which will bring days of dry conditions for most of the East Coast. However, this same weather pattern will bring a flood threat to low-lying coastal communities and days of dangerous beach conditions for those trying to enjoy the last days of summer. An area of strong high pressure over New England will bring strong winds from the northeast pushing water onto and over East Coast beaches. This flooding will be enhanced by a nearly full Moon, which will bring peak flooding during high tides. Charleston, South Carolina’s harbor will likely see the worst impacts, but flooding could also occur along other low-lying coastal areas along the mid-Atlantic through the Southeast and into northern Florida’s coast.

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Call Phil Flynn to open you trading account at 888-264-5665 or email me at pflynn@pricegroup.com.