Arms Race. The Energy Report 10/30/2025

Maybe Russian President Vladimir Putin made a mistake by unintentionally starting a news arms race with the US after he tested a new nuclear-capable, nuclear-powered long-range remote torpedo, President Vladimir Putin said, a weapon that some experts have dubbed a “doomsday machine.”

Mr. Putin, who longs for the good old days of the Soviet Union, should know that when the Arms Race Heated up under President Ronald Reagan there was no way the they could keep up financially and now not only will Russia be economically pressured by the potential sanctions on Russia oil but also by trying to outspend The US who leads the word in technology and artificial intelligence.  Bad move Vlad.

Fox News report that in response “President Donald Trump announced that he has ordered the United States to resume nuclear weapons testing “immediately,” saying he directed the Department of War to match other nations’ programs. He called the move a necessary step to maintain global parity.

Trump wrote in a Truth Social post Wednesday night: “The United States has more Nuclear Weapons than any other country. This was accomplished, including a complete update and renovation of existing weapons, during my First Term in office.”

“Because of the tremendous destructive power, I HATED to do it, but had no choice! Russia is second, and China is a distant third, but will be even within 5 years,” Trump said. “Because of other countries’ testing programs, I have instructed the Department of War to start testing our Nuclear Weapons on an equal basis. That process will begin immediately.” According to Fox News.

 Talk of an oil glut is weighing om the market after Shell’s CEO said he saw an oversupply coming after reporting blow out earnings. Also people are still unsure if President Trump’s tough sanctions against Rosneft and Lukoil will actually put a real dent in Russia’s oil exports. The market seems way more worried about a possible slowdown in global demand and the idea that we might be heading for an oil glut. But honestly, we’re just not seeing that reflected in the U.S. oil inventory reports.

For example, the latest numbers from the EIA show that U.S. commercial crude oil inventories (not counting the Strategic Petroleum Reserve) dropped by 6.9 million barrels from the previous week. Right now, we’re sitting at 416 million barrels, which is about 6% lower than the five-year average for this time of year. Gasoline inventories also fell—down 5.9 million barrels—and are 3% below the five-year average. Both finished gasoline and the stuff used to blend it saw declines. Distillate fuel inventories  that would most acutely be impacted of reduced Russian petroleum exports went down by 3.4 million barrels and are 8% under the five-year average.

On the flip side, propane and propylene inventories actually rose by 2.5 million barrels and are 14% above the usual levels for this time of year. Altogether, total commercial petroleum inventories dropped by a hefty 15.9 million barrels last week. Sure, sounds like an glut to me.

Demand also is at the highest level is years as the EIA’s Weekly Petroleum Status Report showed that total product demand based on product supplied was approximately 20.3 million barrels per day (b/d) down marginally from late-summer highs but up year-over-year by about 1.5% due to higher distillate demand (e.g., diesel and heating oil). Gasoline demand fell to around 8.8 million b/d as driving season winds down, while distillate demand rose to 4.1 million b/d, reflecting early winter preparations.

The oil market is awaiting updates on the US-China trade deal, which appears to be progressing. President Trump has eased some sanctions on Russia while his administration negotiates agreements with South Korea.

This morning’s big story centers on the Trump administration’s ongoing push for “energy dominance,” which basically means ramping up U.S. exports of liquefied natural gas (LNG), crude oil, and other fuels to major Asian allies. This strategy goes hand-in-hand with broader trade talks, like President Trump’s recent summit with China’s Xi Jinping and the steady connections with South Korea. For instance, Wright pointed out that the U.S. is in a strong position to boost natural gas and oil exports to South Korea, and he’s planning a trip to Asia soon to hammer out the final details. This follows the August 2025 summit between Trump and South Korea’s President Lee Jae-myung, where both sides agreed to a massive $100 billion energy deal over four years.

Looking at the specifics, South Korea’s Korea Gas Corp. (Kogas) has already locked in long-term contracts for 3.3 million tons of U.S. LNG every year starting in 2028, mainly from places like Cheniere Energy’s Texas facilities.

Wright says this is a smart move for South Korea, helping them cut back on reliance on Middle Eastern suppliers, especially with all the uncertainty in the Persian Gulf. On the crude oil front, South Korea remains the top Asian buyer of U.S. crude, importing an impressive 84 million barrels in the first half of 2025 alone, worth about $6.4 billion.

The agreement also includes LPG, coal, and naphtha, and it’s expected that crude and LPG will make up around two-thirds of that $100 billion goal. Wright notes that U.S. light sweet grades like WTI Midland are especially appealing due to competitive pricing, such as the $2.10 per barrel spread compared to the UAE’s Murban benchmark as of late August.

On a bigger scale, there are ongoing discussions for a joint U.S.-South Korea venture on the Alaska LNG project, similar to what the U.S. is working on with Japan. Wright estimates that U.S. LNG exports could double in the next five years—reaching about 20 billion cubic feet per day—and possibly double again if Asian demand keeps climbing, fueled by the growth in AI data centers and manufacturing.

There’s also a new U.S.-South Korea trade agreement that includes those annual LNG purchases and $3 billion in investments over five years. Wright says this not only boosts South Korea’s energy security, since it imports all of its refinery feedstock, but also benefits American producers in Texas, Louisiana, and Alaska.

Switching gears to China, Wright mentioned that the U.S. is ready to step in if China starts buying less energy from Russia—a possibility given today’s announcement of a potential major U.S.-China energy deal focused on Alaskan oil and gas.

After Thursday’s Trump-Xi meeting, both countries agreed to explore a significant deal for Alaskan resources, and Wright, along with Interior Secretary Doug Burgum, plans to meet with Chinese officials soon to hash out the details. Trump himself posted about this on Truth Social, rating the meeting a “12 out of 10” and highlighting lowered tariffs as part of the package.

China has been a major buyer of discounted Russian oil and gas since the Ukraine invasion, but U.S. sanctions—like those targeting Russian oil shipping and financial networks—are starting to squeeze those volumes. Wright had previously said in September that Russian gas sales to China wouldn’t hurt U.S. exporters, but now his comments suggest that if sanctions or politics push China to buy less from Russia, the U.S. could easily fill the gap. You can also get my daily trade levels by reaching out to me directly.

Speaking of filling the gap that’s exactly what natural gas futures did this morning and we could be very close to a seasonal bottom and natural gas what we would recommend is start looking and putting on those winter strategies right now as we believe that a colder than normal center which is being predicted by the fox weather channel could lead to a surprising rallying as we have said before the market has become complacent because we haven’t had a below average winter since 2018 if we indeed flipped the script this winter we could see natural gas make significant advances especially with the increasing US export picture as well as increasing domestic demand.

Of course as always with natural gas and for the rest of the energy complex weather may be the final determining factor that’s why it’s very important to download your Fox weather app to keep up with the latest developments at the same time for your business news you better stay tuned to the Fox Business Network we also of course have been sharing our daily trade levels and strategies with our clients if you need a strategy or you need help call me at 888-264-5665 as we will cover all the major commodities markets.

 

Thanks,

Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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