Ceasefire Hopes Trump All. The Energy Report 03/12/2025

Let’s start with the EIA. The EIA admitted that they missed on their projection of supply and demand and reported that it underestimated demand and overestimated supply. The IEA said the global oil demand came in at 105.17 million barrels a day while global supply came in at 103.92 million barrels a day in February. The EIA said that, “Global oil markets will remain relatively tight through the middle of 2025 before gradually shifting to oil inventory builds later this year. We expect global oil inventories will fall in the second quarter of 2025 (2Q25) in part due to decreasing crude oil production in Iran and Venezuela. As a result, the Brent crude oil spot price in our forecast rises from about $70 per barrel (b) to $75/b by 3Q25. However, we expect oil inventories will build and place downward pressure on crude oil prices in late-2025 and through 2026 when we expect OPEC+ unwinds production cuts and non-OPEC oil production grows. As a result, we forecast the Brent crude oil price will fall to an average of $68/b in 2026.

The API reported a 4.247 increase in crude oil supplies as refiners are running at low rates. They are in maintenance to switch over to the summertime blends of gasoline so out with the old and in with the new. The out with the old means that we got a 4.56 million barrel drop in gasoline inventories. We should get some support from the fact that Cushing, OK oil inventories fell by 1.196 million barrels and distillate inventories were slightly higher up 421,000 but are still well below the average range for this year because of a much colder than expected winter.

What this report also suggests is that the bottom in oil should be close and that soon refiners will have to ramp up their production of gasoline. And generally that happens towards the end of March into April and that’s when we should see prices start to increase.

A lot of focus will be on China demand as they ramp up commodity purchases. JODI reported today that China’s crude oil imports fell by 542 kb/d in December while total product imports were up by 96 kb/d m/m.

Obviously, the concerns about tariffs are keeping the reporting agencies on edge. We know that the Trump administration wants to continue to pressure oil prices lower. Some members of the oil industry are hesitant about President Trump’s advocacy for increased drilling, partly due to the impacts of Strategic Petroleum Reserve releases that broke the market. Scott Sheffield from Pioneer Resources mentioned that much of the prime shale acreage has already been drilled. MSN Reported that Scott Sheffield, the former CEO of Pioneer Natural Resources, the shale company thought to have (had) the deepest inventory depth: “one of the main reasons that Pioneer sold was…we were running out of Tier 1 inventory. Everybody is running out of Tier 1 inventory. People don’t talk about the fact that we are running out of inventory.” The twilight of US shale is upon us.

The EIA also had an interesting take on natural gas as a cold winter changes the nature of the market. The EIA reported on natural gas consumption and inventories. Cold weather during January and February led to more consumption of natural gas and large withdrawals of natural gas from inventories. We now expect natural gas inventories to fall below 1.7 trillion cubic feet at the end of March, which is 10% below the previous five-year average and 6% less natural gas in storage than we had expected last month. We also increased our forecast for overall electricity generation over the next two years. As a result, we now expect the electric power sector will use more than 36 billion cubic feet per day of natural gas on average in 2025 and 2026, 2% and 1% more, respectively, than last month. Overall, we expect natural gas in storage to be 4% lower in 2025 and 3% lower in 2026 compared with what we had forecasted last month.

Natural gas prices. Because we now expect more consumption of natural gas in 2025 and 2026 and less natural gas in storge, we have raised our forecast Henry Hub spot price. We expect the Henry Hub price will average around $4.20 per million British thermal units (MMBtu) in 2025, 11% more than last month’s forecast. We expect the annual average price in 2026 will be near $4.50/MMBtu, up 8% from last month.

It also shows you that in the natural gas market, despite what you think you might know about the fundamentals, weather has the final say and that’s why you have to download the Fox Weather app. The FOX Forecast Center is continuing to monitor the potential for a multiday severe weather outbreak that could blast cities across the central and eastern U.S. with thunderstorms capable of producing large hail, damaging winds and even some tornadoes. Forecasters have been keeping their eyes on computer forecast models and now say the threat of severe weather will continue through the weekend, placing tens of millions of people living along the East Coast on alerts for powerful thunderstorms by Sunday. The FOX Forecast Center said it is most concerned about what could potentially take place starting Friday, but severe weather is also possible on Wednesday and Thursday.

Download the Fox Weather Ap! Stay tuned to the Fox Business network – they are invested in you!

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