A New World Coming. The Energy Report 05/14/2025

The US markets are on fire after a much better than expected consumer price index (CPI) that came in at a much better than expected increase of 0.2% which was the lowest annual increase since February of 2021 and a historic world changing trip to Saudi Arabia by President Donald J Trump. President Trump’s doubters are running for the exits as the stock market surged, bringing the S&P within 5% of its February record high with stocks turning positive for this year.

The stock market is growing optimistic due to Donald Trump’s successful trade deals, including the 90-day pause with China. Reports suggest more deals are forthcoming. The biggest boost came from the CPI index showing a cool down in food prices, falling 0.1%, with home and food down 0.4%. The CPI also showed that gasoline prices fell 0.1% and adjusted gasoline prices did increase by 2.9% year over year but are down 10% from April of 2024.

The optimism from the economic data filtered into the energy markets.  Oil prices surged, closing up 2.78% from the last session. This was above the four year low of $57.13 on May 4th and could target a run longer term to the 2025 high of last January of $78.90 a barrel. The momentum was slowed after we saw some data.

The American Petroleum Institute (API) reported a significant increase in crude supplies by 4.287 million barrels. This was accompanied by an 850,000-barrel drawdown at the Cushing, OK delivery point and a large drop of 3.675 million barrels in distillate inventories. Gasoline inventories also fell by 1.374 million barrels. The Increase in crude supply is affecting market sentiment in the WTI contract at least temporarily.

Stocks also like the new World Vision laid out by President Trump in Saudi Arabia where he emphasized the fact that the United States and Saudi Arabia have a deep historic relationship and he looks at it as a bedrock. Yet he really talked about a vision for a new golden age in the Middle East. He applauded Saudi Arabia’s economic diversification and he criticized western interventionism into Middle Eastern countries. The President said that, “nation builders, neocons, the liberal non for profits for spending trillions of dollars on failed intervention in the Middle East the president said that the region’s progress such as the development of Riyadh and the Abu Dhabi were driven by local initiatives and not external lectures on governance.” Those comments drove the industrial war complex absolutely crazy.

President Trump lifted sanctions on Syria, stating it gives the country a chance at greatness after the fall of the Bashar al-Assad regime. Some Democrats criticized the move, as Syria’s current leader Ahmed al-Shara (Abu Muhammad al-Jolani) was formerly associated with al-Qaida. He fought against U.S. forces in 2003 and was imprisoned by them from 2006 to 2011. President Trump aims to forgive past conflicts to foster future peace and prosperity, but whether the former al-Qaeda member can reform remains to be seen.

The oil prices also saw some weakness on President Trump’s comments regarding Iran. It seems that President Trump is now looking at a dual approach of offering dialogue with Iran while threatening maximum pressure. He is using the carrot and the stick approach with Iran. Whether or not Iran will agree to forgo its nuclear weapons remains to be seen but unless they do so, it’s likely that we will never see a deal. President Trump is asking Iran to be realistic when it comes to this and not allow it to be a stumbling block to peace and prosperity which can only lead to military confrontation.

The outlook for oil remains strong with a clear upward trend. Today, the market will focus on Federal Reserve speeches and the Energy Information Administration report, while anticipating major reports from the International Energy Agency and OPEC.

S&P Global indicates that the global oil market might face a smaller demand shock from electric vehicles than initially expected. The forecasted displacement of over 6 million vehicles by 2030 has been reduced by 18 million barrels. Despite a 25% year-over-year increase in EV sales, it remains insufficient to significantly alter the future trajectory of gasoline demand. One reason is that the internal combustion engine remains one of the cheapest and most efficient ways to transport people. Just yesterday, the CEO of Halliburton Jeff Miller reminded us of the availability and affordability of gas. The DOE also reminded us that fuels supply over 80% of America’s energy needs. Wind, solar, & batteries only account for less than 4%.

Natural gas was above $400 before pulling back overnight on conflicting outlooks on weather. Jodi Shafto at Natural Gas Intelligence wrote that, “Shoulder season doldrums were evident in natural gas futures trading Tuesday as the prompt month contract drifted between gains and losses without significant support for a breakout in either direction.”

Yet a heat wave could ignite the market soon. Fox Weather reports that, “The scorching heat descending upon the Lone Star State will be so extreme that thermometers are forecast to climb higher than the sun-baked sands of all the U.S. deserts, with high temperatures possibly reaching close to 115 degrees along the Rio Grande. The FOX Forecast Center said major cities like Austin and San Antonio can expect record-breaking triple-digit temperatures through Sunday. We still like buying long dated calls and bull natural gas spreads.

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