It’s Big and Beautiful. The Energy Report 05/22/2025

It’s big and it’s beautiful. President Trump’s big, beautiful budget bill passed the house floor and set up a vote on a reconciliation bill. This means it’s likely that the bill is going to get out of the house and on its way to the senate’s, opening the door for clarity in the market and uncertainty surrounding the bill.

The big bill drama seemed to impact oil prices yesterday especially after the failed 20-year bond auction where the yield came in at a much higher than expected 5.047%.

This raised concerns about the stock market and the health of the economy hurting oil prices that were already under pressure because of reports that the Trump Administration is going to go the extra yard and have a fifth round of nuclear talks with Iran with Oman mediating the talks. There is even rumors Pope Leo XIV might make an appearance though that is not confirmed and perhaps not likely. Of course, you know what they say, “when in Rome”.

President Trump did suggest that Pope Leo could host Ukraine Russian talks in the Vatican. So as far as peace talks go, maybe he could also try to nudge Iran into giving up their nuclear ambitions which could be the Pope’s first miracle.

Oil is also getting pressure from more OPEC rumors. Reuters reported that, “Oil prices dropped by more than 1% on Thursday after a report that OPEC+ is discussing a production increase for July, stoking concerns that global supply could exceed demand growth.” This report is again citing unnamed OPEC sources which continue to be quoted quite often by Reuters and other news services. The report says that members of OPEC+ are deliberating the possibility of a third consecutive increase in oil production this July, with an output increment of 411,000 barrels per day under review.

Recent reports suggest a potential supply surplus if demand drops. However, the International Energy Agency (IEA) has indicated a continuing supply deficit. The International Energy Agency has systematically underestimated demand.

In November 2024, global oil inventories averaged 7.655 million barrels, with OECD stocks at 2.749.2 million barrels. By May 2025, US crude stocks reached 443.2 million barrels. Despite rising inventories, they remain tight compared to historical norms, near the bottom of the five-year range and likely 50-100 million barrels below average. US crude inventories also fall below average.

The latest data from the Energy Information Administration (EIA)highlights these trends. The EIA said that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week. At 443.2 million barrels, U.S. crude oil inventories are about 6% below the five-year average for this time of year.

Total motor gasoline is also below averse as inventories increased by 0.8 million barrels from last week and are about 2% below the five-year average for this time of year. Distillate fuel inventories increased by 0.6 million barrels last week and are about 16% below the five-year average for this time of year.

Still even with the supply deficit, the markets took the report as a short term negative. Gas demand faltered week over week and crude production edged up. The oil trade has been rangy and to get the swing levels, it’s a great idea to be getting my daily trade levels.

Natural gas prices are lower in part on a negative macro feel but also on shoulder season weather. The US Department Of Energy did give a boost to the back end of the curve as it talked about why we believe the US price outlook for natural gas will improve. They said, “Liquefied Natural Gas (LNG) exports represent one of America’s significant strategic assets—it is poised to become the country’s largest export while supplying one-third of the national energy consumption.

This comes as Argus Media reports that natural gas producers and analysts are forecasting a tighter market in 2026 than previously expected. Because of rising LNG exports, a slowdown in crude production and a reluctance on the part of gas-focused producers to ramp up supply. The market has already tightened this year as cold winter weather balanced the previously oversupplied domestic market and Venture Global’s Plaquemines LNG terminal ramped up faster than expected.

Nymex gas delivery for 2026 at the US benchmark Henry Hub settled Tuesday at $4.30/MMBtu, up from $3.91/mmBtu at the start of the year. US LNG exports are expected to rise by 19pc to 14.2 Bcf/d this year, followed by a 15pc increase to 16.4 Bcf/d in 2026, the US Energy Information Administration forecasts. Natural Gas Intelligence reports positive signs for U.S. LNG demand as the likelihood of Russian gas returning to Europe remains low.

It’s important to remember that hurricane season is here. The Fox Weather App reports potential development of Tropical Storm Alvin off Mexico’s southern coast next week. Development chances are increasing shortly after the start of the Eastern Pacific hurricane season. While Atlantic and Gulf storms pose more danger to oil production and facilities the early start means we need to stay on the Fox Ap all season.

Download the Fox Weather app for the latest weather updates and tune in to Fox Business Network for business news.

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