Bullish Tensions Boiling Over. The Energy Report 06/12/2025

Brent crude oil got back above $70.00 a barrel as oil surged over 5% higher as the bullish factors in the oil are starting to boil over. Not only did we get a very supportive weekly Energy Information Administration (EIA) status report, it came against the backdrop of President Trump suggesting that they had a deal with China. Later in the day a report of evacuations from the US embassy in Iraq, Kuwait City in Bahrain, apparently tied to concerns that Iran could either protest or attack those facilities. This comes as President Trump suggests that he doesn’t think that Iran wants a deal and that they are making a huge mistake. Iran seems to be doubling down.

The Wall Street Journal reports that Iran will open a new uranium enrichment facility and increase production of highly enriched fissile material after the UN atomic economic member states declared that Tehran failed to comply with its nuclear proliferation obligations. This is casting a fast shadow over Iran US nuclear talks according to the Wall Street Journal.

Senator Tom Cotton and Senator Lindsy Graham yesterday said that the believes that the only way to prevent Iran from getting a nuclear weapon is for them to completely dismantle their enrichment program. Senator Collins says that Iran has enough uranium for six nuclear weapons. Senator Cotton said that Iran can either have a nuclear program or it can have a peaceful civilian nuclear program with no centrifuges, no enriching, no reprocessing and no pathway to a nuclear weapon.

But the market pretty much believes that if the Iran nuclear talks fail, we will see an attack on Iran’s nuclear facilities.

Iran, from their point of view, looks like they’re trying to buy some time. It also increases risk that they will lash out at other areas and poses a significant risk to the movement of oil supplies in the region, as well as other oil producing areas. This raises concerns that an attack on Iran’s nuclear facilities may not be avoided. Iran’s armed forces have commenced military exercises, concentrating on monitoring enemy movements.

The economic backdrop is very bullish for the oil market. Remember all those people telling you that President Trump was going to lead to a surge in inflation? Are they tired of being wrong? We got a big boost from the very tame CPI report yesterday. It showed just a 0.1% increase in inflation month over month and that was much less than the market had anticipated.

At the same time the fear mongering about president trump’s policies shows a distinct misunderstanding on how inflation is created. There is also a lack of knowledge about how the tariffs are going to impact the global economy and the US trade deficit. 

So far early returns show that the tariffs are actually having a positive effect for the US economy. Tariffs have also had a positive impact on inflation. By generating additional revenue from tariffs, the trade deficit is reduced, which in turn allows the government to print less money—addressing one of the primary causes of inflation.

Yet the purveyors of economic darkness are out in force trying to say don’t believe the data in front of your eyes

There is doom and gloom just around the corner just as Chicken Little told you the sky is falling. Fitch Rating service may be in line with Chicken Little as they report that the outlook for the oil and gas sector is worsening. They anticipate demand will increase by 800,000 barrels a day, which is lower than their previous forecast of 1,000,000 barrels a day. Fitch attributes this to significant uncertainty, which they believe will have a suppressive effect and deteriorating demand.

If you really want some doom and gloom just looked at the World Bank that is screaming that the tariffs are going to cause the worst economic global slowdown since 2008! Such fear mongering is not supported by economic data or market prices, including bond yields and the stock market. Or by oil data.

The Energy Information Administration reported that last week everybody parked their car, but this week gasoline demand surged by almost 907,000 barrels a day from the week before! I wonder what everybody was doing last week but apparently this week they needed gas.

According to the EIA, U.S. commercial crude oil inventories decreased by 3.6 million barrels, resulting in a total of 432.4 million barrels, approximately 8% below the five-year average for this period. Motor gasoline inventories increased by 1.5 million barrels but remain 2% below the five-year average. Distillate fuel inventories rose by 1.2 million barrels, which is around 17% below the five-year average. Propane/propylene inventories increased by 4 million barrels, placing them 6% above the five-year average. Overall, total commercial petroleum inventories experienced an increase of 6.2 million barrels last week.

Over the past four weeks, the average total product demand based of products supplied was 19.9 million barrels per day, representing a 0.5% increase from the previous year. The motor gasoline supply averaged 8.9 million barrels per day, showing a 2.5% decline. Distillate fuel supply averaged 3.5 million barrels per day, reflecting a 5.9% decrease. Meanwhile, jet fuel supply increased by 1.3% compared to the same period last year.

Natural gas is surging back higher with shifting weather forecast and increased tensions in the Middle East. The US is a major natural gas exporter and makes our local market more sensitive to the tensions in the Middle East than it had been in the past.

US energy secretary Chris Wright yesterday told Congress that: “The natural gas story has been a great story…It has been a great story of lowering costs for American consumers and giving great security to our allies abroad, and growing the geopolitical influence of the United States.”

Weather is also key. Fox Weather reports that Colorado State University forecasters predict 17 named storms this Atlantic hurricane season. They expect nine to be hurricanes, with four reaching major status with winds of 111 mph or higher. The 2025 hurricane season is off to a busy start in the eastern Pacific, with three tropical cyclones already having developed before a single named system has formed in the Atlantic, which could be an indicator of what lies ahead.

Since reliable record-keeping on hurricane seasons began in the late 1960s, there have been less than two dozen years in which three or more named storms developed in the eastern Pacific before the Atlantic recorded its first. 

This occurrence happens about once every four years and can take place regardless of the status of the El Niño–Southern Oscillation or what is commonly referred to as the ENSO. In more than 84% of the seasons where three or more named storms formed in the eastern Pacific before the Atlantic, the Atlantic basin failed to end the year with more activity than its eastern Pacific counterpart. The only seasons where the Atlantic was able to overtake the Pacific was during a La Niña or a Modoki El Niño cycle – neither of which are in control of weather patterns in 2025 according to Fox Weather.

Make sure you download the Fox Weather ap to keep up with the latest weather news. Stay tuned to the Fox Business Network! Invested in you!

Call to open your trading account. You can reach Phil Flynn by calling 888-264-5665 or email me at pflynn@pricegroup.com.