Listen To What Opec Says. The Energy Report 07/07/2025

Yet despite the talk about OPEC wanting to maintain its market share, the truth is with this recent production unwind of their voluntary cuts, is that they must raise production because demand is much greater than expected. OPEC states they are increasing output due to low global inventories, not to regain market share.

Distillate inventories are critically low, causing a diesel shortage and higher crack spread costs. As of June 27, 2025, US stocks were at 103.62 million barrels—down 1.71 million for the week and 16% below the five-year average. Globally, distillate supplies remain tight, with Europe and Asia affected by refinery constraints, reduced Russian exports, and rising demand.

Part of the problem has been that the “green energy movement” has shut down refineries. We have seen the permanent closures of about a million barrels a day of refining capacity in 2025

Due to the war with Russia and Ukraine resulting sanctions reducing Russian distillate exports since 2022, European and global markets have tightened. Stronger-than-expected demand from freight and manufacturing, combined with a colder winter in 2025, has kept inventories low.

Saudi Arabia has increased its official selling price for oil. OPEC raised production, and the official selling price for Arab Light crude oil shipped to Asian buyers in August rose by $1.00 per barrel, setting it at $2.20 per barrel above the Dubai/Oman average. This is an increase of $1.20 from the July price. The official selling prices for other Saudi crude grades—including Arab Extra Light, Arab Medium, and Arab Heavy—were also raised by $0.50 to $0.60 per barrel for August. In addition, Saudi Aramco increased its official selling price for all grades to northwest Europe and the Mediterranean by $1.00 per barrel, while prices for the United States remain unchanged. Saudi Arabia probably didn’t want to get Donald Trump back on Truth Social regarding its raising the prices to United States buyers.

OPEC+ announced that eight members, including Saudi Arabia and Russia, will raise oil production by 548,000 barrels per day in August—exceeding the earlier planned increase. This decision  was not intended mainly to recover market share from U.S. shale producers or to address overproduction by some countries, but they are coming as OPEC reacts to low global inventories and strong market fundamentals.

When adjustments are made for compensation cuts, the net increase in new barrels available to the market may be approximately 110,000 barrels. Although initial figures may appear concerning, it is important for the market to understand that the actual supply of oil will likely be insufficient to meet ongoing demand.

Recent reports indicate robust demand growth. In June, India’s oil demand increased 1.9% year-over-year to 20.313 million metric tons, with diesel up 1.6% to 8.107 mt and gasoline rising 6.9% to 3.522 mt.

The oil market held up better than other markets after a new tariff threat by President Donald Trump. In Truth Social President Trump posted, “Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy. Thank you for your attention to this matter!

Natural gas prices are down overnight as cooling temperatures are starting to take control, and inventories didn’t fall as much as I thought or during the recent heat wave.

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