Hey Brother, Can You Spare Some Capacity? The Energy Report 07/18/2025

Oil prices are surging this morning led by the diesel crack spread as inventories are dangerously tight leading to the scramble to secure supply in that market. On top of that growing concerns about spare production capacity in the world are taking center stage even after OPEC raised production and US economic data is suggesting a coming oil demand surge. Plunging US rig counts coupled with the fact that that some believed that OPEC spare oil production capacity is significantly over estimated is causing the concerns. It’s up to the market for oil and diesel will they continue to tighten. We get more information on the rig counts today at noon from Baker Hughes.

One big company that is calling out those concerns is Standard Charter which according toOilprice.comsaid that they see a potential upside in the price of a barrel of oil at $115.00 mainly because of the growth of demand and the lack of spare production capacity that they believe is way overestimated. StanChart argues that overestimating spare capacity has significantly suppressed oil prices, and once traders recognize that about two-thirds of presumed available capacity is nonexistent, it could dramatically affect the entire oil price forward curve.

This comes after yesterday when we saw the most perfect economic data as President Trump might say it was beautiful, perfect data. I don’t think we could have seen any better data, I don’t think we’ve ever had any better data ever. Maybe the best day of data ever.

It was an extraordinary day of numbers with Nasdaq soaring to new heights with a sense of triumph in the air. Just look at the retail sales: month after month, expectations were for a 1% rise, but the reality? A incredible jump of 5.6%!

And when it comes to jobless claims, the forecast was 233,000 but  came in at 220,000—proof that the job market is even more solid  than expected. Continuing claims are down, and retail sales are surging.

Even the typically unpredictable Philly Fed Index has swung into positive territory and surging. The reading of 15.9%, which was a significant increase from June’s reading of -4.0% and well above the consensus for a -1.0 reading, it also marks the highest rating for the Philly Fed since February which is indicating a strong rebound in regional manufacturing.

In fact, there’s more evidence that President Trump’s tariffs are working in the United States favor. Costs for importing goods rose just 0.1%, far below the anticipated 0.3%, signaling savings for consumers and businesses alike. Meanwhile, U.S. export prices leaped 0.5%—exceeding flat expectations—meaning we’re bringing in more revenue as we send our goods abroad. All told, these numbers paint a picture of strength and optimism. The economy is not just weathering the storm—it’s thriving. Naturally, such stellar economic data only fuels bullish sentiment in oil markets.

Some are also pointing to recent drone attacks in northern Iraq, targeting oil infrastructure—events that stoke fears of potential supply disruptions. If these attacks are indeed the work of Iranian-backed militia groups, the risk of escalating tensions between the United States and Iran rises once more, adding another layer of uncertainty for global energy markets. Meanwhile, Russia’s ongoing assault on Ukraine remains a wild card, with whispers that Moscow may not agree to a ceasefire before President Trump’s self-imposed 50-day deadline, announced back on July 14th. Four days have ticked by, and the world continues to watch, markets bracing for whatever comes next.

Diesel cracks continue to be strong as lane cracks are a little bit weaker but should start finding support going into winter. You want to be hedged not only on diesel but maybe even natural gas. You can also use these volatile times and hitting these swings and it might help if you subscribe to the Phil Flynn Daily Trade Levels to look at these levels and other strategies. We can also suggest when it comes to spreads. The next week could be very critical projecting prices going into winter. 

Natural gas prices are rising as U.S. inventories have stabilized since late June. As of July 11, stocks were 242 billion cubic feet (9%) above the ten-year average, down from a peak of 263 bcf (10%) above average on June 20. Supplies remain strong, though not as elevated as before according to John Kemp.

As we pointed out yesterday, we expect natural gas prices to rise as US production starts to level off and demand rises and when we look at the big picture on natural gas even though supplies will tighten in the near term, the potential of natural gas meeting demand in the United States and around the world hasn’t been fully utilized. For example consider a report that was covered by E&E News by POLITICO. It said that the amount of natural gas flared worldwide reached its highest-level last year since 2007.

The World is estimating that gas lost to flaring last year could’ve been worth $63 billion. This is wasted money but also wasted opportunity that the Trump Administration is trying to fix. They stated that the top nine countries engaged in gas flaring accounted for 76 percent of the global total, amounting to 151 billion cubic meters in 2024. This figure reflects a trend of increase observed in recent years and represents a 5 percent rise compared to 2012.

The World Bank reports suggest the need for major investment in natural gas pipelines and infrastructure. We must build more pipelines to efficiently transport natural gas where it’s needed and expand our capacity to export liquefied natural gas. Surplus gas could power AI, data centers, or expanded Bitcoin mining. It should also be promoted as a feedstock and for use in petrochemicals, heating, and manufacturing to replace less efficient fuels.

The Trump Administration promoted LNG exports by streamlining pipeline permitting, expediting export license approvals, and issuing over 20 long-term authorizations for non-free trade agreement countries. These actions led to a 500% increase in LNG exports from 2017 to 2020. Additionally, President Trump rolled back 90 environmental regulations, including those on shale oil and gas, to encourage energy development. LNG and LPG exports to Europe and Asia were expanded to reduce reliance on Russian gas, with LPG exports to Europe rising by 141% in 2022.

President Trump lifted Biden’s liquefied natural gas export pause on his first day in office in 2025, which led to the approval of the Commonwealth LNG project in Louisiana on February 14th, 2025. All these actions will help use natural gas more efficiently which will be good for if humanity and good for the environment

Natural gas of course still must focus on the weather and that Fox Weather app is something that you should download to keep up on this. That is especially true in the hurricane season. The Fox Weather center reported the risk of dangerous flooding continues along the Gulf Coast from a no-name storm system that could lead to days of an enhanced flood risk along and north of the Interstate 10 corridor. The system, identified as Invest 93L, originally developed east of Florida before traversing the entire state and ending up over Louisiana and Mississippi. Due to its proximity to land and hostile upper-level winds over the Gulf, the disturbance never reached tropical depression or tropical storm status, despite producing conditions similar to a tropical cyclone – impacts that are expected to continue through the early weekend. So at this time there is no real risk to production or refineries but be on guard for power outages.

Download the Fox Weather app and stay tuned to the Fox Business Network because they’re the only network in America that is truly invested in you.

Also contact me today to open your futures trading account by calling Phil Flynn at 888-264-5665. Email pflynn@pricegroup.com