Tighter Than You Think. The Energy Report 10/08/2025

So far, the talk of an oil glut is not showing up in the numbers even as some big banks like Goldman Sachs and reporting agencies like the International Energy Agency (IEA) and the Energy Information Administration (EIA) continue to call for global oil over supply. Yet at the same time we have signs that OPEC might be getting close to being tapped out against a backdrop of ongoing risk to supply as the Russia Ukraine war drags out. We also have concerns about US oil production peaking even as the EIA raises their production forecast as the Texas Railroad Commission sends signals that oil production is actually falling.  

Oil Price is raising concerns about OPEC after they failed to deliver a big production increase and have failed to pump their larger quotas. Oil Price says that, “Over the past three years, the OPEC+ cuts, which at one point withheld supply equivalent to about 5% of global consumption, have supported oil prices. But the spare capacity that the cuts left have also eased fears of shortages during all the Israel-Iran flare-ups since 2023, for example. However, as OPEC+ proceeds with reversing these cuts, now tapping its last layer of reductions of 1.65 million barrels per day (bpd), the spare capacity those producers that do have it is shrinking. So is the ability of the market to absorb the next supply shock.

In today’s fragmented and volatile geopolitical situation, this shock could occur any day and expose the limitations of the OPEC+ alliance in managing a “stable” oil market, as it likes to say.  Insufficient spare capacity will not be able to offset a major shock to supply. Analysts have also warned that the market is overestimating the size of said spare capacity. Add to the fact that global strategic reserves were released taking away another cushion of supply. Yet the glut talk continues.  Goldman Sachs projects a supply-led surplus, with an average surplus of 2.0mb/d from Q4 2025 to Q4 2026. They expect a 4.1mb/d (4%) rise in global supply for 2025, slightly higher than earlier estimates, and have increased their global demand growth forecast to 1.0mb/d annually for 2025-2026. The supply upgrade is due to record US crude and NGL output and increased supply from Iraq, which offset reduced Russian production.

The EIA is also calling for a glut as they expect global oil inventories to rise through 2026, putting significant downward pressure on oil prices in the coming months. They are forecasting that the Brent crude oil price will fall to an average of $62 per barrel in the fourth quarter of 2025 and $52/b in 2026.

Yesterday’s American Petroleum Institute Report (API) while showing a weekly build of 2.780 million barrels in shoulder season, did not look that large because of a 1.152-million-barrel drop in the Cushing, Oklahoma delivery point. The API was supported by the fact that we saw a 1.245-million-barrel drop in gasoline inventories and a drop of 1.822 million barrels in distillate. That means on balance it was a bullish report. No glut to see here.

The EIA upped their production numbers in the US. The EIA said that in July, U.S. crude oil production averaged more than 13.6 million b/d, the most in any month on record. According to the U.S. Energy Information Administration (EIA), crude oil production in July exceeded prior estimates, prompting an upward revision to the baseline for the agency’s U.S. production forecast. The EIA also increased its outlook for Gulf of America crude output, citing several projects ramping up faster than anticipated. While the EIA expects nationwide crude production to ease off its recent highs as oil prices fall, the agency now forecasts U.S. output will average 13.5 million barrels per day in both 2025 and 2026, with the 2026 projection up by 0.2 million barrels per day compared to last month’s forecast.

Yet the Dallas Federal Reserve’s latest Energy Survey shows a clear cooling in the U.S. oil sector, with drilling and completion activity declining for the second consecutive quarter due to scaling back of exploration budgets and a shift towards more measured operations. We’re seeing the U.S. oil patch slam the brakes, and it’s not just a tap on the pedal—it’s a clear sign of cooling off in the wake of surging costs and an industry shift. Labor and supply expenses are climbing, price signals in crude oil markets remain jumpy and shareholders want cold, hard returns instead of expansion at any cost.

Even with these headwinds, I don’t count out the little guys just yet. Smaller independents are still finding reasons to be bullish, betting on their ability to ride out the bumps. The industry is growing up, trading in its hard-charging shale boom days for a focus on squeezing out every penny of efficiency, protecting cash flow, and building resilience. That’s the recipe for potentially tighter supplies down the road and more stable financial footing—think discipline.

As far as the market, well, they’re taking it all in stride and the market moving in a bullish direction this morning is the lower end of the crude oil trading range continues to hold. We’re probably on target to test the upper end of the training range somewhere around $65 barrel. Products are also looking very interesting here as the crack spreads are starting to be solid as supplies continue to tighten. My clients are getting my trade levels on this and all major markets. Call Phil Flynn 888-264-5665.

Natural gas prices are continuing to move counter seasonally higher. The EIA helped add support as they’re expecting the Henry Hub natural gas price to go up from just under $3 per unit in September 2025 to about $4.10 by January 2026.

However, they note that this January price is nearly 50 cents lower than what they predicted last month. The main reason for these lower price expectations is that the EIA thinks U.S. natural gas production will be stronger than they previously thought, which means there will be more natural gas in storage than originally projected.

On the export side, the EIA says, “We expect the United States will add 5 billion cubic feet per day in liquefied natural gas export capacity in 2025 and 2026,” thanks to new projects coming online. They estimate total LNG exports will grow from 11.9 billion cubic feet per day in 2024 to 14.7 in 2025 and then to 16.3 in 2026.

According to EBW Analytics, natural gas is experiencing a turbulent shift from the injection season to the upcoming winter, marked by four swings of 6% or more in just seven trading sessions. While last week’s rally was mainly driven by a short squeeze, the early-week gains are now supported by underlying market fundamentals. EBW Analytics highlights that over the next 7 to 10 days, LNG feedgas could hit new record highs, pipeline bottlenecks are restricting supply, and late October weather trends may continue to provide bullish support. From a technical perspective, last week’s highs around $3.585 may be an important price level to watch.

However, EBW Analytics cautions that starting the withdrawal season with storage above 3,900 Bcf, combined with an expected increase of 3.5–4.0 Bcf per day in supply over the next two months, presents downside risks for medium-term prices—especially if November weather does not turn out to be supportive.

To find out, download the Fox Weather Ap. Fox Weather is reporting that Tropical Storm Jerry could pound Leeward Islands with torrential rain, kick up massive waves Tropical Storm Jerry is forecast to become a hurricane on Thursday. – Tropical Storm Jerry is continuing to gain strength and is forecast to become a hurricane on approach to the Leeward Islands, where Tropical Storm Watches are now in effect. Tropical Storm Jerry formed in the Atlantic on Tuesday after first being designated as Invest 95L.

Keep up with these seismic shifts in weather. Make sure you download the Fox Weather Ap to keep up with the wild weather. Also stay tuned to the Fox Business Network Invested in you. Call to get the Phil Flynn Daily Trade Levels and to open your account by calling 888-264-5665 or email pflynn@pricegroup.com.