Daily Energy Market Update August 5,2025

Liquidity’s Daily Market Overview

Energies are lower as demand concerns due to the weak US jobs report and the OPEC+ production hike announced Sunday outweigh worries over President Trump's threats to India over its Russian oil purchases. Traders are said to be skeptical of any supply disruptions with regard to Trump's threat, as he is not seen wanting oil prices to rise. Befitting the notion of demand worries, the industrial fuel/ULSD is leading the way down today.

Crude oil fell to a session low a short time ago as President Trump threatened a tariff of 35% on the EU "if it doesn't meet its obligations." President Trump also tweeted that President Putin would stop the Ukraine war if oil prices go low enough. Oil, though, bounced back off the session low today as President Trump also tweeted that China's leader Xi had called for a meeting and that such a meeting would happen if China and the US were to have a deal. Trump added that "we are close to a deal with China".

The notion of demand concerns is underscored by the following news: JPMorgan said on Tuesday the risk of a U.S. recession was high. Also, China's July Politburo meeting signaled no more policy easing, with the focus shifting to structural rebalancing of the world's second-largest economy, the analysts said. (Reuters)

ARA Gasoil stocks fell in the period to July 31 and are at their lowest level in 20 months and are 30% below the ten-year seasonal average. (Reuters) This drop in Gasoil stocks is in contrast to the large increases seen of late in U.S. distillate supplies. But, supply to Europe is seen on its way from Saudi Arabia. But, the spread for September points to lingering tightness and Europe’s need to attract middle distillates from other regions to rebuild stocks run down during the war, as per Reuters commentary. Russia's seaborne diesel and gasoil exports fell 5% in July from the month before  due to lower production amid refinery maintenance and strong domestic demand, according to LSEG shipping data and market sources. Turkey and Brazil remained the main importers of Russian diesel and gasoil last month, shipping data showed.

Reuters analysis says that U.S. onshore crude production is seen falling in 2026 and into 2027 due to the rig count drop. Yet, even as technological improvements and new techniques have seen output improve in recent months, the slowdown in the rig count will see output drop. Longer lateral wells, automation and more powerful equipment, have driven productivity gains across the industry that have allowed oil companies to pump more with fewer rigs and less capital. In April 2019, the last time over 1,000 rigs were consistently deployed across the U.S., oil output stood at 12.14 MMBPD. Today, there are just 540 rigs in operation, while output has jumped to some 13.5 MMBPD. Lower 48 oil output is expected to fall by 200 MBPD next year, followed by a further decline of 130 MBPD in 2027, as per Wood Mackenzie analysis. At the current rig count of 540, energy analytics firm, Novi Labs forecasts a 400 MBPD drop in lower 48 production by the end of next year, with losses upwards of 200 MBPD within the first few months of 2026. Improvements in output are not seen rising as the use of the bigger, more  efficient rigs has maxed out. The rig count declines have begun to outpace drilling efficiency gains, as Novi Labs commentary. Despite improvements to drilling technologies, oil wells in the Permian basin are becoming less productive as operators have drilled through a lot of the best rock.

A letter issued Monday by Diamondback Energy underscores the theme of oil production dropping. We continue to believe that, at current oil prices, U.S. shale oil production has likely peaked and activity levels in the Lower 48 will remain depressed. "We have set up our business for the rest of 2025 to hold oil volumes flat while cutting CAPEX", the firm said. Last quarter, "we cut our full year 2025 capital budget by 10%, due to our preference for Free Cash Flow generation over volume growth in an oversupplied market.", they added. The firm noted efficiencies in their oil production and better than expected volume performance, while reducing capex and keeping their rig count at current levels, thus also underscoring the themes mentioned in the Reuters analysis. Diamondback is one of the largest Permian-focused oil firms. The firm consistently ranks among the lowest-cost independent producers in the entire industry.

We failed to mention yesterday when speaking about the large Gasoil long position held by money managers that ING wrote:" the next (money managers' position) release may show a reduction in (managers' long) positioning, given the sell-off we’ve seen in the gasoil crack since last Tuesday."

Energy Market Technicals

Technically momentum remains negative for the energies. But, currently the RB & distillates are having inside days versus yesterday's trading range.

WTI spot futures almost tested our first support at 65.00-65.05 with today's low of 65.10. Below that support is seen at 64.50-64.51. Resistance comes in at the overnight high at 66.39-66.42. Above that resistance is seen at 67.13-67.14.

Natural Gas Market Overview

Natural Gas--NG is up 6.3 cents
NG is higher as likely some bargain hunting and short covering are at work as prices yesterday fell to a more than 3 month low.

Comments seen re Monday's down move in NG futures prices :"hefty supplies more than offset expectations for August heat waves." "Gas demand for power generation was at its highest of the summer last week, but is on track for a year-on-year decline reflecting higher gas prices, competitive coal and renewable energy."   Strong production and the uptick in the gas rig count seen Friday were said to be weighing on NG prices Monday. As a colleague says: "Production needs to fall before I can get bullish medium term."

The EIA gas storage number due out this week is seen as a build of 13 to 16 BCF. That compares to last year's build of 21 BCF and the 5 year average build of 29 BCF. Reasons given for the low storage number are less wind generation during the reporting week. After a large increase last week, wind generation fell 26.5% week/week, as per EIA data. Natural gas-fired generation, meanwhile, jumped 14% on the week to support cooling demand due to the heat seen in much of the country. The small storage increase comes even as LNG feedgas demand was down 0.8 BCF/d during the reporting week.

U.S. domestic natural gas production was down slightly to 108.9 BCF/d yesterday, but it remains strong compared to the 30 day average of 108.4 BCF/d and is up 4.4 BCF/d versus this time last year, according to Bloomberg data.

On Monday, Reuters forecast demand for this week at 105.8 BCF/d rising next week to 110.5 BCF/d. This week's forecast was down 2.8 BCF/d versus that seen mid-week last week.

NG futures open interest on the CME rose by nearly 27,000 contracts in Monday's activity. We see this as mostly new short positions. The increase was seen in the months from September to January.

"A strong price rally toward the $3.50 area cannot be ruled out should the temperatures show another period of extreme heat amid some injection of storm premium, especially if European gas demand increases in response to the U.S. tariff factor and possible Russian sanctions," analysts at energy advisory firm Ritterbusch and Associates said in a note.

Technically momentum basis the DC chart for NG is neutral. The spot futures are currently having an inside trading day versus yesterday's price range. One analyst's view is :"weakness is likely if $3.00 fails to break convincingly. Price action remains dominated by lower highs and lower lows, typical of a controlled downtrend. " But, it is worth noting that the NG futures have been below $3.00 for all of 12 sessions since late Nov. 2024. At that time the NG began a rally that kept $3.00 as a foothold during the winter months.

NG spot futures have support at yesterday's low of 2.895 and then at the key lows at 2.858-2.859. Resistance is seen at 3.074-3.078 and then at 3.140-3.145.

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Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC