are bouncing back from the low of their maddening trading range as the deadline for tough sanctions on Russia grows closer. And if you think Trump isn’t serious well, the shadow fleet knows, and a friendly report from the American Petroleum Institute () showed a much larger than expected 4.2 million barrels drawdown in crude oil inventories. President Trump gave Vladimir Putin till Friday to agree to a ceasefire or get hit with sanctions. The Russian shadow fleet, which is a lifeline for the Russian economy as it moves oil to countries that feast on discounted Russian oil that helps fund Russia’s war with Ukraine, may come to an end.
By targeting Russia’s oil fleet of aging tankers, he is doubling down on the Biden-era sanctions that helped slow Russian oil exports but didn’t stop the trade entirely. However, these new rounds of sanctions could strike fear into the hearts of those transporting Russian oil, as they risk having their ships seized by the U.S. government if caught moving Russian barrels. The U.S. Office of Foreign Assets Control could also designate specific vessels, owners, and operators as financially toxic, blocking their property and interests in the U.S. and prohibiting any U.S. person from dealing with them. Previous sanctions on the Russian shadow fleet had reduced its size by 49%, meaning there’s still 51% left for the Trump administration to target.
Of course, you always have the EU price cap folly to scare Vladimir Putin. I’m sure he’s either shaking in his boots or laughing until he cries, as the price cap has actually done nothing to hurt him but has hurt the countries that imposed it. My buddy and oil analyst Anas Alhajji pointed out that the G7/EU price cap on Russian oil didn’t impact Russian crude pricing, but instead prevented EU shippers from transporting it below the cap to third countries—effectively sanctioning their own companies. So, as he points out that as oil prices fell and Russian oil sold below $60, EU shippers began transporting it. The EU lowered the cap in the 18th round of sanctions from $60 to $47 to stop them. Sanctioning themselves again!
Oil has also been focused on perhaps settling an ongoing dispute over moving Iraqi oil. So, here’s what’s happening: The Kirkuk-Ceyhan pipeline—linking Iraq’s oil to Turkey—was shut down back in March 2023 after an international ruling said Turkey let the KRG export oil without Baghdad’s OK. Turkey got hit with a $1.5 billion bill, and the pipeline stopped moving around 450,000 barrels a day.
Since then, there’s been a standoff between Iraq’s government, the KRG, and oil companies over who gets paid and how much, plus some technical snags and even earthquake checks slowing things down. Now, after two years, they’ve finally reached an agreement to restart exports—though issues like unpaid oil firm debts and Turkey possibly ending the pipeline deal by 2026 are still hanging over the talks. Yet as positive as this sounds, Reuters reports that there’s no sign of an imminent restart of oil exports through the pipeline, so stay tuned.
The real debate is where oil demand is going to be once we get out of this trading range. In the short term, the market has been totally focused on the return of some barrels coming from but totally unconcerned about the possibilities of a major reduction in U.S. oil output. Recounts have been falling, and that is raising concerns that U.S. oil production has peaked, and yet there seems to be little concern about the future. Are there signs that demand is going to grow a lot more quickly than supply over the next few years?
So, just yesterday, Saudi Aramco chimed in, saying they still see the oil market as fundamentally strong. According to Aramco’s CEO, Amin Nasser, they expect oil demand in the second half of 2025 to be more than two million barrels per day higher than in the first half. That’s a bold outlook.
Now, it’s worth noting that Aramco (TADAWUL:) did see its revenues drop year-over-year, mostly because crude prices have been lower, especially in the second quarter. Prices have mostly stayed in a range all year, except for a brief spike when tensions flared up between Israel and Iran.
All in all, the market is closely to see whether these fundamentals will finally push prices higher.
Rystad Energy is continuing to talk to a projected long-term deficit warning that if we don’t see any major discoveries of oil, we could see a shortfall of 18,000,000 barrels a day by the year 2040. They weren’t as low reserve replacement rates of only 25 to 30% and a possible peak in US shale production
This comes as we get another report this morning from Energy Headlines News that says that U.S. data center power demand could double to reach 12% of the nation’s electricity news by 2028 amid the artificial intelligence-driven boom. Energy Secretary Chris Wright tweeted yesterday that America is adding 1.3 gigawatts of new power to the electric grid, delaying the retirement of a 297 MW coal unit. “This is how we energize the nation to fuel America’s next industrial surge,” according to Energy Secretary Chris Wright—and he is right on the mark.
Natural gas is trying to pop its head above $3, but it’s still having a hard time bottoming at this point. Even though the long-term outlook for natural gas looks positive, in the short term, it looks like we have a glut and that supplies are going to be adequate going into winter.
They are reporting that Tropical Storm Dexter is gaining strength as it continues to move away from the U.S., but the National Hurricane Center (NHC) is continuing to monitor an area of disturbed weather off the Southeast coast and in the central Atlantic Ocean that could develop into a tropical depression later this week or this weekend. And on Wednesday, Hurricane Hunters are set to fly to the area off the Southeast coast to investigate the region for possible tropical development. This could impact demand for natural gas. So far, not a threat to production, but staying tuned.
