Energy Prospectus

Trading Economics:
WTI Oil Price:
> WTI crude oil futures climbed toward $63 per barrel on Monday, reaching a two-week high, after the US and China agreed to reduce most tariffs on each other’s goods. This major trade breakthrough signaled a cooling of tensions between the world’s two largest crude consumers, reducing risks to oil demand.
> The US reduced tariffs on Chinese products from 145% to 30%, while China will lower duties on US imports from 125% to 10%, both for a 90-day period. < Much larger reduction in the tariffs than was expected yesterday.
> Meanwhile, exerting bearish influence on oil, OPEC+ plans to accelerate output hikes in May and June.
> A potential US-Iran nuclear deal also weighed on prices, as it could ease concerns about global oil supply shortages. US and Iranian negotiators concluded talks in Oman on Sunday, with further discussions planned. < MY OPINION: Airstrikes on Iran's nuclear enrichment facilities is more likely than an agreement that won't be worth the paper it is written on.

HH Natural Gas Price:
US natural gas futures rose to above $3.75 per MMBtu in last week, the highest in one month, amid increased demand for LNG and an outlook of robust demand domestically.
> Forecasts of a hot North American summer gained ground by major forecasters, reflecting higher demand for gas-intensive air conditioning in households and businesses to extend the rebound since the start of the month.
> Energy commodities were also higher after the US after the White House lowered tariffs on China for the next three months and de-escalated risks of an extended trade war. The impact of the move on stronger foreign demand supported the LNG outlook for Asia and Europe amid their restocking season.
> Meanwhile, the latest EIA data showed that gas in underground storage rose by 104 billion cubic feet (Bcf) last week, far above the 5-year average of 79 Bcf, due to mild weather and soft demand. This pushed the surplus to 30 Bcf versus the average, though inventories remain 412 Bcf below last year.
MY TAKE: This morning's pullback in the natural gas prices is because higher oil prices are perceived as bearish for natural gas because it lowers the potential for a decline in associated gas production in the Permian Basin.

It seems to me that producers would not be in any hurry to deploy more rig and frac crews until there is more certainty. Rushing back in could be costly. Holding back sounds like more revenue with less CapEx to me.

I agree. It will take much higher oil prices to see a meaningful increase in D&C capex.

The Republicans passing the income tax reduction bill is more important than the updates on the Tariff War. When the bill passes, I believe the S&P 500 Index will increase by 1,000 points and the FEAR of recession will fade quickly.

This is just more kabuki theater. 9 trillion in debt to be refinanced this year. Treasury runs out of money in August. Congress has to suspend the debt ceiling and larding up the “big beautiful bill “ with SALT deductions for blue states that may go as high as 100K or else four Republican bozos will not vote for the bill. Other countries are selling Treasuries and buying gold. Look at the 10 year Treasury today. You may think that is an indicator of no likely recession but the Fed has no direct influence. It’s an indicator that the rest of the world has no confidence in the economics of America. Gold is on the cheap today.

https://www.cnbc.com/2025/05/12/us-treasury-yields-us-and-china-agree-to-slash-tariffs-.html

EIA from their May 6 STEO report:
With less natural gas in inventory, we now expect higher natural gas prices during the forecast period
than we did in our January STEO, the first STEO to include forecasts for 2026. We expect the Henry Hub
spot price to average $4.10/MMBtu in 2025 and $4.80/MMBtu in 2026, between $0.80–$1.00/MMBtu
higher than we had forecast in January.