Important Update: Eye on Energy is Evolving
We have been publishing the weekly Eye on Energy as an extension of the Schachter Energy Report to provide timely and expanded insights on the Energy and World Market. Over time, the volume of information and the effort required to produce this report have grown significantly. As a result, we are transitioning Eye on Energy to a paid subscription model on Substack to ensure its continued quality and sustainability.
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We sincerely thank all of our readers for your continued interest and support.
Warm regards,
The Schachter Energy Report Team
Global Economic, Political & Military Update
WTI Crude oil prices are steady at US$62.83/b (low today so far US$62.39/b) compared to US$62.14/b last week at this time. This on US Total Stocks decline of 4.0 Mb. Exports rose 795 Kb/d (weekly increase of 5.6 Mb) to 4.37 Mb/d and is up from 4.05 Mb/d last year. It appears that countries wanting to get away from President Trump’s ire on trade imbalances are increasing imports of US crude and products.
We expect that WTI will breach US$60/b in the coming weeks and bottom in the US$57- US$59/b area. When this occurs we expect another BUY signal to be triggered and we plan to add additional BUY ideas for SER subscribers. The window for weaker prices is until winter arrives when we expect prices to rise over US$70/b and maybe see days over US$80/b in very cold periods during winter 2025 – 2026. The upcoming low and BUY signal will be the second opportunity to buy energy stocks at great bargain prices. The first 2025 signal occurred in April and was a wonderful period to add to energy positions.
On Monday US President Trump met Ukrainian President Zelensky and European leaders at the White House as he mediates them and Russia to get a peace deal. Originally the Alaska meeting last Friday was to get a ceasefire but progress was made on a number of issues so that President Trump moved forward towards a more comprehensive peace agreement. The press wrote off the meeting as a failure due to no ceasefire but evidence of progress on some of the thorny issues like US and EU security guarantees for Ukraine were made. The US will not provide troops into Ukraine but its air forces in the region will protect Ukraine’s territory. Will there now be a trilateral meeting with Putin, Zelensky and Trump to iron out more of the remaining issues? Switzerland has offered to host these negotiating meetings.
The ongoing US stock market rally (new highs for S&P 500, the NASDAQ and the Dow Jones) has been focused on the AI and tech sectors and is very narrow in leadership. NVIDIA and META have crossed market caps of >US$4T. The market darling Palantir Tech has taken a beating and fallen just today by over 9% to US$143 per share (recent high was US$189 per share). With sluggish economic data especially in the consumer areas, we suspect we could see a 20%+ general stock market correction (led by tech) over the coming months. Caveat Emptor! More on this below.
Investors should have cash reserves and be ready for a material market correction. It could get very nasty in September!
This week’s ‘Eye On Energy’ Details:
US coffers are seeing revenue of US$28B per month (July data) at current tariff rates. So annualizing at >US$300B is the start. More monthly receipts should come as more country deals are arranged. New tariffs like those on Nvidia and AMD of 15% on their exports of chips to China, add to receipts.
The US budget deficit for July rose to US$291B despite the tariff revenues. The year-to-date budget deficit showed at US$1.63T, up 7% from last year. While receipts rose 6% to US$4.34T, outlays grew 7% to US$5.98T. Some forecasters now see the current fiscal deficit at a whopping US$3.5T, a new record high.
US inflation data was a bit hot in our view. The PPI in July rose 0.9% on a monthly basis for a 3.3% annual rate. Equipment and machinery prices led the sharp rise. It is unlikely that the Fed will lower interest rates at their September meeting after such a sharp inflation increase. Services inflation rose 1.1% in July, another concern for the Fed. On the food side, beef prices are up 11.3% year over year. Going forward are concerns over utility costs. New Jersey’s Board of Public Utilities (PBU) has approved an increase in electricity prices of between 17 and 20% – OUCH!
Target today announced a weak sales outlook and changed their CEO. Net income fell to US$935M or US$2.05 per share from US$1.19B or US$2.57 per share last year. Comparable store sales decreased 1.9% year over year. The stock is getting bashed today. It is down 8.5% to US$96 per share. Its 52-week high was US$167 per share.
The US stock market is very overvalued and is now showing some cracks. From excessive exuberance to now some doubt about valuations and company outlooks. Margin use has risen to over US$1T which is up nearly 25% from last year. The S&P 500 10 largest companies represent over 40% of the value. Such a high percentage has not been seen since the Great Depression of 1929. Technicians see that market breadth is collapsing. Cash on the sidelines – the cash ratio – is at a record low of 1.4%.
China is seeing in July slower retail sales, industrial output growth and their unemployment rate is rising. The urban unemployment rate is now at 5.2% above the 5.0% rate of May and June. Youth unemployment is high at 14%.
I remain concerned that other Geopolitical Challenges could take place and be the ‘Black Swan’ to take the general stock markets to our downside targets.
Our expected downside targets are:
Dow Jones Industrials Index 35,000 (now 44,955)
S&P 500 4,800 now (now 6,378)
NASDAQ 15,000 (now 21,083)
S&P/TSX Energy Index 230 (now 265)
WTI US$57-59/b (now US$62.83/b)
We see WTI rising after the current dip and the potential issues that could drive prices quite high in coming years are:
Global growth in late 2025 and from 2026 thereon should exceed global supplies.
Lack of production growth from most of the non-OPEC world.
OPEC production nearing effective capacity versus published potential capacity.
US crude production levels are now down from last year as seen in this week’s EIA report.
If you want to see our Action Alert BUYS and our ongoing research on 37 companies in the energy sector then please sign up now for access to the Schachter Energy Research reports.
EIA Weekly Oil Data
The EIA data for last week was positive for a change, thus keeping WTI prices steady. Total Stocks fell 4.0 Mb to 1666.5 Mb, Commercial Stocks fell 6.0 Mb to 420.7 Mb while the SPR gained 0.2 Mb to 403.4 Mb. Motor Gasoline Stocks fell 2.7 Mb while Distillate Fuel inventories rose 2.3 Mb. Exports rose 795 Kb/d to 4.37 Mb/d as international buyers showed up to meet their tariff agreements to buy more US energy. Refinery Utilization rose 0.2% to 96.6% and is substantially above the level of 92.3% in 2024.
US Production rose 55 Kb/d to 13.38 Mb/d but is down 18 Kb/d from last year’s level of 13.4 Mb/d. Low oil prices have made even some Tier 1 inventory uneconomic to drill and complete. It is clear now that the industry is cutting back spending due to insufficient returns from current low prices. Overall product demand rose a modest 149 Kb/d to 21.5 Mb/d, as Distillate Fuel demand rose 267 Kb/d to 3.97 Mb/d. Motor gasoline consumption fell 158 Kb/d to 8.84 Mb/d. Jet fuel consumption rose 70 Kb/d to 1.90 Mb/d. Cushing Inventories rose 0.4 Mb to 23.5 Mb. However, this is below the 2024 level of 28.2 Mb.
Overall 2025 US demand is up 0.9% to 20.26 Mb/d up from last year’s 20.08 Mb/d while Gasoline demand is down for the year by 0.6% to 8.78 Mb/d from last year’s 8.84 Mb/d.
In the coming weeks crude prices should continue declining towards US$60/b. If demand is weak during the latter stages of summer we could see a decline below US$60/b towards the US$57 – US$59/b area. We expect to get our next BUY signal at that time. In Q4/25 crude prices should lift to the US$72 – US$76/b level. Energy related stocks should be great performers as global demand picks up when winter starts.
EIA Weekly Natural Gas Data
Last week there was an injection of 56 Bcf (data August 8th). This raised storage to 3.19 Tcf with the biggest increase coming in the Midwest and East areas with both seeing injections of 21 Bcf. NYMEX is now at US$2.76/mcf. In 2024 there was a 6 Bcf withdrawal and for the five-year average, injection was 30 Bcf. US Storage is now 2.4% below last year’s level of 3.27 Tcf and 6.6% above the five year average of 2.99 Tcf. US power usage is at a record high this year according to the EIA. Demand is forecast to grow materially as data centre demand and home and businesses use more natural gas in the coming years.
We recommend buying the very depressed natural gas stocks during periods of market weakness. Many natural gas stocks are very cheap now. We see much, much higher gas prices in Q4/25 as quite a number of new LNG plants come onstream over the next 12 months.
In the US Venture Global has commenced production from its Phase 2 of its Plaquemines LNG export terminal in Louisiana. The plant pulled in 2.9 Bcf of feedgas as it filled cargos.
AECO is trading <C$0.70/mcf, due to a wet summer in western Canada, particularly Alberta, the slower than expected ramp up of LNG Canada Train 1 facilities, pipeline and facility maintenance holding back 1 Bcf/d of exports and full Canadian storage levels. In September the maintenance issues will be completed and full volumes will be able to be moved via pipelines. In addition, once regular operations are reached at LNG Canada then one export cargo can be loaded every two days. We look for AECO to rise to over C$3.00/mcf during Q4/25 and over C$3.50/mcf during winter 2025-2026. Operators can hedge all of their 2026 production now at >C$3.00/mcf. Higher prices should come as more LNG plants are planned for the BC coast.
European natural gas prices are around US$15/mcf (versus US$12/mcf in Asia) as storage is depleting quite quickly. European inventories are low for this time of year’s stock rebuild. Rebuilding storage to the required 90% level by November 1st for winter 2025-2026 will be a big challenge across Europe and should keep import prices high.
Catch the Energy Conference
Registration is Open – Join Industry Leaders at the Catch the Energy Conference!
Tickets are now on sale for the public. Become a subscriber and get two free tickets to the conference (tickets to the public are on sale at $119 per ticket each during the early bird window until September 20th (they then move to $179 each). To find out more go to www.catchtheenergyconference.com . We did sell out last year so if you would like to attend please get your tickets as soon as possible.
As usual SER subscribers will receive two complimentary tickets to the event. We look forward to seeing you there!
We are working away on getting our Presenters for this year’s conference. Below are those already signed up with confirmation forms in. We have met with other companies and will update this list as their confirmations come in. We have room for 45 companies and there are some slots still available. SER subscribers always get two complimentary tickets so please put the event in your calendar for October 18, 2025 if you can come to Calgary.
If you know of any companies with great stories and are public companies then have them reach out to me and we can meet them and see if the company would resonate with our attendees. We expect to have over 800 attendees this year versus just over 700 last year. My contact information is josef@sersinc.ca.
Thank you to our Sponsors, Exhibitors and Presenters. It is going to be a great lineup and largest attendance this year!
Baker Hughes Rig Data
In the data for the week ending August 15th, the US rig count saw no change at 539 rigs working. US Rig activity is now 8.0% below the level of 586 rigs working last year. Of the total US rigs working last week, 412 were drilling for oil and this is 14.7% below last year’s level of 483 rigs working. The natural gas rig count is up 24.4% from last year’s 98 rigs, now at 122 rigs as wells are drilled to meet LNG export requirements. Companies remain financially disciplined despite the Trump administration edict to ‘drill baby drill’. WTI will need to exceed US$80/b for some time before drilling activity picks up materially for crude production to reach new all time highs. Natural gas needs to be over US$4.00 for NYMEX to incentivize natural gas drilling activity on a consistent basis. President Trump is in glee over the lower price of crude and lower gasoline prices (one of his election promises) however, productive capacity is shrinking.
In Canada, there was a 3 rig increase to 183 rigs. This rig activity rate is now down 15.7% compared to last year’s 217 rigs. There were 126 rigs drilling for oil last week down 16.6% from 151 last year. Drilling for natural gas was down 13.6% from 66 rigs to 57 rigs this week due to low and unprofitable natural gas prices.
Energy Stock Market
The S&P/TSX Energy Index today is at 265 (unchanged from last week). I still expect a further >10% correction in the Index.
We like to BUY when stocks are cheap and being ignored. Bargains are clearly being seen now. Late July should provide the next great window to add to favourite positions at prices 10% lower than today. Investors should decide what you want your energy weighting to be for this long energy super cycle. Our BUY List includes ideas from the Pipeline/Infrastructure/Royalty area, Canadian oil and natural gas ideas, energy service ideas and companies working internationally. Our list includes large Conservative ideas and small to large caps in our Growth and Entrepreneurial categories. Add to your current ideas or add new ideas. We expect global demand should exceed supplies at that time. We see WTI prices above US$75/b consistently during 2026.
We are working on our next SER Monthly that should be out to paid SER subscribers August 28th. It will include the Q2/25 results of 15 companies. If you are interested in independent analysis of the energy sector and to see our Balance of Evidence sections on the individual companies then become a subscriber. https://schachterenergyreport.ca/subscriptions/
We are holding our Q3/25 quarterly webinar on Thursday August 28th. It will start at 7PM MT and last 90 minutes. We plan on highlighting the best ideas we see from our coverage universe so subscribers can focus on names that fit their portfolio needs when we get our next BUY signal. Another reason to become a subscriber.
