Schachter Energy Report

Eye on Energy: July 9
Schachter's Eye on Energy

Crude Prices Vulnerable Due To Weak Demand And Growing Global Stocks (Especially In The US).

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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Eye on Energy will continue to be available at no cost until September 10, 2025. After this date, readers will have the option to subscribe on Substack at a rate of $30/month or $250/year. To subscribe on Substack go to https://josefschachter.substack.com/

Special Note for Schachter Energy Report Subscribers:
If you are a current subscriber to the Schachter Energy Report, you will continue to receive Eye on Energy as part of your Black Gold subscription at no additional cost. 

Limited-Time Offer:
From now until September 30, we are offering a special promotion for those interested in becoming Black Gold subscribers. New annual subscribers will receive $100 off their first year. To redeem this offer, enter coupon code SER100 at checkout using the link below:

https://schachterenergyreport.ca/subscriptions/

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

Summary:

President Trump got to sign his ‘BIG, BEAUTIFUL BILL” on Independence Day – July 4th with many positives in the bill. There are still areas of cuts for poor and lower middle income households that will give the Democrats lots of ammunition during the mid-term elections in November 2026. Republicans in swing districts will be targeted to get the Democrats control of the House. It remains quite the ‘Big Messy Bill’. So with that out of the way, tariffs and company earnings (Q2/25 results) have now come back as the uncertainty for the markets.

Crude oil is holding in despite OPEC announcing continued monthly production increases and global inventories growing during a normal summer withdrawal season. Demand is also weaker this year due to the economic uncertainties and tight wallets for stretched consumers. We feel that we will see WTI prices below US$60/b in the coming weeks. Today the price of WTI is at US$67.92/b (up from US$65.81/b last week) as the tariff uncertainty and worries about greater fighting between Russia and Ukraine add to the war premium. More on this below.

Tariff day is here (July 9th) and it appears that only a few deals will be completed and many of these not even papered. Lots of letters have been sent out to smaller countries but no concrete deals have been made. So, Trump has announced tariffs of 25% on S.Korea and Japan and 20% on Vietnam but doubles this to 40% for transhipped goods from China. Other countries being used by China to get around the high tariffs against their country will see this same transhipment extra tariff. Some companies with negotiations underway have been given a date of August 1st to conclude deals or the steep April tariff rates will be applied.

The recent US stock market rally has been focused on the AI and tech sectors and is very narrow in leadership. NVIDIA crossed a market cap of US$4T today (beating Apple and Microsoft), a new record market cap for any stock. We saw this same gapping up in early February 2025 just before the Dow fell from 45,100 to 36,600 or a decline in 2.5 months of 19%. 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 weeks. Caveat Emptor! More on this below.

This week’s Eye On Energy Details:

Current Challenges:

Challenges for President Trump and his administration over his second 100 days will be tough: He needs success on these issues before the end of this timeline:

  • Be able to fund the current deficit and renew maturing Treasury issues when foreign investors worry about US trade policy and support of NATO. China and Japan have been selling some of their substantial Treasury issues. Near term rates have come down due to the success in Iran and crude prices retreating.

  • Show that he can cut wasteful government spending. The current deficit looks to be US$2.2T for this fiscal year and could go higher in coming years if the growth forecast assumed by the bill does not occur. The current deal looks to add US$30T to the deficit over the next 10 years. The Moody’s rating downgrade from ‘Triple A’ was a blow but so far has not raised interest rates to get required funds. Markets are watching to see how upcoming Treasury offerings do. So far so good! But interest rates payments are now over US$1T and rising as much of the debt raised 2, 3 and 4 years ago was at much lower cost and the renewal will add to the rising interest cost to the budget.

  • President Trump’s volatile moves on tariffs have had a strong impact on stock markets. The latest on-off of 50% for the EU is just one such market mover. The delay to July 9th means that 27 EU countries need to agree to harsh trade changes. For Germany that means for autos and for France food and wine. We are skeptical that this can be done. So far no tariff deal has been made and signed. The one that has initial agreement is with the UK but insufficient papering of the deal. His threat against Apple of 25% tariffs on imported cell phones to force them to move manufacturing to the US awaits Apple’s response. Other cell phone manufacturers may face the same increase in tariff rates. Trump yesterday said he would impose a 50% tariff on copper imports as he works to get more of this critical metal produced in the US (now only 50%). Canada gets smacked down again as Canada exports $4.8B of copper concentrate (99% of US imports). Copper prices jumped to US$5.90 per pound from US$4.23 per pound just a month ago. Next on Trump’s hit list is the pharmaceutical industry where he plans at a “very, very high rate, like 200%,” if deals are not done to lower US prices significantly.

  • With US Consumer Sentiment very weak, Amazon Prime Day saw volumes down >10%. While Jeff Bezos needed funds for his wedding in Italy, selling $666M of Amazon stock may be a warning.

  • Get peace negotiations started between Russia and Ukraine and a ceasefire implemented to end the weekly death toll exceeding 5,000 personnel from both sides (military and civilian). The US is pushing NATO countries, especially in Europe to cover the needed funds and military equipment. This war just gets uglier and more deadly. Russia is attacking civilian targets and the Ukraine military targets deep into Russia. Putin seems to be tone deaf that President Trump is now very angry at the lack of progress to peace.

  • Negotiations with China are not moving well and China has put a six-month limit on its ease of rare-earth export licenses to keep pressure on the US. China’s economy is weakening at a fast pace. Industrial profits have fallen 9.1% in May, Mining down 29% and Auto profits down 11.9%. Recent PPI data for China showed deflation as it plunged 3.6% in June from a year earlier. China is now signalling to the US that no trade talks are possible without US concessions on Taiwan.

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 44,334)

  • S&P 500 4,800 now (now 6,246)

  • NASDAQ 15,000 (now 20,547)

  • S&P/TSX Energy Index 230 (now 270)

  • WTI US$57-59/b (now US$67.92)

We see WTI rising after the near term dip and the potential issues that could drive prices quite high are:

  • If Iranian sleeper cells make an attack within the US.

  • Russia has gathered 110,000 troops near the strategic city of Pokrovsk, a major logistic hub for rails and roads needed by Ukrainian forces in the east of the country. An expansion of the war would bring back a war premium to crude oil.

  • Global growth in late 2025 into 2026 exceeds supplies (Venezuela sanctions impacting as well).

  • Lack of production growth from the non-OPEC world.

The Trump tariffs have still not been seen by customers as inventories of current stock need to be sold and then new imported items will carry the tariffs and become relatively expensive. This is now expected to hit stores during July/August. Both Walmart and Target have warned of the cost of new inventory. Some economists see tariff prices impacting households by US$2,800 by year end. Just think about the cost of cereals and berries as easy items to see the tariff price impacts. China is now feeling the tariffs and weaker exports of products, hurting energy demand.

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 a negative report as Total Stocks rose 6.6 MB to 1642.8 Mb (last week Stocks rose 9.6 Mb) . Commercial Stocks rose 7.1 Mb to 426.0 Mb while the SPR rose 0.2 Mb to 403.0 Mb. Motor Gasoline Stocks fell 2.7 Mb while Distillate Fuel inventories fell 0.8 Mb. Exports were 2.76 Mb/d but are down from 3.99 Mb/d in 2024. Refinery Utilization fell 0.2% to 94.7% compared to 95.4% this time last year.

US Production fell 48 Kb/d to 13.39 Mb/d but is now only up 85 Kb/d from last year. Overall product demand grew 376 Kb/d to 20.86 Mb/d, as Motor gasoline consumption rose during the summer holiday season by 519 Kb/d to 9.16 Mb/d. Jet fuel demand rose 192 Kb/d to 1.93 Mb/d. Cushing Inventories rose 0.5 Mb to 21.2 Mb. This is below the 2024 level of 33.5 Mb.

Overall US demand is up modestly from 2025 at 0.5% to 20.12 Mb/d up from last year’s 20.00 Mb/d while Gasoline demand is down for the year by 0.3% to 8.75 Mb/d from last year’s 8.77 Mb/d.

In the coming weeks crude prices should retreat to the low US$60’s and if demand is weak this summer as consumers restrain from travel then we could see a test of the April lows. We expect to get our next BUY signal at that time. In Q4/25 crude prices should lift to US$75/b. Energy related stocks should be great performers as global demand picks up when winter starts and Venezuela sanctions take hold.

Canadian politicians are talking of adding new pipelines. Most talk of a new oil line to the BC coast. However the BC tanker ban has to be removed to make this possible. Manitoba wants to see pipelines from Winnipeg to Churchill and from Ft. McMurray to Churchill. Lots of talk – let’s see some industry and then government support for this to be more than political rhetoric for the masses.

EIA Weekly Natural Gas Data

Last week there was an injection of 55 Bcf. This raised storage to 2.95 Tcf with the biggest increase coming in the North East area at up 23 Bcf. NYMEX is now at US$3.20/mcf. In 2024 there was a 32 Bcf injection and for the five-year average, injection was 37 Bcf. Lower injections occur at this time of year due to strong air conditioning demand. US Storage is now 5.6% below last year’s level of 3.13 Tcf and 6.2% above the five year average of 2.78 Tcf.

We recommend buying the very depressed natural gas stocks during periods of market weakness. 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; one in Canada has now ramped up (first shipment sent to South Korea). In the US Corpus Christi Stage 3 begins production of LNG (1.5 Bcf/d). In 2025, Golden Pass LNG is bringing on the first two trains of this new three train export facility. US LNG exports reached a high in recent months of 15.8 Bcf/d.

AECO is trading at C$1.30/mcf a sloppy summer price level. We look for AECO to rise to over C$3.00/mcf in 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/gj. Higher prices should come as more LNG plants are planned for the BC coast. LNG tankers are being redirected from Asian customers to Europe as prices are much higher there. European natural gas prices are around US$16/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

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 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.

We have signed up four additional Presenters (Touchstone Exploration, E3 Lithium Ltd., Step Energy Services and Logan Energy Corp.) and will have a new ad out at the end of July with additional company Presenters. We are focused on having our program completed during the summer. Our attendance marketing will start shortly.

Baker Hughes Rig Data

In the data for the week ending July 3rd, the US rig count saw a decrease of 8 rigs to 539 rigs. US Rig activity is now 7.9% below the level of 585 rigs working last year. Of the total US rigs working last week, 425 were drilling for oil and this is 11.2% below last year’s level of 479 rigs working. The natural gas rig count is up 6.9% from last year’s 101 rigs, now at 108 rigs. 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. In Canada, there was an 11 rig increase to 151 rigs. This rig activity rate is now down 13.7% compared to last year’s 175 rigs. There were 102 rigs drilling for oil last week down 11.30% from 115 last year. Drilling for natural gas was down 18.3% from 60 rigs to 49 rigs.

Energy Stock Market

The S&P/TSX Energy Index today is at 270. The energy sector is beginning to retreat from its mid-June high of 286 and I expect a further 10-15% correction.

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 July 17th. It will include company updates on two companies, one of which is completing a major transformational acquisition. If you are interested in independent analysis of the energy sector and to see our Balance of Evidence sections then become a subscriber. https://schachterenergyreport.ca/subscriptions/

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