August 6, 2025 | Crude Oil Falls >US$5/b From Last Week On Growing Supplies And Weak Summer Demand.

Crude oil prices have declined >US$5/b from a week ago (today’s low US$64.66/b versus US$70.13/b last week) as weak demand and rising inventories (see EIA section) offset President Trump’s aggressive moves on secondary sanctions and increasing tariffs on Russian oil buyers. Today the US increased tariffs on India from 25% to 50% as a result of their purchases of Russian crude. India is unlikely to capitulate on this pressure and China for sure will not react. It will be interesting to see if Apple gets relief from these higher tariffs as it produces a significant number of iPhones in India as it moved production from Chinese factories. Maybe today’s announcement of spending an additional US$100B in the US will help to get an exemption. Apple’s CEO Tim Cook is expected at the White House later today.

The Friday US deadline for Russia to accept a ceasefire in Ukraine sees Russia not caring about letting this deadline expire. They have increased attacks against Ukrainian energy infrastructure as well as nightly attacks on civilians. On the battlefield they continue to make slow progress in consolidating their land grab in the Donesk region. An announcement that they sent nuclear submarines to the US east coast has been met by President Trump announcing that he sent two nuclear subs to the Russian coasts. The neo-cons in the Trump administration are taking control of foreign policy. Trump has swung 180 degrees from being anti-war to threatening Russia. NATO is gearing up its military spending to be ready to directly confront Russia. Drafts have been instituted and there is talk of NATO moving troops directly into Ukraine versus on nearby countries.

Crude oil demand in the US and China is softening so we continue to expect a decline below US$60/b in the coming weeks. 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 ongoing US stock market rally (new highs for S&P 500 and NASDAQ but not 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. We saw this same gapping up of MAG7 and AI stocks 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 months. Caveat Emptor! More on this below.

Investors should consider building up some 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 inflation is picking up with the PCE (Personal Consumption Expenditure Index) rising to an annual rate of 2.6% and above the Fed’s target of 2.0%. This data point would keep the Fed from lowering rates in September.
• Last week Friday’s July job report was seen as weak with only a rise of 73,000 jobs versus the expected gain of 100,000 jobs. The shock to the market was the revisions to May and June of 258,000 jobs which left the revised job increase for May at 19,000 jobs and 14,000 for June. The number of unemployed people for 27 weeks or more increased to 1.83M from 1.65M in June. President Trump fired the Commissioner of the Bureau of Labor and Statistics (BLS) Erika McEntarfer for in his words – juicing the data before the November 2025 Presidential election in favour of President Biden and now faking bad data for Trump. There is no evidence that either data was faked. Revisions are normal as more information is received. The data does show that the Federal Government shed 12,000 jobs in July and that manufacturing dropped 12,000 jobs and was the third straight month of such job losses. This data point would support the Fed to lower rates in September.
• Part of the reason for weaker crude oil prices is that OPEC announced an increase in quotas of 547,000 b/d in September after an increase of 548,000 in August. It is unlikely that such volumes will be added. In June they were planning new quotas and production increases of 411,000 b/d but only achieved a rise of 220,000 b/d as many of the members were producing over quota or did not have capacity to bring on due to lack of capital investment.
• China is now signalling to the US that no trade talks are possible without US concessions on Taiwan. With China agreeing to sell more rare earth critical minerals needed for high tech equipment built in the US, Trump has reversed his decision to hold back sale of NVIDIA and AMD high end semis to China. Those stocks have added to their runs due to this reversal. A bit of progress but not enough. The energy issues of China buying crude from Russia and Venezuela remain large differences to be resolved.
• President Trump is putting substantial tariffs on countries without explaining the economic reasons only that they are political or the country just got on his bad side. Brazil got a 50% tariff just because they are going after their former President Jair Bolsonaro who is a friend of Trump’s. Switzerland was hit with a 39% tariff with no explanation. Big Pharma tariffs will start slow (according to President Trump yesterday) but if they don’t lower prices in the US then the tariffs could rise to 250%.

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 44,191)
• S&P 500 4,800 now (now 6,338)
• NASDAQ 15,000 (now 21,104)
• S&P/TSX Energy Index 230 (now 272)
• WTI US$57-59/b (now US$64.91/b)

We see WTI rising after the next 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.
• US crude production levels are declining as seen in this week’s EIA report.

Josef Schachter August 6th, 2025

Posted In: Schachter's Eye On Energy

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