August 21, 2025 | Crude Oil Falls >US$5/b From Last Week On Growing Supplies And Weak Summer Demand

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.

Josef Schachter August 21st, 2025

Posted In: Schachter's Eye On Energy

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