September 4, 2025 | WTI Prices Vulnerable In The Near Term To Fall Shoulder Season Inventory Build. This Week Total Stocks Up 7.6 Mb.

WTI Crude oil prices are steady at US$63.44/b (low today US$62.72/b) compared to US$63.66/b last week at this time. President Trump’s window for Russia to agree to peace talks with Ukraine have gyrated energy prices. President Putin has invited President Zelensky to Moscow but this is not as safe as where Zelensky wanted, Switzerland.

Crude oil continues to face downside pressure as we enter the Fall season when demand weakens from the strong summer period of consumption. We see a breach of US$60/b in the near term. (More on this below).

The ongoing US stock market rally (new highs recently 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. 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. Investors should have cash reserves and be ready for a material market correction. It is likely to get very nasty during September/October! Caveat Emptor! More on this below.

This week’s ‘Eye On Energy’ Important Details:

1. ECONOMIC

• President Trump’s tariff policy got the shaft from a Federal Appellate court that ruled that the tariffs were unconstitutional. A quick run to the Supreme Court is expected by his Justice Department. If tariffs are not allowed then the cost US$300B/year may have to be refunded to companies and the deficit will grow accordingly. The bond markets were upset and the 30-Year US Treasury Bond neared 5%. If it breaches that level it would be a problem for financing the deficits and raise US borrowing costs.
• The jobs report for August comes out this Friday. Economists forecast a 75,000 increase (73,000 in July). Any revisions will be closely monitored. Job openings fell 176,000 in July according to the Labor Department Bureau of Labor Statistics. Those unemployed now exceed the job openings (7.24M versus 7.18M). The ADP report out today showed a slowing job market. August saw only 54,000 jobs added versus the 75,000 in the forecast. Job losses (17,000) occurred in trade, transportation and utilities.
• The Congress has to extend the debt ceiling this month. If not extended, a government shutdown is possible.
• US core inflation rose 2.9% in July, hotter than the June number.
• US Insiders trades were all on the sell side last week (200 sells, 0 buys). A clear market signal to be noted.
• AI spending is not seeing profits by its users. Many highlight their use which helps the AI developers but the dollars spent may be wasted. Many companies brag about the use of AI but hide the high costs.
• Gap’s stock got hammered as the retailer missed sales expectations and warned that tariffs are impacting profits (US$150-US$175M).
• Canada’s economy may already be in recession as Q2/25 came in at a negative 1.6% due to a sharp drop off in exports and business investment. Net exports took 8.1% off real GDP growth as vehicles, industrial machinery and travel services fell sharply.

2. GEO-POLITICAL

• Israel killed the Houthis Prime Minister and others in retaliation for missiles fired into Israel. Decapitating the enemy leadership is a key weapon used by Israel to stop attacks.
• President Trump sent more warships to the coast of Venezuela to intercede drug shipments. A drug ship was destroyed. Another benefit is to keep Venezuela’s drugs out of the U.S. Drug king, President Nicolas Maduro, now fears regime change.
• China held a massive military parade during its leaders summit. New weapons were shown. Now called the ‘CRINKS” – the China-Russia-Iran-North Korea alignment against the US, they were very belligerent against US attempts at secondary sanctions and continuing to be the global policeman. New intercontinental ballistic missiles, unmanned tanks, stealth drones and nuclear weapons were shown. China now has first class weapon systems, the largest military manpower and the world’s largest navy. Will they go after Taiwan during the Trump administration?
• Russia showed off its jamming techniques by firing an EMP that forced the EU’s leader to lose GPS in Bulgaria. The US showed off an EMP capability to neutralize drone swarms (defense contractor Epirus).

3. ENERGY

• OPEC meets this coming Sunday and plans to announce additional production quotas’.
• Germany is interested in buying Canadian LNG. This would be done by contracting for LNG on the west coast and then swapping them with Asian buyers for deliveries in Germany. Both could save transportation costs.
• China continues to buy Russian and Iranian crude as it adds to its Strategic Reserves (SPR) at current low prices.
• India also loves Russian imports which trade US$3-4/b cheaper than Brent. Both countries have no intention of stopping due to US secondary sanctions.
• Syria has initiated crude exports after 14 years. It shipped its first cargo from its Tartus terminal on its west coast. The crude comes from Kurdish areas of the country that had US forces keep former President Assad from gaining access to the revenues from oil sales.
• China struck a deal with Russia to build a large natural gas pipeline from Siberia through Mongolia to NE China. The new line called the Siberia 2 pipeline would meet 20% of China’s needs and offset 70% of the volumes Russia lost to Europe. China got a very good deal on the price and will fund the construction.
• The CEO of TransMountain said no new crude pipelines are needed at this time as they can lift their capacity from 890,000 b/d (now using 730,000) as it adds compression and chemical additives to move more crude. They see boosting capacity to 1.0 Mb/d. However given long lead times, more capacity (new pipelines) will be needed by 2030.

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 45,461)
• S&P 500 4,800 now (now 6,475)
• NASDAQ 15,000 (now 21,578)
• S&P/TSX Energy Index 230 (now 277)
• WTI US$57-59/b (now US$63.44/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 not growing as they have in the past.

Josef Schachter September 4th, 2025

Posted In: Schachter's Eye On Energy

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