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<\/p>\nLong-term Cycle Effects on Global Energy Production<\/p>\n
Longer term shifts in production are driven by larger macro trends
\nTechnology and geopolitics often play major roles
\nChina has incentivized domestic natural gas production
\nSome natural gas prices in Canada turn negative<\/p>\n
Sincerely,<\/p>\n
David Thompson, CMT<\/p>\n
Executive Vice President<\/p>\n
Powerhouse<\/p>\n
(202) 333-5380<\/p>\n
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The Matrix<\/p>\n
The development of new crude oil and natural gas production requires massive amounts of capital and long lead times. For this reason, significant changes are usually driven by demographics, geopolitics, technology or longer-term economic growth (or decline) as opposed to simple daily or weekly price fluctuations.<\/p>\n
The rollercoaster ride that is the history of crude oil production in the United States dramatically illustrates this point. Declining through the better part of two decades (1985 \u2013 2005) as cheaper-to-produce crude oil came onstream from other countries, the technological advances of the Shale Revolution launched one of the greatest comebacks in the history of energy production.<\/p>\n
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Something similar in scale is ongoing in China but in natural gas. China is the world\u2019s largest importer of natural gas. It depended on imports to meet 43% of its total consumption in 2024. Recognizing this as a major geopolitical risk, Chinese policy decisions are prioritizing the growth of domestic shale gas production. Whereas the<\/p>\n
U.S. increased crude oil production by 160% in twenty years (2005-25), China has increased its natural gas production by 182% over the last fifteen years (2010-25).<\/p>\n
As data center demand for natural gas-fired power demand ramps up, the market should pay close attention to China\u2019s efforts to \u2018de-risk\u2019 its exposure to natural gas imports.<\/p>\n
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Supply\/Demand Balances<\/p>\n
Supply\/demand data in the United States for the week ended September 26, 2025,\u00a0were released by the Energy Information Administration.<\/p>\n
Total commercial stocks of petroleum increased\u00a0(\u2b06) 7.2 million barrels to 1.2884\u00a0billion barrels during the week ended September 26th, 2025.<\/p>\n
Commercial crude oil\u00a0supplies in the United States were higher (\u2b06) by 1.8\u00a0million barrels from the previous report week to 416.5\u00a0million barrels.<\/p>\n
Crude oil inventory changes by PAD District:<\/p>\n
PADD 1: Down (\u2b07) 1.0 million barrels to 7.0 million barrels<\/p>\n
PADD 2: Down (\u2b07)\u00a01.6 million barrels to 101.6\u00a0million barrels<\/p>\n
PADD 3: Up (\u2b06)\u00a04.0 million barrels to 238.3 million barrels<\/p>\n
PADD 4: Up (\u2b06) 0.1\u00a0million barrels to 22.8 million barrels<\/p>\n
PADD 5: Up (\u2b06) 0.3 million barrels to 46.8\u00a0million barrels<\/p>\n
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Cushing, Oklahoma, inventories were down (\u2b07) 0.2\u00a0million barrels to 23.5\u00a0million barrels.<\/p>\n
Domestic\u00a0crude oil production increased (\u2b06) 4,000 barrels per day from the previous report to 13.505\u00a0million barrels per day.<\/p>\n
Crude oil\u00a0imports averaged 5.833 million barrels per day, a daily decrease (\u2b07) of 662,000 barrels. Exports decreased (\u2b07) 733,000 barrels daily to 3.751\u00a0million barrels per day.<\/p>\n
Refineries\u00a0used 91.4\u00a0percent of capacity; a decrease (\u2b07) of 1.6 percent from the previous report week.<\/p>\n
Crude oil inputs to refineries decreased (\u2b07) 308,000 barrels daily; there were 16.168 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, decreased (\u2b07) 282,000 barrels daily to 16.604 million barrels daily.<\/p>\n
Total petroleum product inventories increased (\u2b06) by 4.1 million barrels from the previous report week, up to 871.9 million barrels.<\/p>\n
Total product demand decreased (\u2b07) 627,000 barrels daily to 20.166 million barrels per day.<\/p>\n
Gasoline stocks increased (\u2b06) 4.1 million barrels from the previous report week; total stocks are 220.7\u00a0million barrels.<\/p>\n
Demand for gasoline decreased (\u2b07) 440,000\u00a0barrels per day to 8.518 million barrels per day.<\/p>\n
Distillate fuel oil\u00a0stocks increased (\u2b06) 0.6 million barrels from the previous report week; distillate stocks are at 123.6 million barrels. EIA reported national distillate demand at 3.617 million barrels per day during the report week, a decrease (\u2b07)\u00a0of 121,000 barrels daily.<\/p>\n
Propane\u00a0stocks rose (\u2b06) 3.5 million barrels from the previous report to 103.4\u00a0million barrels. The report estimated current demand at 534,000\u00a0barrels per day, a decrease (\u2b07) of 361,000\u00a0barrels daily from the previous report week.<\/p>\n
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Natural Gas<\/p>\n
Over the last full week of September, cash natural gas prices at three major Canadian hubs (AECO, Westcoast Station 2 and Empress) all averaged negative values. A robust production response to the commissioning of LNG Canada\u2019s new export facility has collided with the terminal\u2019s inability to ramp up to full capacity leading to supply backups. Tariff effects and maintenance of some pipeline systems that export gas to the U.S. have also added to the downward pressure on Canadian prices.<\/p>\n
According to the EIA:<\/p>\n
Net injections into storage totaled 53 Bcf for the week ended September 26, compared with the five-year (2020\u201324) average net injections of 85 Bcf and last year\u2019s net injections of 54 Bcf during the same week. Working natural gas stocks totaled 3,561 Bcf, which is 171 Bcf (5%) more than the five-year average and 21 Bcf (1%) more than last year at this time.
\nThe average rate of injections into storage is 15% higher than the five-year average so far in the refill season (April through October). If the rate of injections into storage matched the five-year average of 10.4 Bcf\/d for the remainder of the refill season, the total inventory would be 3,924 Bcf on October 31, which is 171 Bcf higher than the five-year average of 3,753 Bcf for that time of year.<\/p>\n
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