Energy market analysis June 4, 2025

“OPEC+ is no longer whispering. In May there were hints, in June there was clear talk and in July there was a megaphone.” – Jorge Leon, analyst Rystad Energy

After days of wild speculation about a possible new price war by OPEC+ – similar to the Saudi “armada” of March 2020, which temporarily pushed the WTI oil price below minus $45 – the cartel plans to increase oil production for the third consecutive month. Despite increasing reluctance from Russia, one of its key members, OPEC+ continues its historic change in direction. This is expected to put additional downward pressure on oil prices.

A number of OPEC countries agreed in a video conference Saturday, May 31, to release 411,000 barrels per day in July. The production increase is similar to May and June. It marks a radical reversal from defending prices to actively driving oil prices lower.

Officials say the supply increases reflect the Saudi’s desire to punish over-producing members such as Kazakhstan and Iraq and regain lost market share from U.S. shale producers and other rivals. It also satisfies President Trump’s desire for cheap oil. Although this will lead to higher government deficits for Saudi Arabia which produces 10 million barrels per day (bpd) with a break-even price of about $90 per barrel.

The increases will provide temporary relief for consumers as the Northern Hemisphere enters its peak demand season. Moreover, it will help central banks fight stubborn inflation. Yet the market impact will also create financial problems for oil producers worldwide, who could face low prices for a long time, followed by much higher prices as production infrastructure will suffer through disuse.

Most notable about this third consecutive production increase is that several members have expressed reservations about the speed at which OPEC+ is increasing its output. This reports Bloomberg. Delegates report that Russia, Algeria and Oman want a pause in the increases.

The differing positions between Russia and Saudi Arabia, the most powerful cartel members, will come up again at the next meeting on July 6 when they will discuss production levels for August. Giovanni Staunovo, commodities analyst at UBS, earlier reported to Reuters that OPEC+ has considered even larger production increases. The group will decide in coming months how quickly it will restore the rest of the supply it is still keeping off the market.

In April this year, oil prices briefly dropped to a 4-year low below $60 per barrel after OPEC+ first unexpectedly announced to increase output by three times the planned volume. The decision came after disappointing demand and Trump’s trade war had already put pressure on the market. This was followed by the announcement of a second increase a month later. And now, therefore, a third.

The price of Brent futures contracts has since recovered to about $65 per barrel. Still, the IMF estimates that the Saudis need a price of $90 a barrel to cover Crown Prince Mohammed bin Salman’s wasteful spending plans. Saudi Arabia is facing a widening government deficit and is being forced to cut investment in prestige projects, such as the futuristic city of Neom.

If the strategy is to discipline the cartel’s quota violations through “controlled sweating,” this does not seem to be working for now. Kazakhstan continues to exceed its limits by several hundred thousand barrels per day. The country has publicly stated it has no plans to reduce its production. Energy Minister Yerlan Akkenzhenov reported that she cannot force reductions from international business partners, nor can she scale back state production.

The price decline is taking a clear toll on U.S. shale oil production. The breakeven price for many U.S. producers is between $45 and $60 per barrel, depending on location and efficiency. U.S. shale producers will temper their production plans and scale back investments for the time being. In the longer term, this could potentially lead to consolidation with larger players surviving by operating more efficiently.

For some analysts, increasing supply makes complete sense. Demand will increase in coming months because of “driving season,” or more motorists on the road due to summer vacations. Also in the Middle East where peak use of air conditioning means more barrels being consumed domestically. Fundamental factors are strong right now due to low inventories, said Amrita Sen, research director at consulting firm Energy Aspects Ltd. So it seems like a good time for OPEC+ to bring more barrels to market.

Nevertheless, further price declines may be in the offing. JPMorgan predicts Brent futures prices could fall to highs of $50 later this year if the cartel’s production increases contribute to a global supply surplus of more than 2 million bpd.

The price of Brent crude for August 2025 delivery has set a preliminary bottom around $58 per barrel. A 5-wave price rebound followed and the price then corrected largely sideways with a low print above $62 per barrel. On the 4-hour chart, both price and lagging line trade above the Ichimoku (Japanese for at a glance) cloud. The lagging line has slowed by 26 x 4 hours, confirming the price breakout. The chart has a bullish look given the sideways correction and higher bottom.

Price Crude oil – Brent August 2025 ($/barrel) – 4-hour cloud candle, log scale

“In recent weeks, Denmark has announced plans to reconsider a 40-year-old ban on nuclear power as part of a major policy shift, Spain has indicated it is open to reviewing the closure of its nuclear power plants and Germany has abandoned its longstanding opposition to nuclear power.” – CNBC

Comeback nuclear in America and Europe.

A resurgence in nuclear power is currently underway, driven by increasing concerns around energy security and climate goals. This is accompanied by rising uranium prices. America and parts of Europe are embracing a nuclear resurgence, with President Trump calling for a quadrupling of U.S. nuclear capacity by 2050. European countries such as Denmark, Spain and Germany are sending signals of renewed interest in reactor technologies.

The Fukushima disaster on March 11, 2011 shocked the world of nuclear power and the uranium industry. The tsunami, triggered by a large earthquake off the coast, crippled the nuclear power plant’s cooling systems, causing three reactors to overheat and partially melt down. Following that, radioactive materials were released into the air and ocean. As the world watched in horror, public and government confidence in nuclear electricity plummeted. As a result, some countries decided to phase out or completely terminate their nuclear development plans.

Germany, Belgium and Italy decided to phase out nuclear power or cancel planned expansions, while Spain and Switzerland chose not to build any new plants. The Fukushima disaster resulted in stricter safety requirements and more thorough assessments of existing nuclear power plants. In Japan, the contribution of nuclear electricity dropped dramatically. Coal-fired power plants had to fill the gap. The accident caused an increased focus on alternative energy sources such as gas, coal and renewable as well as a push for new reactor design with improved safety features.

This event also impacted the uranium market and companies that explore and mine the nuclear fuel. After Fukushima, the sharp decline in demand pushed uranium prices downward. The market bottomed around $30 per pound (lb) in mid-2014. As of 2022, the story and focus changed completely. Fueled by renewed demand for nuclear power and a jump in the price of uranium concentrate following Russia’s invasion of Ukraine, uranium miners pulled their uranium projects out of mothballs in 2022.

The uranium price reached a 10-year high of $105.49/lb on Jan. 29, 2024. Last year ended with a spot price of $72.63 and a long-term price of $80.50. Thus Canadian uranium miner Cameco.

The price of uranium futures contracts rose to $72 per pound at the end of May 2025, the highest level in nearly three months. This extended the rebound from an 18-month low in March when the possibility of political support for the nuclear sector outweighed sufficient supply, according to Trading Economics.

Despite skepticism about the safety of nuclear, there are just as many voices that believe it is a relatively benign form of baseload power necessary for the transition from fossil fuels to renewables. Nuclear is emission-free but does not suffer from variability (“intermittency”) like wind and solar.

A rethinking of nuclear electricity has taken place in Europe as countries move toward energy independence. Denmark banned the use of atomic energy in 1985. The renewable-heavy Nordic country indicated in mid-May that it plans to analyze the potential benefits and risks of new, advanced nuclear technologies, such as small modular reactors complementary to solar and wind technologies. The Danish government does not want to return to traditional nuclear power plants.

Spanish Environment Transition Minister Sara Aagesen said in late April that extensions of nuclear reactors beyond 2035 cannot be ruled out. This while the government continues with plans to depreciate nuclear reactors over the next decade. The statement by the minister was followed by a widespread power outage on April 28 that impacted most of Spain, Portugal and southern France.

Germany, which closed its last three remaining nuclear power plants by 2023, recently dropped its objection to French efforts to treat nuclear electricity equally as renewable in EU legislation. This was reported by the Financial Times on May 19.

The price of electricity, delivery in 2026, is still trading above the cloud on a weekly basis. The lagging line, 26 weeks lagged, is in the cloud and will stay above the cloud and move into the green on sideways or higher price action. Possibly a sign of a trend reversal.

Price Baseload Electricity supply year 2026 (eur/MWh) – week cloud candle, log scale

“We will do everything in this regard to ensure that Nord Stream 2 cannot be put back into operation.” – German Chancellor Merz

Germany plans to do everything in its power to keep the Nord Stream 2 pipeline offline. This was reported by German Chancellor Friedrich Merz at a press conference with Ukrainian President Zelensky in mid-May. Germany will continue to increase pressure on Russia.

Nord Stream 2, an $11 billion project to transport Russian natural gas to Germany under the Baltic Sea via the Nordstream route, was slated for completion in September 2021. The pipeline never became operational after Germany cut short the certification process in early 2022 following Russia’s invasion of Ukraine.

Russia, for its part, closed Nord Stream 1 for an indefinite period in early September 2022. The country claimed it was impossible to repair the gas turbines because of Western sanctions. In late September 2022, gas leaks were discovered in both pipelines, probably due to sabotage.

Debates about the pipelines continue despite the fact that no cubic meters of gas have been transported for more than 2.5 years. In recent weeks, speculation has increased about a restart of the pipelines as part of a deal to end the war in Ukraine.

Earlier this month, European Commission President Ursula von der Leyen said sanctions on the Nordstream 1 and 2 pipelines could be part of the new EU sanctions package against Russia. The EU has begun talks on this new sanctions package which, in addition to sanctions on pipelines, is expected to place more ships on the Russian shadow fleet list and lower the oil price limit on Russian oil.

As with the oil price, the gas price TTF delivery year 2026 is above the 4-hour cloud, as is the delayed line. Again, a potentially bullish (higher, as bulls raise their horns) scenario . And if so, also confirmation for a trend reversal in the baseload electricity price.

Price TTF gas delivery year 2026 (eur/MWh) – 4-hour cloud candle, log scale

“They will tolerate a period where some of the domestic production is very difficult.” – Toby Hassall, coal analyst LSEG

China is drowning in growing coal reserves amid declining electricity demand.

China’s overarching central planning model, designed to keep the economy afloat, has become so intertwined that it is virtually impossible to keep up with fake supply and even more fictitious demand. The situation bears dangerous parallels to the former Soviet Union in its final phase, when supply-side economics masked the rot in the economy until the absolute end.

In an effort to raise domestic prices, China, with a slowing if not shrinking economy, is forcing its coal-fired power plants to store more fuel and import less. This writes Reuters. Traders, however, are skeptical of the measures that would stop the decline. China’s coal industry is running into rising coal inventories due to a massive expansion of output following shortages and blackouts in 2021. In fact, more coal is being produced than the world’s largest thermal power fleet can consume.

To support money-losing coal producers, whose profits are under increasing pressure, the state planner National Development & Reform Commission (NDRC) has asked coal plants to prioritize domestic coal and increase thermal coal stocks by 10%. This sets an overall target of 215 million metric tons by June 10. However, with inventories piling up throughout the supply chain, these guidelines will not spur more purchases or further support prices.

NDRC’s decision follows months of calls from industry groups and companies to curb coal imports and output. Chinese coal prices, however, have been steadily marching downward. Prices have fallen so far that some buyers are trying to maneuver themselves out of long-term contracts and prefer the short-term spot market.

China imported a record 542.7 million tons of coal in 2024. The total is expected to decline this year. China’s coal production rose 6.6% year-on-year during the January through April period and stands at 1.58 billion tons. Coal imports were 16% lower in April than a year earlier. At the same time, industry profits fell 48.9% year-on-year over the same period, according to official data.

Chinese mining production continues to grow despite low prices. Output cuts are unlikely to be considered. Coal analyst Toby Hassall of London Stock Exchange Group (LSEG) expects them to tolerate a period where some domestic producers will really struggle. The government wants to avoid at all costs a repeat of the shortages and blackouts of 2021 and 2022.

The coal price for delivery in 2026 bottomed around $86.50 per metric ton (MT) on June 1, 2023 and set a slightly higher low at $92 per MT on July 13 of the same year. On Feb. 19, 2024, the market closed one day below $91 and then traded above $130/MT 3 times. Since then, the market has tested the $100 price level 6 times and has remained above it so far.

Current low coal prices are also affecting other energy markets including natural gas. This is because coal is a cheaper alternative to gas for electricity generation in a number of countries.

Price ICE Coal delivery year 2026 (usd/t) – week cloud candle, log scale

“All this just to support ‘clean’ electricity in richer countries.” – Ronald Stein

Electric Cars: Good, Bad or Ugly?

The documentary Electric Vehicles: The Good, The Bad and The Ugly offers a nuanced look at the rise of electric vehicles (EVs). It examines both the advantages and disadvantages of this technology and highlights its complex challenges. The documentary encourages viewers to think critically about the transition to electric mobility and its broader implications.

The good

The documentary acknowledges the technological advances of EVs, including their quiet operation, rapid acceleration and advanced features such as autonomous driving. These features make EVs attractive to consumers.

The bad

Several concerns are highlighted, including:

• Production costs and scalability: EVs are currently more expensive than traditional cars, partly due to limited production volumes.
• Dependence on fossil fuels: despite their green image, EV production requires significant amounts of fossil fuels, both for manufacturing and electricity production.
• Limited infrastructure: the current network of charging stations is not yet adequate, which may limit the usability of EVs.

The ugly

The documentary also explores the ethical and geopolitical implications:

• Mining practices: Mining of critical minerals such as cobalt and lithium, often in countries like China and some African countries involves environmental damage and human rights violations. Indeed, many of these countries have minimal labor laws and poor environmental controls so that the production of critical minerals and metals leads to serious environmental damage and serious social consequences.
• Geopolitical dependence: EV component production is highly concentrated in countries such as China, leading to strategic dependencies.

Mining and refining to meet demand for EV batteries, wind and solar involve large quantities of raw materials. The estimated total mass of raw materials processed for an EV battery, including coating and waste rock, can range from 22,000 to 45,000 kilograms, depending on battery size, chemical composition and mine efficiency.

The withdrawal rate and R/P ratio (Reserve to Production) for many of the critical minerals and metals are alarming. Most natural resources are not being replaced. This suggests the worrying possibility that the current policy of subsidies for “green” energy is unsustainable. Indeed, even countries with the largest reservesface significant challenges in increasing production growth to meet future demand.

• Lithium. In 2024, the world mined about 240,000 tons of lithium, nearly three times as much as in 2020. The International Energy Agency predicts demand for lithium will rise to 450,000 tons per year by 2030. Despite significant world reserves , its production remains a major challenge.
• Cobalt. In 2024, the world produced an estimated 280,000 metric tons of cobalt, the highest volume ever recorded. The Democratic Republic of Congo was the largest producer, accounting for 74% of the global total, while the country is known for major problems with child labor and poor working conditions in its mineral sector.

The allowance price is above the 4-hour cloud, as is the lagging line. As in the 4-hour chart of Brent crude oil a sideways, to slightly lower price movement after a rally from just above €60 to €75. The psychological level of €70 seems to offer support for now. Again, a bullish look.

The rally itself seems to consist of 3 waves (up-down-up), a 5-wave impulse cannot yet be ruled out. A 3-wave rally is rather corrective and points back down in the longer term. A 5-wave rally, on the other hand, is an initial upward momentum move within a larger bull market. The market will decide.

Price Emission Rights – Dec-25 contract EEX (eur/t) – 4-hour cloud candle, log scale

“CAISO also limits solar generation to make room for natural gas generation. A certain amount of natural gas generation must remain online throughout the day.”

Increasingly curtailing solar and wind due to rapid renewable capacity growth.

California is playing a unique role in the global energy transition. This American region differs from Europe in a number of ways when it comes to renewable energy. The experiences here thus provide a good vista for the energy transition in Europe and elsewhere in the coming years.

The California Independent System Operator (CAISO), grid operator for most of the state, must increasingly intervene to limit solar and wind electricity generation. CAISO increasingly must do so to balance supply and demand amid rapid renewable capacity growth. This is according to EIA in recent research.

Grid operators must balance supply and demand to maintain a stable electricity system. The output of wind and solar producers is reduced through price signals or in a rare case through the order to reduce output during periods of:

• Congestion: in the event that power lines have insufficient capacity to deliver the available energy.
• Oversupply: when generation exceeds consumer electricity demand.

In 2014, a total of 9.7 gigawatts (GW) of wind and solar photovoltaic capacity was built in California. By the end of 2024, that volume had grown to 28.2 GW. CAISO is also curtailing solar generation to make room for electricity production via natural gas. A certain amount of electricity produced via natural gas must remain online during the day to be compliant with North American Electric Reliability Corporation (NERC) reliability standards and switch up baseload during evening hours.

Solar energy supplies nearly half of CAISO’s electricity demand between 8:00 a.m. and 4:00 p.m. Demand increases in the evening hours when people come home from work and turn on air conditioning, electric heaters, lights, furnaces, computers and televisions. This need is especially evident on hot summer nights after the sun has set and no solar power is available.

CAISO tries to implement curtailment in several ways:

• Trade with grid operators in neighboring regions to sell excess solar and wind electricity
• Incorporating battery storage into underlying services, energy and capacity markets
• Incorporating curtailment reduction into transmission planning

Starting this year, companies plans to use excess renewable energy for hydrogen production. Some will be stored and blended with natural gas for use in the summer at Intermountain Power Project’s new facility. This project will come online in July.

The Western Energy Imbalance Market (WEIM) is a real-time market that allows participants to buy and sell energy outside of CAISO to balance supply and demand. In 2024, more than 274,000 MWh of curtailments were prevented by trading within the WEIM, equivalent to about 8% of total pent-up electricity that year. The Extended Day-Ahead Market (EDAM) is expected to become operational by May 2026. This market gives CAISO another outlet for selling solar electricity.

To further reduce renewable curtailment and increase grid stability, CAISO is promoting the addition of flexible resources that can respond quickly to sudden increases and decreases in demand. Battery storage, recently the most important flexible “resource” to come online, allows a portion of renewable energy to be stored and deployed 4 to 8 hours later in the day. Batteries can be charged with excess solar in the afternoon and discharged when the sun goes down. Thus, electricity can be provided during hours when it is needed most.

Battery capacity at CAISO increased 45% in 2024, from 8 GW in 2023 to 11.6 GW in 2024. Thus EIA research on recent and planned capacity changes. More electricity is produced than used in the spring. Without more transmission capacity or long-term storage solution, high curtailments can still occur at this time of year.