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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Geopolitical Thaw and Weather Whipsaw. The Energy Report 12/29/2025

As 2025 draws to a close, the energy markets are marked by a blend of optimism, ongoing uncertainty, and heightened volatility.

West Texas Intermediate (WTI) crude is currently trading higher in Asia, rising approximately 1% to around $72 per barrel amid persistent yet controlled tensions in the Middle East.

In contrast, natural gas prices have exhibited significant volatility, surging during periods of colder weather and subsequently declining as forecasts indicate milder temperatures, as reported by Fox Weather.

Several key factors are influencing today’s market. Reuters reports that China’s leadership is advocating for a “proactive” fiscal policy in 2026 following a disappointing 4.8% growth rate this year.

Industrial profits have declined at their fastest pace in over a year, and fixed-asset investment is poised for its first annual decrease since 1998, signaling reduced energy demand.

Although CO₂ emissions have stabilized due to the expansion of renewables, as reported by Hellenic Shipping News, the energy sector remains highly sensitive to policy changes.

Hopes for additional stimulus have yet to invigorate steel markets, with exports outperforming GDP and China’s external demand—rather than domestic oil imports—supporting the economy, as covered by S&P Global.

If China enacts further fiscal stimulus, it could potentially revive refinery operations and crude oil demand, possibly triggering a rally in oil prices.

Reuters notes that these ongoing discussions for peace have contributed to oil price volatility, with prices increasing by 2% overnight as traders evaluate potential impacts on global supply.

Should a peace agreement be reached, Russian exports may normalize, sanctions could ease, and increased supply might exert downward pressure on prices.

Previous hopes for a truce have led to $1–2 drops in oil prices, due to concerns over a potential surplus and diminishing war risk premiums.

Still, the destruction of 60% of Ukraine’s gas production prior to winter, as reported by Russia Matters, suggests that any peace deal might include offers of affordable Russian energy to Europe, affecting global LNG markets.

Nonetheless, the situation in Donbas remains unresolved, and according to The Institute for the Study of War, Russian advances have been gradual.

If negotiations fail, EU market risk premiums could rise rapidly.

In the longer term, an increase in Russian oil on the market may prompt OPEC+ to tighten quotas to preserve price floors above $70 per barrel.

Regarding U.S. political developments, Politico notes that President Trump has assumed an active role as a mediator, having recently met with Ukrainian President Zelenskyy. Trump claims that the parties are “a lot closer” to reaching an agreement, with a reported 95% consensus on security guarantees and Russia purportedly offering reconstruction aid and discounted energy.

President Trump has also communicated directly with President Putin and is scheduled to confer with Israeli Prime Minister Netanyahu regarding the Gaza situation and Iran, as reported by News4Jax.

Domestically, Flynn observes that Trump’s initial year in office saw over $32 billion in clean energy investments canceled, a suspension of offshore wind projects for security reviews, and discussions with oil industry leaders regarding a potential return to Venezuela should political conditions improve.

In conclusion, with all this news, oil prices are higher, as are the products. Of course, it’s going to take more convincing to believe that this is going to be a massive turnaround on the demand side. The explosive growth in the United States, with that blockbuster GDP, should increase demand expectations.

Natural gas is still up and down on weather reports and the perception of liquefied natural gas exports. Natural gas is also keeping an eye on the negotiations between Russia and Ukraine and Trump, because that could actually reduce the demand somewhat for LNG if sanctions are ever lifted on natural gas in Russia.

President Trump has engaged in direct communication with President Putin and is planning discussions with Israeli Prime Minister Netanyahu, focusing on the situations in Gaza and Iran, as reported by News4Jax.

On the domestic front, Flynn notes that during Trump’s first year in office, over $32 billion worth of clean energy investments were canceled, offshore wind projects were put on hold for security reviews, and there have been conversations with oil industry leaders about possibly resuming activities in Venezuela, provided the political climate improves.

Meanwhile, oil prices remain elevated, as do related products, and it will take significant evidence to convince markets of a major turnaround in demand. The explosive GDP growth in the United States is expected to raise demand forecasts.

Natural gas prices continue to fluctuate based on weather conditions and perceptions about exports. Additionally, the market is closely watching negotiations between Russia, Ukraine, and Trump, since any lifting of sanctions on Russian natural gas could potentially decrease global LNG demand.

Still, from natural gas to weather, it’s going to be ultimately the key. Fox Weather is reporting that just after a strong winter storm blanketed areas of the Northeast in snow and disrupted post-Christmas travel on one of the busiest weekends of the year, another fast-moving system will bring a mixture of rain and snow blended with a blast of Arctic air that will usher in below-average temperatures along much of the East Coast to start off the New Year.

Both New York and New Jersey were declared to be in a State of Emergency by government officials, and thousands of flights were delayed and canceled in the region on Friday. Now, a long, trailing cold front will become the focus for millions, threatening a dangerous mix of severe storms, blizzard conditions, flash flooding, and potentially feet of lake-effect snow in its wake.



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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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