Russia’s oil and gas revenue dropped 35% year over year in May to 512.7 billion roubles ($6.55 billion), as lower global oil prices and sanctions continued to pressure the Kremlin’s finances. Revenue also declined 53% from April, prompting the finance ministry to cut its June forecast and raise the projected 2025 budget deficit to 1.7% of GDP. The steep drop in energy income, long a key source of federal funding, underscores Russia’s growing fiscal challenges amid its ongoing military campaign in Ukraine. Russia has reportedly opposed recent OPEC+ output hikes, seeking higher prices to stabilize its budget.
Rising OPEC+ output and increased global supply from countries like Brazil, Guyana, and Kazakhstan are reducing demand for U.S. light, sweet crude, pressuring prices and export volumes. U.S. crude exports to Europe and Asia are declining as refiners shift toward cheaper medium-sour barrels better suited for summer fuel production. Prices for key U.S. grades like WTI-Midland and Light Louisiana Sweet have dropped significantly since March. Amid uncertain economic conditions and shifting global trade dynamics, U.S. producers face a tough outlook, with some considering output cuts despite political pressure to maintain domestic supply.
Oil companies are pulling back on activity and trimming capital spending plans for the rest of the year due to rising costs and declining prices, according to the Federal Reserve’s latest Beige Book. Oilfield service firms are struggling to pass along tariff-driven cost increases, with 90% doing so within 90 days. U.S. oil demand has held steady, though global demand has softened, and overall oilfield activity has slowed, with firms focusing on more economical regions like the Permian Basin. The Fed also noted broader economic uncertainty and a slight decline in manufacturing and overall economic activity since April.
On Thursday, U.S. President Donald Trump and Chinese President Xi Jinping held their first call since Trump’s return to office, reopening high-level trade discussions. Both leaders emphasized the need to stabilize relations, with Xi urging the U.S. to lift tariffs and ease tech and visa restrictions. Trump called the conversation “very positive,” though concerns remain over unresolved issues like Taiwan and rare earth exports. Despite a 90-day tariff truce, the call highlights continued uncertainty surrounding the broader U.S.-China trade war.
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Propane
Wednesday’s EIA report showed a significant build of 6.8 million barrels in propane stocks, much higher than the expected 2.6 million barrels. Most of the build came from the Gulf Coast, which increased by 5.7 million barrels, while the Midwest inventory increased by 900,000 barrels. Currently, Midwest inventory is 30% lower and Gulf Coast inventory is 4% higher than a year ago. Production levels reached another record high at 2.897 million barrels per day (bpd), although export numbers dropped by 918,000 bpd. We will have to wait until next week to see if this was caused by reporting around a holiday. The DOE report is below for your viewing.
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