Why Model-Based Oil Forecasts Keep Missing the Mark – ENB Weekly Recap

Stuart Turley: [00:00:00] Why model-based oil forecasts keep missing the mark. That and more on this week’s Weekly Edition. [00:00:05][5.5]

Stuart Turley: [00:00:14] What does Powell’s comments in Jackson Hole mean to the oil and gas markets, but more importantly, what does it mean to investors? Federal Reserve Chair Powell’s annual address at the Jackson Hole Economic Symposium is always a pivotal moment for the markets, and Friday was no different. His 2025 speech delivered on August 22nd was no exception. Titled, Michael. Monetary policy and the Fed’s framework for review. You can’t buy this kind of entertainment. It did shake the market up, probably even more than Cracker Barrel, but let’s keep going. Economic growth was decelerated around 1.2 in 2025, down from the previous year’s pace. A notable update was revisions to the Fred longer run goals moving away from the 2020 average inflation targeting. Michael, this is important. And why is it important for the oil and gas because it also means if he does go down 25 points in their next meeting, it means cheaper money for bigger oil companies when they go to try to do more drilling because we need trillions of dollars just to meet normal decline curves. What this also means is that for private investors, there will be everyone looking for Where am I going to get returns? This is critical. [00:01:37][83.8]

Michael Tanner: [00:01:38] Absolutely. I mean, I think this decision to move away from that 2020 guidance of, you know, kind of what’s been called average inflation targeting now moving towards what they’re kind of talking about, like a moving target, a more flexible approach. The markets, as you said, interpreted this, you now Dow Jones was up one and a half percentage points, S&P 500, and the NASDAQ were also up. I think you hit the nail on the head. I mean, from an oil and gas investing standpoint, the capital markets obviously are going to enjoy the fact that money is going to become cheaper. I mean, we’re about to talk at the end of this show about the potential crescent energy vital merger. I mean you’re talking to $600 million market cap company with 2.8 billion of debt. I mean that kind of gives you an idea of how much debt a lot of these large public companies who may not have exact core acreage need to continue to drill. And if… You know, if President Trump and Secretary of Energy Chris Wright want to keep following through on this drill baby drill promise with they had. They actually need easier, they need looser capital markets. They need money to more easily flow. I mean, I think what you’re going to probably see is a 25 basis points cut in December. I’m not going out on a limb saying that everyone is sort of saying that post Jerome Powell’s speech, but I do think it’s important to kind of buoy the oil and gas business from a capital market standpoint. Now in a pricing structure, who knows what that does? I mean, we’ve sort of been testing that $60 lower bound. We hit it earlier in the week. We actually saw gains this week as we’ll talk a little bit about what that means for the markets later on in the finance segment. But it’s going to be very interesting. And I think the scarier notion is that they decide to delay cuts. I mean, now that we have this moving target, it really allows the Fed to do what they want. And, you know, we could get in a big discussion about this idea of 2% inflation trying to manage that as their, you now, as their goal all around. I mean there’s a lot that’s wrong with that. Again, I do think for, you, know, investors in the oil and gas space, it’s going to lead to possibly more drilling. But what that means relative [00:03:40][121.8]

Stuart Turley: [00:03:40] The best thing they can do to manage inflation is stop printing money. [00:03:43][3.2]

[00:03:44] Let’s go to the next story here, Michael. Surging US LNG export fuel growth in US shale, but how does this impact investors and businesses? I had fun writing this one on our sub stack, Michael. The United States is a solidified itself, and I use that word solidified as the world’s leading exporter of liquefied natural gas. Michael, for the uneducated from Oklahoma State University, that is LNG. Surging exports, driving unprecedented growth in shale gas production. As we keep going through 2025, this is reshaping the energy landscape. And I point to a couple key things in this article. Natural gas production has been more robust. Dry natural gas output reached a preliminary. 3,327 billion cubic feet in May alone equating to 107 BCF per day in a new high that underscores the strength sector. That’s a big number. That is a lot of gas. That more than Jerry Nadler combined. Let’s go to the next one here. You take a look at EIA projects. Overall U.S. Gas output to rise from 103 BCF in 2023 to around 113 BCF by 2030. We’re going to need more than that in order to fuel the data centers and everything else that’s coming around. In fact, the death. The, of the Permian is overrated and I’ve scheduled a meeting with Trisha Curtis, the CEO of Petro nerds to talk about the death of the Permian, is peak oil here and a couple other key issues. And she is a top notch person. She’s one of my go-to people when I want to talk about oil and gas stuff. But here’s where it gets really important, Michael. And that is the trade for molecules. The trade for molecules now means that people are starting to look at natural gas drilling separately than they used to be. And when you talk about drilling for oil, and oh, by the way, gas is a byproduct, we’re also tracking the natural gas rigs remaining more stable in the rig counts. And we start watching this trend, I look for trends, and we take a look at what’s going on in the future, businesses are going to start taking a look at where do I put my business? I’m going to put my businesses where I can get natural gas. Where can I get business? And it’s also going to be bringing up another one. I just interviewed Bill Amazetti and he is a cool cat from Rosden Data Center. Just turn that into the production team. He is working on the Stargate data center. This is a huge opportunity for businesses to take charge of their business up front, Michael. [00:06:43][179.1]

Michael Tanner: [00:06:43] No, absolutely. I mean, I think the other thing that’s really interesting when it comes to the growth of LNG is the fact that, you know, as we sit here, Stu, we’re analyzing, you know 10 deals a month, 15 deals a month and talk about trends. The Permian is getting gassier over time. The gas-oil ratio is becoming way higher than it was 10 years ago. I mean, you used to think about GORs in the low 600s. You’re now seeing them over 1,000 when it comes to the amount of gas. And so what does that mean? It means that we’re not depleting the Permian, but not to get all reservoir engineering on us, but we’re lowering the bubble point, which forces more gas to come out of solution. What does that means? It means we’re gonna have excess amounts of this LNG as we continue to drill up the Permian as it still is one of the more economic places. So if you’re thinking about where is an investor possibly to put long-term capital, LNG makes a great spot. Now, the interesting part is, I don’t think the value is going to accrue to the drillers because there’s gonna be an excess amount of LNG that’s gonna drive prices down. I think where the value’s going to a accrue is a lot of these export facilities. The issue with that as an investor, you need billions of dollars. You can’t come in, you know, unfortunately, they’re not letting the individual accredited investor into this. You need to be more of an institution to get into this, but if you are an institution looking to bet on energy and want to make a get involved in the energy business, LNG exports, in my opinion, is where the value is going to accrue as this shift happens. [00:08:12][89.0]

Stuart Turley: [00:08:13] Oh, I couldn’t agree more. [00:08:13][0.8]

[00:08:13] Ercot Project cancelation reached a record in Q2 of 2025. What is next? I want to call attention, Michael, to this picture that is standing there with the windmills where the winds, they’re not blowing. This was taken by this character called Stu Turley as he was driving out of Abilene on Saturday morning. And it was actually a very interesting to see all of these windmils in West Texas. In the second quarter of 2025, the ERCOT witnessed an unprecedented surge in project cancelations marking a pivotal moment in the state’s energy landscape with approximately 16 gigawatts of power generation scrap. Oops. I’ll tell you, we take a look at many of these projects. Only 9% of the projects in ERCot Q are projected to come online after 2028, signaling a bottleneck. Oops. This has led to $14 billion over $14 billion in energy cancelations by mid 2025. This is pretty big stuff. Take a look at these cancelations in this chart, Michael. Lots of them happening right now. [00:09:27][73.5]

Michael Tanner: [00:09:27] Yeah, and a lot of that I think has to do with the shift away from incentivizing more stable streams of energy and this shift towards renewables. Now I think things are swinging back a little bit, but again, as we predicted after the big beautiful bill, we’re going to see a surge of projects being staked so that they can be eligible for the tax credit. And then it’ll eventually roll over and I think you’ll get back to natural gas. I think everybody’s talking about nuclear right now when it comes to some of the future huge baseland. Based low demand. So I think it’d be really interesting where it comes down. I mean, that’s a big number though. You said to 22 billion of cancelations of clean energy projects. [00:10:05][37.4]

Stuart Turley: [00:10:05] And the argument, Michael, that’s out there right now is that you can put a wind farm and a solar farm faster than you can do natural gas or nuclear. But the problem is for each nameplate of a megawatt, you’ve got to have 180 megawatts. I mean, you got to 180 times the megawats. So even though you can bring a megawatt online for a solar farm, you got to add 180 on top of that, because the math don’t math up as we say in Texas. No, the math. The math ain’t mathin’. Math ain’t Mathin’. [00:10:42][37.6]

[00:10:43] The true cost of renewable energy and the impact on consumers’ electrical bills. But what does the EU, UK, and ERCOT all have in common? This is a story out of the energy newsbeat substack in the global race toward net zero emissions. Renewable energy sources like wind and solar are often touted as the affordable path to a sustainable future. Governments including those in the EU the United Kingdom and have implemented big ambitions. But rut row. Net zero policies in the EU and UK. Let’s talk about promises versus reality. The targets for 42.5% renewable energy and the overall mix by 2030 and significant reductions in greenhouse gasses ain’t going to happen. What happens is net zero equals deindustrialization. Just ask Germany, just ask New York, just, just as New Jersey, California. But here’s where it gets dicey. In this article on Substack, I wrote this part, reviewing Dieter Helm’s analysis, systems costs, and the renewables. This was an outstanding article that I went and analyzed it and took a summary. Helm argues that while the levelized cost, the LCOE for wind and solar has dropped, this metric ignores broader system costs. Intermittent to see the fact that renewables generate only when the wind blows or the sun shines. But yet what he missed was what Meredith Angwin from the author of Shorting the Grid talked to me about a while ago. And I brought up that point. Let’s take Ercot for a example. Ercot is about 90 gigawatts that they need in order to supply power on the grid. That 90 though, they’d have 180 gigawatts. Of that 180 gigawatts, they could do with a lot less using the old standard of coal, natural gas, and nuclear of just adding 20 percent. Just in case you had an outage, if you needed downtime to repair maintenance. But now when you take a look at 100 and 200% more power, that cost is never calculated into the consumer price front. And neither is the land reclamation. And that is not being talked about. And it was missed his article. That’s why I added it in my article here on this. So go to theenergynewsbeat.substack.com and check it out. [00:13:33][169.8]

Stuart Turley: [00:13:33] Why is model-based oil forecast keep missing the mark? This is an outstanding story from oilprice.com, Irina Slav. I absolutely love Irina Slav and her sense of humor. Her knowledge is top notch. Let’s go through the three top bullet points and then we’ll go the story. Many oil price forecasts, particularly those from the International Energy Agency and Net Zero organizations, consistently predict a glut. And ignoring contradictory data or using flawed computer models. Yeah, we’ve been saying that for quite a while. Despite these forecasts, global oil demand continues to grow. Sorry about that. Prices frequently jump in response to threats on supply, indicating a tighter market than models suggest. Listen to this, reliable indicators of oil demand and supply are found in physical market data, which often leads to forecasting bodies to reverse their projections and call for more oil investments. I want to give Chris Wright a shout out at the Department of Energy in the EIA in the United States. They have gotten better at not politicizing their data. Unlike the foreign, the international or the IEA is about as political as you possibly can get. Brent Crude is trading about $67 a barrel and WTI, West Texas Intermediate is about 65, not because the world’s consuming less oil than three years ago. When crude shot up over the $100, oil demand has grown steadily since the 2020 slump caused by the pandemic. The only reason these forecasters and most notably the IEA are predicting a glut is because that is what fits their models and she is spot on. IRENA hit it out of the park because that’s what I’ve been saying. We need trillions of dollars just to invest in meeting normal decline curves that has not been happening. So if we sit back and take a look at whether or not it’s just normal decline curves, that means demand has got to be there. And another major thing is what happens if the Russian sanctions are lifted. If Zelensky can actually understand that he needs to be the big boy in the room, get a new tailor and not from some child’s wardrobe, like he showed up at the white house and actually end the war, give Russia the Crimea that is Russian bases have been at for a billion years, and then go ahead and then allocate that out there, Zelensky needs to end the war. If Russia ends the war and sanctions are lifted, prices are going to go up because Russia is pretty well maxed out on their EMP company’s ability to increase their production. They’ve been able to avoid sanctions by the use of the dark fleet. They have a ballpark number of 700 tankers and they are quite capable of keeping their oil flowing. However, that being said, they have a limited supply unless American companies could help them out and get going again. And then I think energy as an export, as a service, would help secretary chris right be energy dominant by exporting services. But anyway, she brings up some other great points. Last week, prices tanked after the meeting between the presidents of Russia and the United States, as I was going in, then the EU and Zelensky took the meeting home and the prospects of peace began to evaporate only to be replaced by the prospect of more sanctions on Moscow. Irina has coined the phrase sanctions don’t work as intended, and they will still mean that Russia will be able to sell all he can produce. But he’s been limited in putting money back into production because he’s funding the war so he’s not capable of putting out a lot and flooding the market as people are saying oh rush is gonna flood the market not gonna happen anyway outstanding job irina slob over price dot com. Also, subscribe to Irina Slav on her sub stack as well too. [00:13:33][0.0][801.4]