In case you haven’t heard, the global energy transition away from fossil fuels has been a failure.I know! I was as shocked as you are. Yet Saudi Aramco CEO Amin Nasser stated and declared this epic failure stating that, “Much of the promised progress has not been delivered, with many unintended consequences. Thankfully, it is finally shifting the narrative….”And it could shift a bearish narrative for oil.

This comes as President Trump shifts the narrative, once again defying his critics with major peace deals, hostage releases andnow received assurances from India that they would stop buying Russian oil. This fact should help secure a seasonal bottom for oil prices. President Trump said that Indian Prime Minister Narendra Modi told him New Delhi will stop buying oil from Russia, though the move will take time. ″[Modi] assured me today that they will not be buying oil from Russia. That’s a big stop.” Trump said at the press briefing in the Oval Office. “Now we’ve got to get China to do the same thing.”

Reuters also reported that U.S. Treasury Secretary Scott Bessent also said on Wednesday that he told Japanese Finance Minister Katsunobu Kato that the Trump administration expects Japan to stop importing Russian energy.

India and China are the two top buyers of Russian seaborne crude exports, which are sanctioned by the U.S. and European Union. For months Modi resisted U.S. pressure to stop buying Russian oil, with Indian officials defending the purchases as vital to national energy security.

Image Source: Unsplash

Along with grains, cheap oil appears to be the reason why the Fed should have room to cut interest rates, as those commodities, compared to record-breaking gold and silver prices, are crazy and historically cheap. You see as gold and silver prices are reaching record highs while crude oil hits five-month lows— this represents an epic divergence in commodity markets. For further discussion call PhilFlynn 888-264-5665. Say that gold is trading around $4,198 per ounce, silver at approximately $52.85 per ounce, and WTI crude oil near $58.88 per barrel (with Brent around $62). This pushes the gold-to-oil ratio (calculated as gold price per ounce divided by oil price per barrel) to about 71, meaning it takes roughly 71 barrels of oil to buy one ounce of gold. Looking back over the period from 1946 to 2024, it’s clear that such dramatic divergences—where the gold-to-oil ratio shoots above 40—are as rare as a democrat giving President Trump credit for anything.

In fact this has only happened a handful of times in the past four decades. For example, in 2020 during the COVID-19 pandemic, the ratio spiked to an all-time high of 91. That year, oil prices crashed (even turning negative for a moment) as lockdowns choked off demand, while gold surged as investors sought safety amid massive monetary stimulus and uncertainty. Silver, too, outperformed oil during this period. Another notable occurrence was in 2016, when we had the OPEC vs shale production war that created a huge oil glut driven by the U.S. shale boom and OPEC ramped-up production and pushed the ratio above 40, with oil dropping below $30 a barrel. At that point gold held its ground or edged higher as people worried about the economy, and silver followed a similar path.

There have been other times—like the early 1980s after the oil shocks, and during the 2008-2009 financial crisis—when the ratio climbed above 30 or even 40, often coinciding with recessions or financial turmoil. Still, it’s not always the case that oil is at rock-bottom prices just as gold and silver are making record runs.

Fast forward to 2025, and we’re seeing another high ratio (over 50 since August), thanks to ongoing U.S.-China trade tensions, rumors of oil glut, and weaker global demand dragging oil down, while gold and silver rally on the back of geopolitical risks and worries about inflation. To put it in perspective, over the past 78 years, gold-to-oil ratios above 40 have happened less than 5% of the time. The pattern is similar for silver and oil, since silver tends to move closely with gold (their correlation is often above 0.8), resulting in these kinds of rare but notable divergences.

Instead of concerns about peak oil demand, there are now growing worries about peak shale oil production in the United States. The illusions of an impending oil glut are being dismissed by major oil companies and industry experts. Shale producers on the ground believe that data from the Energy Information Administration, which suggests that U.S. production is rising, does not fully capture the impact of declining rig counts and increased financial discipline among producers—factors that are causing U.S. oil production to peak. So, the question becomes, is this historic spread between gold and oil signaling a financial collapse or is it signaling that oil prices are dramatically undervalued. I think that it means you should use this weakness to get hedged. You can also use my trade levels and option strategies by calling Phil Flynn at 888-264-5665.

Today, we get the Energy Information Administration’s perspectives on petroleum supplies and natural gas. Due to the holiday schedule, we will get the natural gas report at 9:30 and the petroleum report at 10:00 central time.

Natural gas prices have dropped due to milder weather forecasts. EBW Analytics remains bullish, noting that technical patterns triggered a price decline as storage grew to 3,925 Bcf and October weather stayed bearish. Supply is expected to increase as pipeline maintenance ends. LNG exports are nearing record levels and will likely rise with more capacity and seasonal demand. Despite long-term optimism, high storage, mild weather, increased production, and bearish technical may keep prices down in the near term. Long-term bullish prospects remain intact. Weather will be key.FOX Weather reports that potentially dangerous severe weather threat is brewing for the Ozarks and Mississippi Valley this weekend due to a cross-country storm that could fire off thunderstorms capable of producing damaging wind gusts, large hail and tornadoes.

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