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The Energy Report

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


Refining the Chaos. The Energy Report 09/02/2026

Hey Mr. Refiner, could you spare us some capacity please. As President Trump appeals to refiners large and small, energy markets are pulling back this morning after Tuesday’s explosive rally, when crude reached its highest level since late July and diesel crack spreads set a record. The retreat should not be mistaken for calm. Overnight the war in the Strait of Hormuz flared again, and the market is still pricing the possibility that Tehran tries to keep this going.

Tuesday, WTI jumped more than $4 and settled at $90.22. Brent settled at $94.65 — the highest close since July 24 after President Trump hit the Iranians hard. Overnight and early Wednesday, Brent tagged just over $97 and WTI pushed toward $92 before both contracts gave some of it back. That’s not a market that thinks this is over. That’s a market that spikes first and then asks whether Tehran can actually keep this up.

CENTCOM said U.S. forces struck IRGC targets including air defenses, radar, maritime assets, mine-laying capability, and communications after attempted attacks on commercial shipping and American forces. Two tankers were hit Monday night in the strait. Iranian media claimed a U.S. strike hit a wedding in Hormozgan; CENTCOM said it never targets civilians and that the wave of strikes is complete for now. Iran answered with missiles and drones at U.S. bases across the Gulf.

President Trump put the position in plain language on Truth Social: “I couldn’t care less if they sign a worthless, to them, agreement. I like our position now much better, with almost total control of the Hormuz Strait, and their economy totally collapsing. They are just playing out the inevitable. When are the Iranian people going to rise up and fight?” Treasury Secretary Scott Bessent put it bluntly: Iran’s bankruptcy is in the “acceleration phase,” and about 17 million barrels still moved through Hormuz on Monday. The regime is weaker. The economy is collapsing. The pressure does not get lighter from here. The real problem is not just the crude barrel. It is the refined barrel. The U.S. diesel crack spread punched through $107 a barrel — a record. ULSD futures settled Tuesday near $4.68 a gallon, a post-war high and one of the highest prints in the history of the contract. Ukraine keeps hitting Russian refineries. Moscow has extended its diesel export ban. Years of underinvestment in Western refining — thank the green energy movement for that — left the system with no spare capacity when the world actually needed diesel. Distillate tightness is now one of the critical points of this entire conflict. Trucks, farms, construction, and the military all run on the same molecule. When that molecule is short, everything else gets expensive.

President Trump sat down yesterday with the big refiners and the smaller ones — the companies that actually turn barrels into gasoline and diesel for American drivers. Chevron, Valero, Marathon, PBF, Delek and others were in the room. The White House message was clear: expand capacity and get more product to the pump. Trump made it plain he is on their side. This is not a lecture. It is a partnership. Meet demand now, and seize the enormous opportunity coming from Venezuela. To win the refining war in this country we have to expand capacity — not only for the heavy oil, but for the light barrels as well. That is how you put American energy first and keep the advantage on our side of the water.

One name was missing from the room: ExxonMobil. Reuters and everyone else noticed. Darren Woods called Venezuela “uninvestable.” Well, guess what. It is not uninvestable to everybody. Trump has been saying the opposite for months: “We have Exxon going in, we have Chevron going in, we have our big oil companies going in… It’s all coming to the US for refineries. Our plants, our refineries are specifically meant for Venezuelan heavy oil.” Bloomberg reports Coinbase co-founder Fred Ehrsam is seeking control of at least three Venezuelan oil fields — the Boca, Guico, and Guara blocks in the Orinoco Belt. U.S. officials are reviewing whether those contracts get revoked.

Uninvestable? Tell that to the people lining up for Venezuelan barrels. Tell that to Energy Secretary Chris Wright saying output can more than double. Tell that to the diesel market at a $107 crack. Tell that to Europe staring at €75 gas and a thin winter stockpile.

Wright is in Caracas this week. He landed last night and did not mince words: the deals coming together will lead to more than a doubling of Venezuelan oil production in the next few years. Current output is running around 1.1 to 1.2 million barrels a day. Wright said several agreements will be announced, and he is expected to showcase as many as 17 oil and gas pacts. After the refiners meeting he also said he expects “downward pressure” on gas and diesel prices in the next few weeks. The naysayers said this would take years. The development of Venezuelan crude may move faster than a lot of those naysayers were saying just yesterday — and definitely faster than January, when the U.S. captured narco-terrorist Maduro.

Heavy Venezuelan barrels are exactly what Gulf Coast cokers were built to run — and they make diesel. They have light barrels as well. That is not a slogan. That is metallurgy and coking capacity that American refiners already paid for. While some executives sat on the sidelines calling the country uninvestable, the administration is lining up barrels that fit the units we already have. That is the American energy advantage: produce it, refine it, and ship it. Trump’s line on Iran remains the same: “We had to go into Iran. We had to make sure they don’t have a nuclear weapon.” The market is still deciding how long that fight lasts.

Natural gas here at home is starting to firm again. LNG exports are putting the optimism back into the complex. Cheniere just finished the last piece of its Corpus Christi Stage 3 expansion, adding more than 10 million tonnes a year and lifting the company’s platform toward the mid-50s mtpa, with more trains already in the pipeline. U.S. LNG exports averaged 17.4 Bcf/d in the first half of 2026, up 23 percent from a year earlier. That is not oversupply talk. That is the United States keeping the lights on for people who spent a decade shutting in their own production.

FOX Weather has been all over the Midwest heat that feels more like the Fourth of July than early September. That demand is real. So is the export pull. Download the FOX Weather app and stay ahead of it. And the green energy experiment keeps writing the same bill in Europe. TTF natural gas broke above €75 per megawatt-hour for the first time since the war started in February — the highest since early 2023. European gasoline has been at the highest levels since 2023. Diesel is through the roof. Storage is running well behind where it should be heading into winter. Europe is going to lean even harder on U.S. LNG to keep the lights on.

The Financial Times had it right this morning: oil and gas are rattling bond markets again because a prolonged inflation impulse is back on the table. Brent ran as much as 2.5 percent to just over $97 before slipping back toward $95. The U.S. 10-year has been under pressure on the same story. This is what happens when you combine a pinched strait, smashed Russian refining, and a decade of pretending refining capacity was a moral problem instead of an economic one. The regime in Tehran is running out of time. The refiners who still have units standing — and the administration willing to put American energy first — are not.

Make sure you download the Fox Weather app aand stay Tuned to the Fox Business Network Call Phil Flynn at 888-264-5665 or email pflynn@pricegroup.com.



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