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The Energy Report

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


Climate Change Shakedown. The Energy Report 10/05/2026

As Democrats complain about the cost of energy, despite generations of supporting policies that raise prices, oil production under President Trump is going to surge above 14 million barrels a day, something once thought unheard of. Natural gas production is at an all-time record high, and still, Big Oil has to go to court to keep the oil flowing and the economy moving.

Overnight, oil prices are down after the big release from the International Energy Agency, following pressure from President Trump and the threat of a diesel export ban that he now says was never under consideration. The IEA is releasing 100 million barrels from global strategic reserves, beginning immediately and running over four months, including a front-loaded, substantial diesel release within the first 20 days by G7 members and partners. That comes even as the diesel crack spread is still elevated, with nerves about how tight supply is. OPEC+, meanwhile, decided to keep production steady.

Aramco CEO Amin Nasser says the global oil supply cushion is “scarily thin.” Less than 10% of the world’s oil inventory is available, and the pressure only gets worse until Hormuz is open. Refilling those stockpiles, he says, may take two years after the strait clears. The G7’s coordinated release is only temporary help. Upstream facilities are intact, maximum capacity of 12 million barrels a day can be back in days, and demand is already picking up and needs inventories refilled. Aramco is studying alternate export routes and more global storage, and the East-West pipeline is flowing as normal.

Yet beyond that, what he is really saying is that the oil is there, but the routes to market are still at risk, and we still need more refining capacity. Big Oil goes to the U.S. Supreme Court this morning to ask the justices to do something Congress has refused to do for thirty years: decide who, if anyone, pays for the weather.

The case is Suncor Energy v. County Commissioners of Boulder County, being argued on the first day of the new term. ExxonMobil and Suncor want the Court to throw out a lawsuit Boulder filed in 2018 that tries to stick the companies with the bill for wildfires, floods, infrastructure repairs, emergency management, and public health costs the city blames on climate change.

Boulder also claims the companies misled the public about fossil fuels. The companies deny it. A win for Exxon and Suncor could knock out nearly sixty copycat suits from cities, counties, and states chasing billions. A loss, and every mayor with a floodplain and a plaintiffs’ lawyer has a new ATM. This is not science. It is a shakedown dressed up as tort law.

Boulder wants you to believe that selling a legal product the world still runs on — gasoline, diesel, jet fuel, the feedstock for the plastics in the hospital, the fertilizer that feeds the planet — is the same thing as a defective drug, a crooked opioid pitch, or a lawsuit against Big Tobacco. It is not. Emissions cross state lines and national borders. Chinese coal plants, Indian refineries, European drivers, and American pickups all put carbon dioxide into the same atmosphere. You cannot pin Boulder’s wildfire season on two companies with a straight face and call it causation.

The companies’ argument is the obvious one: the states gave up the power to regulate inherently interstate and international problems when they joined the Union. Federal law preempts this. If the country wants a carbon policy, that is a job for Congress and the President, not a Colorado courtroom inventing liability after the fact.

The activists keep calling this the tobacco playbook. Tobacco was a product you inhaled for a nicotine hit. Oil and gas are the reason the lights are on, the trucks roll, and the crop gets to the grocery store. There is no substitute at scale that does what a barrel does, which is why even the governments suing these companies are still buying their product. You cannot sue the supplier of the energy you refuse to stop using and pretend you have discovered a new theory of justice. What you have discovered is a backdoor carbon tax, levied by judges, collected by trial lawyers, and paid by drivers, refiners, and anyone with a pension that owns Exxon.

Justice Samuel Alito is sitting this one out because he owns oil and gas stocks, though not Exxon or Suncor. That leaves eight justices and the real risk of a 4-4 tie, which would leave the Colorado Supreme Court’s decision standing and send Boulder toward trial.

A ruling is expected by the end of June. Chevron, ConocoPhillips, Occidental, Phillips 66, Shell, and BP are all watching, because the same complaints name them in other courthouses. The energy industry has warned the damages could run into the billions and, in the extreme, threaten the companies that actually produce the fuel. That is not accountability. That is an attempt to bankrupt the supply and then act surprised when the price of everything made from a barrel goes up.

The climate docket has always been politics that could not clear a legislature. Global average temperatures have risen. So have crop yields, life expectancy, and the share of humanity not living in energy poverty, and fossil fuels paid for most of that progress. Weather is not a tort. A city that wants more resilient roads and water systems should budget for them, not send the invoice to Houston and Calgary and hope a jury confuses correlation with a verdict. If the Court gets this right, it shuts the door on using state nuisance law to run national energy policy. If it punts, the lawyers eat and the consumer pays. Trade the companies, not the headlines. The barrel is still the product. The lawsuit is the surcharge.

Diesel margins slid below $100 but are now back above it, near $102 overnight, after the G7 announced a 100 million barrel release of crude and diesel. That is the product market doing what it always does with a headline stock dump — sell the crack first, ask questions later. The EU Commission is already warning of a very difficult winter for energy prices, while arguing that the stock release should help member states. Help is not the same as a fix. Hormuz LNG flows are still down more than 75%, even with a modest rebound in traffic. Qatar LNG remains an attractive investment, according to ConocoPhillips, which also sees U.S. oil output holding above 14 million barrels a day in 2027 if prices stay supportive. That is the two-track market: stranded Middle East molecules on one side, resilient U.S. shale on the other.

The strait itself is not quiet. UKMTO reported an incident 11 nautical miles north of Khasab, Oman. A tanker transiting the strait was hailed by the IRGC and told to turn back or it would be targeted. That is not a drill, and it is not last week’s news. Yemen is heating up on the ground at the same time. Yemeni government forces launched attacks on the Houthis from the north, west, and south, and the armed forces said they began a “strategic offensive” on Sanaa. The Saudi-led coalition said 100 fighter jets hit 324 high-value targets. The Kremlin, for its part, answered Zelenskiy’s talk of striking Russian refineries with a simple line: Ukraine will pay the price. Afghanistan and Pakistan are still talking about dialogue, with the Taliban foreign minister claiming a right to self-defense. None of that loosens the Strait.

OPEC+ core members (Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman) held a short Sunday call and left November quotas unchanged, as expected. Actual exports are still well under quota — some estimates put key producers at 60–80% of normal — because of the Iran war and the Hormuz attacks, even though shipping data showed Middle East crude exports above pre-war levels on four of the seven days in the last week of September. Saudi Aramco cut its November Arab Light price to Asia to $5 a barrel below the regional benchmark, the lowest since 2020. Traders and refiners had been looking for about a $5 increase. Bloomberg framed that cut, plus recovering flows, as the reason oil swung to a loss and offset the Yemen bid. Yemen escalated. The Saudi-backed government launched a full campaign Sunday to retake Houthi-held territory. The Houthis claimed ballistic missiles and drones hit Aramco sites in Riyadh and Khurais. Saudi Arabia has not confirmed that. The Houthis also hold the Bab el-Mandeb, which had been a Saudi bypass around Hormuz.

Iran is still hitting some ships in Hormuz. Reports over the weekend said Trump rejected an Iranian offer to reopen the strait within a week and restart nuclear talks in exchange for lifting the U.S. naval blockade, and that more strikes remain possible before the midterms. Talks may resume this week. OPEC+ also delayed the review that would set 2027 quotas, because the war has scrambled capacity-expansion estimates. Iraq is still pushing for a higher quota in the audit.

Brazil’s presidential vote is feeding straight into the currency, the softs, the grains, and oil. Flávio Bolsonaro took the first round with about 47% to President Lula’s 45%, short of an outright win and headed to an October 25th runoff, but well ahead of what the polls had priced in. It looks like a push toward conservative values is taking hold all over the globe.

Markets read that as a better shot at fiscal austerity and deregulation, and the Brazilian real is surging, with traders looking for the dollar to open near 5.10 from Friday’s 5.21 close. A stronger real lowers the local-currency value of dollar exports and takes some of the urgency out of producer selling, and coffee felt it immediately: December arabica jumped more than 3% this morning, back toward 298–299 cents a pound after Friday’s 288.75 close. The same currency move lands on oil. A firmer real can slow the incentive to push barrels out the door in dollar terms, even as a more market-friendly outcome lifts Petrobras and the appetite for Brazilian crude investment. The barrels are still there, and Brazil remains a major exporter, but the election is tightening the link between the real, coffee, and how aggressively those oil exports get sold.

Natural gas: November Henry Hub settled Friday at $3.035, up 2.3% on the day, after a $2.912–$3.051 range. Sunday’s electronic trade was soft, around $3.015, and early Monday it is flat to slightly lower near $3.01–$3.03, with an overnight range of about $2.999–$3.045. There’s no fresh storage number — the EIA’s last print was a 64 bcf injection, in line with estimates, and that took some of the bid out late last week. Shoulder-season weather and high production are still capping it; LNG feedgas remains the main support. Thursday’s storage report is the next real catalyst.

Bottom line for the open: crude is trading the G7 stock release and the surprise Aramco OSP cut against Yemen and Hormuz risk. Gas is stuck in a tight range around $3 until the weather or Thursday’s EIA report breaks it out.

Fox Weather is reporting that “Despite an El Niño that’s predicted to become the strongest on record this fall, forecast models are predicting a near-average hurricane season in the Atlantic from late September into November, toward the end of the season. Things are expected to remain quiet for now, as strong upper-level winds keep anything from forming.”

Make sure you download the Fox Weather app to keep up on tropical activity, as it can have a major impact on natural gas. Also make sure you stay tuned to the Fox Business Network, because they’re the only network that’s truly invested in you. At the same time, you can call me at 888-264-5665 to sign up for my daily trade levels and my special report. You can also email me at pflynn@pricegroup.com.



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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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Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com.