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The Energy Report

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


How To Tank Brent Crude. The Energy Report 10/15/2026

Do you want to know how to tank an out-of-control Brent Crude market? Lift sanctions on some tainted tankers so those shadow-fleet ships can re-enter mainstream trade, free up tonnage, and cool the freight spike that is currently propping up delivered prices—exactly the option the Trump administration is now weighing.

One of the problems we’ve had with the shutting down of the Strait of Hormuz and a attacks on oil infrastructure in the Russia Ukraine war is the fact that the tough sanctions oil tankers have reduced tanker capacity. Tanker rates have smashed every historical record, with those very large crude carriers VLCCs hitting $1.4 million a day on Middle East–Asia routes and U.S. Gulf–China fixtures in the $600,000–$800,000 range as Hormuz disruptions and ship-to-ship transfers lock up capacity and turn freight into a $30-plus-per-barrel costs according to Oil Price.

Now the talk out of Washington about easing sanctions on the so-called “shadow fleet” tankers.

A US official told Reuters the Trump administration is looking at allowing previously sanctioned vessels (the ones linked to Russia, Iran, and Venezuela) to carry non-sanctioned, “legal” oil. Companies would have to apply to Treasury for approval. The goal is straightforward: free up tanker capacity, get more crude and products out of the Gulf, and bring down the record freight rates that have been crushing demand for US crude.

Energy Secretary Chris Wright has already referenced the idea in the context of those sky-high shipping costs. This is more negative for Brent than for WTI. The elevated freight rates have been a major reason the Brent premium has stayed so wide. Any relief on tanker availability hits that premium directly. Markets are already reacting—Brent is trading around $104.50 this morning after topping $106 earlier in the week, while WTI is holding closer to $94. Here’s where it gets interesting for the product side. Those record freight rates and the Hormuz disruptions have been a big support for the US heating oil and diesel crack spreads. Middle East refined-product exports (especially diesel and gasoil) have been constrained, inventories are tight, and that has kept US distillate cracks at or near all-time highs—diesel cracks have spent time over $100 a barrel, with heating oil cracks not far behind.

Easing sanctions on those shadow-fleet vessels and lowering freight rates would increase the amount of seaborne product that can actually move. More supply reaching the global market means less relative tightness in distillates. That should put downward pressure on both the US heating oil crack and the diesel crack. Good news for truckers, farmers, and households staring at winter heating bills; a bit of a headwind for the super-wide refining margins refiners have been enjoying. The big API crude draw gives WTI some relative support on the crude side, but the product cracks are more sensitive to any improvement in tanker availability and Gulf product flows.

We are also seeing Middle East risk premium wind down after winding up on Hothi rebel attacks on Saudi Arabia as the roller coaster of risk premium putting it in and out in in a incredible pace. Still you might not know it but by the action but attacks are still happening—a container ship and a dry bulk carrier sank near Hormuz in the past 24 hours, Houthis hit Saudi Aramco’s headquarters, and Iran has talked about new tactics against shipping. But the market is assessing that these have not yet caused severe actual supply disruptions from Saudi Arabia, the world’s largest exporter. Some of the geopolitical premium that pushed prices higher earlier in the week is coming out.

Yet also demand conerns might show that high prices are having a hand at curing high prices The International energy Agency normally famous for underestimating oil demand in its s October report pointed to a larger decline in world oil consumption this year than previously expected—around 2.6 mb/d—with diesel accounting for a big chunk of the drop.

The API reported a crude oil inventory draw of roughly 11.1 million barrels for the week ending October 9, far larger than the expected build of about 1.9 million barrels. That’s a bullish US-specific data point, even though the market did not rally hard on it, suggesting that despite the big draw it probably had more to do with Hurricane Isaias production shut-ins than any reel sign of sustained oil loses. The API also showed gasoline inventories up 1.1 million barrels, distillates down 1.5 million, and Cushing stocks rising about 1.8 million barrels. Gulf of Mexico oil production was still shut in by roughly 202,000 barrels per day as of October 14 from lingering Isaias effects, well below the peak of over 1.4 million bpd. Commercial crude stocks have fallen more than 51 million barrels over the past 26 weeks, while the SPR held steady at 283 million barrels. We get EIA data later and probably will show a big crude draw as well.

While all this is playing out, it’s worth pointing out the success the Trump administration has already had getting Venezuelan oil flowing. After the January operation that removed Maduro, production has recovered and stabilized at higher levels—around 1.15–1.2 million barrels per day and climbing toward 1.3 mb/d targets—while US imports of Venezuelan crude have surged dramatically (up massively year-over-year, in some months hundreds of thousands of barrels a day). Those barrels are coming in at a discount to other crudes, giving US refiners cheaper heavy feedstock and helping diversify supply away from more volatile regions. It’s a real win for energy security and for keeping some downward pressure on the overall barrel. So that is why The shadow-fleet / freight-rate relief talk is the clearest new overnight catalyst, and it specifically pressures the factors that have kept Brent elevated relative to WTI. It should also take some of the air out of the US heating oil and diesel crack spreads by improving product availability. Ongoing Hormuz/Houthi risks and the IEA demand revision are weighing on both benchmarks, while the big US inventory draw gives WTI a relative cushion. Venezuela remains a positive supply story for the US. Prices stay elevated overall given the broader supply-disruption backdrop from the regional conflict, but the tanker story is the one that can most directly narrow the Brent-WTI spread and ease some of the tightness of the product.

Of course, with Iran being behind and the Houthi attacks and the killing of an American heir attack it’s possible that the Trump administration is going to make them pay. CNN is reporting that US strike plans under consideration include the potential use of the GBU-43/B Massive Ordnance Air Blast bomb—the so-called “Mother of All Bombs”—against Iranian energy infrastructure and nuclear sites, including Pickaxe Mountain.

Natural gas is up about 6 cents (around $3.26) after dipping earlier, with the bounce driven by Fox Weather’s latest outlook and growing signs that early-season heating demand could arrive sooner than the milder consensus had priced in.

After Wednesday’s pullback on milder forecasts and a small uptick in output, the November contract found support overnight and into Thursday morning as weather models showed more bite. Fox Weather and other outlets are highlighting a cold front moving through this weekend that will deliver the first real taste of fall for millions across the Central Plains, Northeast, and parts of the Southeast—highs dropping into the 50s and 60s (with some 40s) after recent warmth.

The bigger story for gas is the sharp model split in the 6- to 15-day window. The ECMWF is running substantially colder than the GFS across key demand hubs: demand-weighted heating degree days near 137 on the ECMWF versus only about 73 on the GFS. The East (New York area) and Midwest (Chicago) show the widest gaps, with the European model locking in upper-40s to low-50s mean temperatures and double-digit daily HDDs in spots while the GFS keeps the region milder into the 60s. If the colder solution verifies, it would lift residential/commercial send-out, slow late-October injections, and pull the market toward net withdrawals earlier than many had expected.

That weather risk is landing on top of a storage picture that is already tightening. Last week’s EIA print was an 85 Bcf build, leaving working gas at 3,500 Bcf—still about 2% above the five-year average but 3.6% below year-ago levels. Analysts are looking for something in the mid-70s Bcf range for the week ended October 9 (NGI around 74 Bcf), which would further narrow the surplus versus the roughly 90 Bcf five-year average for that week. Production has also been running below the August/September records (around 110.6–110.8 bcfd so far in October versus 113.3 bcfd peaks), helped by lingering hurricane-related shut-ins and other disruptions.

LNG feedgas has eased modestly to about 17.5 bcfd this month from 17.9 bcfd in September, but export demand remains a structural floor. Milder near-term weather is still capping the upside for now, and inventories entering the heating season are expected to finish October roughly 2% above the five-year average, which keeps the market from running away. Still, any sustained shift toward the colder ECMWF pattern would change the late-injection and early-withdrawal math quickly.

Bottom line: the bounce is weather-driven short-covering and a reassessment of early heating demand. Watch today’s EIA number for confirmation of the tighter weekly balance, and keep an eye on model runs—if the European solution holds or strengthens, the $3.30–$3.40 area gets tested again. If the warmer GFS wins, the market drifts back toward support near $3.15–$3.20. To keep up on it download the Fox Weather ap ans Stay tuned to the Fox Business Network. Invested in you! Also Make sure you open your account call my team at 888-264-5665 or 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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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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