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The Energy Report

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


Deescalation Exultation. The Energy Report 11/10/2026

Global stock markets are rejoicing as oil prices fall below $90.00 in the United States on hopes of de-escalation between Iran and the United States. And it’s not just hope. Real barrels are starting to show up. Brent joined the party, slipping under $90 for the first time since August, and it’s now down more than 20% from the $118 high it hit just before the midterms. Wall Street loved it, with the S&P 500 posting its best day since April.

Supplies of oil in some of the physical markets are reportedly quite ample. Morgan Stanley pointed out this week that that Dated Brent, the price real cargoes trade off of, has slipped to a discount to futures. That’s the physical market telling you there’s plenty of crude around. JP Morgan estimates the global surplus at around 1.4 million barrels a day in October as high prices have cut into demand. Products are getting a little better too, but diesel is still the tight spot in this market. More on that in a minute.

We are still seeing reports of attacks on ships near the Strait of Hormuz, and the Houthis hit Saudi infrastructure again over the weekend. But after President Trump talked with Qatar’s Prime Minister at the White House, there’s a perception that there could be a path to removing some of the risk premium. The President says new strikes on Iran are “highly unlikely” for now, though he’s keeping the naval blockade in place and says he could change course if Iran doesn’t take talks seriously.

The rumor mill is spinning. Qatar’s framework reportedly has Iran letting IAEA weapons inspectors into its bombed nuclear sites on day one, with the U.S. lifting the blockade and releasing some frozen funds, and Hormuz reopening on day two. Talk that Iran would disavow its nuclear program altogether might be wishful thinking. There are also reports that Iran would drop the idea of charging a so-called toll to use the Strait of Hormuz, which would be a big deal for shipping. Still, a Qatari official called some of the reported details inaccurate, and a senior Iranian official told Washington to stop “manufacturing fake news about imaginary talks.”

So there is still some skepticism that we can make a deal. General Jack Keane on Fox News has been warning for months that this regime can’t be taken at its word. He’s called them “pathological liars and cheaters.” The market may be pricing in peace a little faster than the diplomats can deliver it. Diesel is getting some hope too. Russian seaborne oil exports are on the rise despite Ukrainian attacks. Russian diesel shipments are also climbing in November now that Moscow has eased its export restrictions under the deal with Washington. That matters, because U.S. distillate stocks just hit their lowest level since 2003 and retail diesel is still near $6.15 a gallon. The diesel crack barely budged while crude collapsed. A Hormuz deal helps crude first and fuel last, so every extra Russian barrel counts. Ukraine did resume refinery strikes late last month, so this is one to keep an eye on.

AAA’s national average for regular unleaded fell to $3.9788 a gallon today. That’s back below $4 for the first time since the escalation sent prices soaring. It’s a real win, and it looks like we may finally be on a path to lower prices.

The momentum is building. Yesterday the average was $4.0093, a week ago it was $4.1493, and a month ago it was $4.3669. That’s almost 39 cents knocked off in a single month. The supply problems behind the spike are clearing up, and the fall seasonal factors are working in our favor. Summer driving demand is behind us, and cheaper winter-grade gasoline is flowing. Together, those forces are pulling prices steadily lower.

The relief is showing up across the board. Mid-grade is down to $4.4990 and premium to $4.8969, both well below where they were a month ago. Diesel has slipped to $6.1572 from $6.2875 a week ago. That’s welcome news for truckers, farmers and anyone shipping goods for the holidays.

Prices are still above last year’s $3.0707, so there’s more room to run. The direction is what matters, though, and right now it’s pointing the right way. If supplies keep improving and the seasonal factors hold, there’s a good chance this rally at the pump has more to go. Traders should watch the crack spreads and this week’s inventory data for signs the downtrend is sticking.

Natural gas is catching the de-escalation bid in Europe, but here in the U.S. it is getting a weather bid as Fox Weather reminds traders sitting on that record short position that winter is coming. And that short position is a big one.

Short-only positions across seven benchmark Henry Hub contracts climbed to 599,731, the highest since CFTC records began in May 2013, as funds bet that a strong El Niño would deliver a mild winter.

The problem with a crowded trade is the exit door. A sudden cold snap could boost heating demand and disrupt production at the same time, forcing hedge funds to cover and potentially accelerating a price rebound. We saw that movie in January, when a winter storm sparked a sharp rally and money managers cut short-only positions by more than 53,000 contracts in a single week.

If you have the Fox Weather app, they are calling for a nor’easter that will pour in some heating degree days and shake out some of the spec shorts. Longer term, the forecasters are not ruling out a real winter either. The El Niño building toward a December peak is forecast to be the strongest in over 75 years, and while that usually means a milder northern tier, the October forecast data points to an active, stormy South and a shift toward a colder, snowier pattern for parts of the country. Mild in Minneapolis doesn’t help you if Atlanta and the I-95 corridor are getting hammered.

Europe, meanwhile, is getting good news that it might not freeze this winter. LNG traffic through Hormuz hit its highest level since the war began. S&P Global Energy counted 31 laden LNG tankers leaving the Strait in October, up from 23 in September and the highest monthly total since the war began in February.

European gas prices dropped more than 15% over the past week.

The Fox Forecast Center is leaning toward a mild Europe this winter, which would be a gift. But with EU storage about 17 points below normal heading into winter, don’t get too comfortable.

Qatar is only back to a bit over 30% of pre-war Hormuz transits, and Rystad Energy warned that this Northern Hemisphere winter will be extremely uncertain for energy security, with a high likelihood of much higher gas prices.

America’s natural gas advantage is the envy of the world, and we can’t let the new house and senate reveres that.

US natural gas futures are trading around $3.22 per MMBtu. Over in Europe, the benchmark Dutch TTF contract is around €82 per megawatt-hour, or roughly €24 per MMBtu, which is about seven times what we pay here at home. So why is US natural gas so cheap while the rest of the world pays through the nose? One reason: the ingenuity of the US energy industry and the shale revolution that changed the world.

Horizontal drilling and fracking took a nation that worried about running out of gas and made it the largest producer on the planet. Our gas is produced here and priced here, and it doesn’t have to sail through a war zone. The war has made that advantage crystal clear. US natural gas is the one major benchmark that Hormuz can’t reach. Between March and August, Asian LNG ran 75% above pre-war expectations and European gas ran 60% above, while US gas came in 9% below. Europe is learning the hard way. It slipped into a green energy fantasy instead of developing its own natural gas supplies. That made it more dependent on Russia, and now it’s paying the price. European gas storage is only about 72% full, compared with nearly 83% a year ago.

That gives American manufacturers, petrochemical makers and power-hungry data centers a massive competitive edge. It’s also a lifeline for our allies. Flows to US LNG export plants hit a record of more than 19 Bcf a day this month. Every cargo of US LNG that lands in Europe is a cargo that doesn’t depend on Iran or Russia.

The market is waking up, too. December natural gas jumped more than 7% on Monday to $3.218, its biggest one-day gain since September. Colder forecasts forced record hedge fund shorts to cover. Meanwhile, European prices have dropped to a one-month low on hopes of a pause in Iran strikes and new Russia-Ukraine peace talks.

Cheap energy is an economic weapon, and right now the US is holding it. The prices are from this morning: Henry Hub December at $3.218 . This morning at 8:30 Eastern we get the October CPI, and it could move every market on the board. Wall Street is looking for headline inflation up 0.3% on the month and core up 0.2%, a big cooldown from September’s 0.6% headline jump. There’s a twist: because the 2025 government shutdown wiped out last October’s data, we won’t get a year-over-year number on the headline. So traders will be laser-focused on the monthly figures.

Why does that matter for oil? The Fed is widely expected to hike in December. A hot number could fuel talk of more hikes after that, and that would mean a stronger dollar and more pressure on commodities. A softer number could keep the risk-on rally rolling. Keep in mind that October’s data still captures oil’s run to $118, so energy is likely to push the headline up. The market should look through that to the core. We also get the PPI on Friday.

The risk premium is leaking out, the physical market is loosening up, and that’s good news for consumers. But this rally is built on headlines. Diesel is still tight, and one bad night in the Strait could flip the script fast.

The weather could flip the script at any moment, as well, so download the Fox Weather app to stay on top of breaking weather. And stay tuned to the Fox Business Network for the latest market-moving news.

Now is the time to sign up for the wildly popular Phil Flynn Daily Trade Levels. You’ll get sharp, actionable buy and sell levels across all the major futures markets, delivered every trading day. Traders count on these numbers, and you should too. Ready to trade ? Call me today at 888-264-5665 to open your Price Futures Group account. 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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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.

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