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The Energy Report

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


The Flip Side. The Energy Report 07/06/2026

Are oil prices getting ready to flip? After a wave of calls for oil to surge to record highs as the war against Iran shut the Strait of Hormuz, there is now a growing chorus of forecasts looking for prices to move lower—which may mean the market is getting closer to finding a bottom, though I still believe we could see one more washout.

Instead of an oil shortage some are talking oil glut as the Wall Street Journal says that it may take years to rebuild SPR and global storage inventories. Yet they say that two factors that will help rebuild stocks faster: falling prices and a surprising glut of oil. This sharp shift from bullish to bearish calls in oil yet product crack spreads, which continues to soar, suggesting the real pressure point may not be crude itself but refined products.

TotalEnergies CEO Patrick Pouyanné says Gulf producers are desperate to move war-built crude stockpiles at discounts, while gasoline and diesel supplies stay tight due to lingering shipping issues. That’s keeping product cracks strong even as Brent dips — refiners are loving the wide margins for now. Watch diesel as the key signal for when the market fully heals.

But the real story is the flip from wildly bullish oil calls to bearish calls as the Wal Street Journal says that “Some are predicting oil prices—currently around $70 a barrel—will fall even more in the months ahead, providing further relief to drivers and airlines. Analysts at Macquarie and Citigroup both forecast this past week that prices could sink to $60 in coming months.

Of course, we had been saying that for months as we felt that the way the Trump administration skillfully navigated the Iran conflict that erupted in late February. We said that oil would fill the beginning of the war gap and had a shot for a cup of coffee in the fifties before starting to recover. Oil prices never sustained the feared $100–$120+ levels thanks to decisive action: a bold U.S. military “secret mission” that moved over 100 million barrels and 200+ tankers through the strait via escorts, mine-clearing, and low-profile ops; rapid diplomacy with ceasefires, Islamabad talks, and the mid-June MOU that reopened the strait toll-free, triggering sharp drops to three-month lows; a timely 172 million barrel SPR release (part of a 400M IEA effort) to cushion markets, with replenishment premiums in place; plus boosted Venezuelan flows post-Maduro, record U.S. shale production, Jones Act waivers, DFC insurance, and Navy support.

Trump’s jawboning frustrated oil bulls and deal signals further steady futures.

U.S. energy dominance and smart offsets kept prices lower than expected—proving diversified supply and strategic reserves are national security musts. And using them wisely not just for political purposes like the last Admintation As of early July, flows are improving and the market is breathing easier.

This comes as OPEC s signaling higher quotas, while the UAE, formerly of OPEC, saw crude production jump above 3.8 million barrels per day in June—the second-highest level on record.

Adding to the brighter supply outlook, reports say Saudi Arabia cut the official selling price of its flagship Arab Light for Asian delivery to a discount of $1.50 per barrel versus the Dubai benchmark. This is almost unheard of and last done by Saudi Arbia during Covid.

OPEC+ once again hiked quotas by 188k bpd for August — the latest in a string of monthly increases as the group unwinds old cuts and markets calm post-Hormuz. This adds to global supply at a time when prices are already under pressure from recovering flows.

As I’ve written before, I think global oil production is headed for all-time highs as what is left of OPEC is fighting to win back lost market share. The UAE has already stepped away from OPEC and looks ready to push production closer to its full capacity of roughly 4.8 to 5 million barrels per day, well above its old quota levels. Iraq is also pushing hard for more market share, with ambitions to produce 4.5 to 5.5 million barrels per day over the longer term and even higher targets by 2028 and 2029. The bottom line is that many producers are worried about permanently losing ground to non-OPEC supply, so they are preparing to pump as much as they can.

At the same time, the U.S. and other non-OPEC producers are gaining momentum. American production is setting fresh records, helped by a friendlier policy backdrop, while Venezuela is trying to get output to about 1.3 million barrels per day by year-end, which would put it near seven-year highs. Add in broader gains across the hemisphere and strong U.S. exports, and you can see how global supply leadership is shifting further away from the traditional cartel model. Inventories also need to be rebuilt, with both the SPR and commercial stocks still running below normal levels. The good news is that a wave of new supply should help refill those tanks over time. On the demand side, lower prices near $70 WTI could give consumers and fast-growing markets like India a little breathing room, while steadier global energy flows may help support broader economic optimism.

So, as I see it, we may be heading into a classic production scramble. OPEC holdouts want to claw back market share, while the U.S. and its allies keep adding barrels to the market. History also reminds us that wars often turn into selling events for oil. In this case, the Trump administration’s response—coordinated releases, export flexibility, and a quick move toward normalization—helped prevent a major price spike. Now those same forces may be setting the stage for a potential glut.

Natural gas is holding steady around the $3.20-$3.23/MMBtu level even as intense heat and above-normal temperatures across much of the U.S. drive strong cooling demand.

Despite a scorching start to July with a massive heat dome bringing triple-digit temps to wide areas, record heat risks, and heavy air-conditioning loads boosting power-sector gas use, the market remains well-supplied. Robust domestic production (nearing record highs), healthy storage builds (EIA showed a solid +87 Bcf injection for the week ending June 26, leaving stocks above the 5-year average), and steady LNG flows are capping upside for now. Fox Weather is highlighting the ongoing heat wave, with above-normal temperatures dominating the eastern and central U.S. and potential for more record-breaking days. This pattern supports continued cooling demand through the near term, but the market is pricing in ample supply to meet it without major price spikes.

Prompt-month futures hovering near $3.20 with resistance around $3.30–$3.50 if heat intensifies further or storage builds slow. Bearish pressure from production staying strong and any cooling forecasts later in the period.

Fox Weather says thy expect the heat to keep things “full gas” for cooling demand in July, with hot days and warm nights across key population centers. This should provide seasonal support, but with inventories comfortable and output high, don’t look for a major breakout unless the heat dome locks in longer than expected or other fundamentals tighten. Stay nimble—weather-driven demand is here, but supply is answering the call. This market is balancing summer heat with strong fundamentals. We’ll keep watching the weather maps.

Make sure you do as well by downloading the Fox Weather ap. Stay tuned to the Fox Business Network Invested in you Also call to open your account by calling 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.

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