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The Energy Report

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


Slipping Through the Strait. The Energy Report 05/20/2026

From the brink of war to the reopening of the Strait of Hormuz, oil markets keep flipping the script with headlines that are often exaggerated or filled with partial truths. Wars, rumors of wars, and a little Strait movement keep the market off balance. Barron’s reported that oil prices started to fall following reports that three supertankers were moving through the Strait of Hormuz. That pulled down prices that had been elevated on the assumption that an attack on Iran might come as soon as this weekend.

This comes against the backdrop of many analysts and industry experts saying that the market is totally divorced from the real risks facing the oil market, with some suggesting that oil prices should be trading at $150 a barrel today and perhaps even higher if the Strait of Hormuz remains closed. Bloomberg is reporting that India is gearing up to send vessels back through the Strait of Hormuz to load energy cargoes from its traditional Middle East suppliers — the first such move since the Iran conflict kicked off. State-owned Shipping Corp. of India is poised to resume operations in the Persian Gulf once it secures the green light from the Indian Navy and firm commitments from the country’s oil refiners.

This is a big deal. India isn’t about to walk away from its most reliable and cost-effective crude suppliers just because the strait has become a geopolitical hotspot. Diverting to alternate sources would mean much longer voyages, higher freight costs, and tighter refining margins at a time when the country can least afford it. New Delhi clearly calculates that the strategic and economic benefits of sticking with Persian Gulf barrels outweigh the very real risks still lingering in those waters.

This Indian push comes at a critical moment. While tanker traffic around the Cape of Good Hope and through the Panama Canal has exploded as shippers hunt for safer routes, major importers like India are showing they’re ready to test the waters again — literally. If more Asian buyers follow suit, it could start easing some of the pressure on global supply chains and help put a ceiling on what has been a very sharp run-up in crude and product prices.

At the same time, there are plenty of doomsayers out there warning that the damage from the Strait of Hormuz mess will never be fully replaced and that the market is sleepwalking through the real risks. But let’s look at the facts on the ground. Despite all the scary predictions of crippling shortages, we haven’t seen any acute pain yet. Here in the United States, you can still pull into any gas station and fill up on all the gasoline and diesel you want — you’re just paying up for it.

Over in Europe and Asia, where there was big talk of jet fuel shortages heading into the busy summer travel season, airlines are coming out and saying they’ve got plenty of supply to keep those planes flying. And amazingly, oil is proving once again how resilient this market is — finding new routes, rerouting tankers around the Cape, cranking up pipelines, and tapping every workaround in the book to keep barrels moving. The sky-is-falling crowd keeps waiting for the big crunch, but the energy market is doing what it always does: adapting, innovating, and delivering — even if it costs more. That doesn’t mean the risks have vanished, but it sure shows the incredible flexibility and depth of global supply chains when push comes to shove.

Claudia Assis and Myra P. Saefong of MarketWatch reported that tanker traffic has surged along alternative routes as shippers work around the near-standstill at the Strait of Hormuz. Traffic around Africa’s Cape of Good Hope is roughly 20% higher by vessel capacity than before the U.S.-Israel war with Iran began, with west-to-east flows to Asia rising to about 78 million deadweight tonnage and east-to-west traffic to the Americas and Europe climbing to roughly 77 million.

Panama Canal tanker transits have also jumped, reaching 76 per week in early May versus 57 in early March, as U.S. Gulf Coast crude and gasoline shipments are redirected and more refined products move to Europe. Asian buyers are increasingly turning to U.S. crude via the longer Cape route, accepting longer voyages in exchange for lower geopolitical risk, and many shippers are expected to keep favoring that path even if Hormuz reopens later this year.

Even so, rerouting is only a partial fix. Gulf producers have pushed pipelines to their limits and some tankers have resumed movement, but those alternatives replace only a fraction of normal seaborne volumes. The result is continued pressure on inventories and energy prices, helping keep crude near $100 a barrel and U.S. gasoline close to $5 a gallon.

Iran has established the Persian Gulf Strait Authority to regulate rather than fully close the waterway, allowing authorized vessels to transit under new rules. This has produced a modest uptick in crossings, though still far below the pre-war average of about 135 daily transits. The U.S. briefly attempted its own coastal shipping lane along Oman but paused the effort for negotiations. Longer-term, Gulf states are accelerating pipeline projects, such as the UAE’s plan to double capacity to Fujairah by 2027, though even these will take years and cannot fully replace tanker traffic. Analysts expect Middle East exporters will ultimately invest in more pipelines to reduce reliance on the strait, gradually diminishing Hormuz’s strategic importance over many years despite the high costs. Container shipping has similarly shifted to the safer Cape route, adding to global supply-chain costs.

This comes as gas prices are on the rise. According to the latest AAA data as of May 20, 2026, the national average price for regular gasoline stands at $4.555 per gallon. This marks a slight increase from yesterday’s average of $4.533, reflecting ongoing upward pressure on fuel costs. Diesel fuel, meanwhile, averages $5.652 per gallon nationally, up marginally from $5.650 the previous day.

These prices highlight diesel remaining significantly higher than regular gas, consistent with broader market trends driven by supply factors. Week-over-week comparisons show regular gas has risen from around $4.042 to the current $4.555 level, while diesel has also climbed in recent periods amid elevated energy market volatility. AAA tracks these figures daily from thousands of stations across the U.S., providing a reliable snapshot for drivers.

The bottom line is that the market is uncertain about the future, and we’re seeing a lot of volatility. There are those who are convinced that the long-term direction of oil is going to be higher, and it’s only a matter of time. If you hold that view, there are ways to play it, but make sure you’re hedged with options, because, as we see on a day-to-day basis, oil can make significant moves in both directions. For those who believe that the United States is going to resume the war with Iran this weekend over the Memorial Day holiday, that could keep short sellers from getting too aggressive. Yet, at the same time, if we start to see ships move safely through the Strait of Hormuz, and if Iran signals that it does not want to attack its so-called friends — of which it has few left — that might ease some of the worst-case scenarios the market has feared. Or maybe the market hasn’t been fearful, but traders have been.

And if you think oil has been volatile, get ready for similar turbulence in soft commodities and natural gas, as Fox Weather warns that a super El Niño may be on the way. Fox Weather says that New data reveals 100% chance of strong ‘Super’ El Nino forming this year

The FOX Forecast Center said an El Niño of this caliber being predicted so early means it could be an event to look back on for years to come. he latest long-range European forecast shows there’s a 100% chance of a super El Niño, potentially suppressing hurricane activity and making for a wetter fall and winter in the southern U.S. The European Centre for Medium-Range Weather Forecasts (ECMWF) issued their May long-range forecast model, which ups the chances of the strongest El Niño ever hitting by November. Back in March, data only reached through September, when there was only about a 55% chance of reaching the Super El Niño threshold.The FOX Forecast Center said an El Niño of this caliber being predicted so early means it could be an event to look back on for years to come. Typically, a strong El Niño like this one would mean suppressed hurricane activity in the Atlantic, and increased activity in the Eastern Pacific.

Nat gas has shown an impressive reversal in recent days, climbing to multi-week (or 6–8 week) highs around the $3.00–$3.11/MMBtu area for prompt contracts (e.g., June futures recently trading near $3.08–$3.28 with solid gains of 2–3%+ in sessions). This bounce comes on the back of hot weather forecasts boosting cooling/power demand and production cutbacks tied to spring maintenance and producer discipline amid earlier weak prices. Futures have reversed higher from recent shoulder-season lows, holding firm near two-month highs despite some intraday pullbacks. The move reflects a shift from oversupply concerns to short-term tightening signals. Support around $2.80–$2.90; resistance near $3.10–$3.20. Momentum has improved with weather-driven buying.

FOX Weather is highlighting a massive heat wave gripping the eastern half of the U.S., with summer-like temperatures soaring 20–30°F above average along the I-95 corridor and broader East Coast/Mid-Atlantic. Record-breaking May highs are expected in major cities from the Midwest to Northeast, with 80s–90s widespread and potential triple-digit readings in the South/Texas. This pattern is driving strong air-conditioning demand and power burn, a classic bullish catalyst in the shoulder season. Heat alerts for millions; first 90-degree days of the year in many spots. Early heat can slow storage injections or prompt earlier draws if sustained. Broader forecasts show above-normal temps into late May, potentially challenging 150+ daily records. Any extension into June would further support cooling loads. So keep up with this by downloaded the Fox Weather ap and stay tuned to the Fox Business network. “Folks, we are seeing ABSOLUTE FIRE volatility in the markets right now. If you want to stay ahead of these massive moves, you need to get signed up for my Phil Flynn Reports. Pick up the phone right now and call to open your account: 888-264-5665 Or shoot me an email at pflynn@pricegroup.com And make sure you’re following me on X @EnergyPhilFlynn for real-time updates!



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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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