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The Energy Report

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


Can’t Get This Strait. The Energy Report 08/7/2026

Oil just shrugged off another round of Iranian drama in the Strait of Hormuz and kept climbing. Brent pushed above $84 and settled into the low-to-mid $80s, while WTI hung around $77–$79. Thursday-night strikes near Qeshm Island (Iranian media calling them hits on “hostile targets”) didn’t trigger the old panic spike. The market’s seen this movie before. Flows are still running well below pre-war normals, but every time the shooting slows, ships start moving again. Physical buyers are getting used to the noise.

Iran is still trying to lock in a deal with Oman that would give Tehran a bigger say over who sails through and what they pay. They’re talking about barring U.S. and Israeli ships, charging “service” fees or compensation on others they don’t like, and controlling the routes. This is the same playbook they’ve been running since the earlier memorandum language gave them a seat at the table on future administration of the strait.

And that claim that U.S. ships “can’t” go into the Strait of Hormuz? Laughable. The United States has the most powerful navy on the planet, decades of freedom-of-navigation experience, and a long track record of escorting commercial traffic when it decides the mission matters. Markets treat rhetoric as leverage and theater, not operational reality. And it’s Funny that is what Iran Accused President Trump of.

Oil should get sone support from days jobs report as the odds of a rate hike should diminish. The Wall Steet Journal reported that the U.S. labor market shed jobs in July, an unexpected contraction likely to renew questions about the economy’s fundamental strength at a time when it is also facing elevated inflation.

The Labor Department’s July jobs report showed that the economy lost 23,000 last month, a big shortfall versus the gain of 83,000 that economists surveyed by The Wall Street Journal had expected. Also, revisions to May and June payrolls numbers showed that the economy added 103,000 fewer jobs in those two months. More Americans stepped back from the labor market entirely, according to the Labor Department’s separate monthly survey of households. As a result, the unemployment rate eased to 4.1%, from 4.2% in June, even though fewer people were working.

Yet at the same time I think it should be pointed out the government jobs especially in the Department of Education was the biggest signal drag on the jobs markets they lost 50,000 jobs in July that is the stand up mover in the whole report government overall with its flagged by the Bureau of Labor statistics as a major market mover otherwise meaning federal and straight employment were largely steady this week so the bigger story really is the breakdown of the excessive spending in the Department of Education which should be a positive thing for the economy.

Meanwhile, the real story under the surface is still the diesel crack spreads. They blew out to extreme levels earlier this year on Middle East disruption, Russian refinery problems, and tight inventories. Even as crude has chopped around with every Hormuz headline, those product cracks have stayed elevated—often double normal levels. Diesel has refused to roll over the way crude has at times. That “break” higher in refining margins is what keeps the complex supported and why refiners have been smiling while paper traders argue about the next headline.

: Resilience is the word. Isolated attacks aren’t enough to push us back toward triple digits. Strong product cracks are doing the heavy lifting. The bias stays modestly constructive, but don’t kid yourself—the strait is still contested ground and every Iran-Oman announcement will keep volatility alive. Now over to the gas side, where the weather is doing the talking as we keep an eye on the Fox Weather ap.

The EIA aid that working gas in storage stood at 3,117 Bcf as of Friday, July 31, 2026, according to EIA estimates. That marked a solid net increase of 33 Bcf from the prior week. Inventories sat 12 Bcf below year-ago levels but remained a comfortable 195 Bcf above the five-year average of 2,922 Bcf. At 3,117 Bcf, total working gas continues to sit within the five-year historical range.

Regionally, the East posted a healthy 24 Bcf build to 678 Bcf, putting stocks 3.5% above last year and 5.3% above the five-year norm. The Midwest added 20 Bcf to reach 809 Bcf, now 4.5% higher than a year ago and 7.0% above the five-year average. Mountain stocks edged down 1 Bcf to 237 Bcf (4.4% below last year but still 15.0% above the five-year mark), while the Pacific slipped 3 Bcf to 304 Bcf (essentially flat with last year and 15.2% above the five-year average). South Central inventories declined 6 Bcf to 1,090 Bcf—5.0% below year-ago levels yet 3.6% above the five-year average—with salt facilities drawing 11 Bcf and nonsalt adding 5 Bcf.

Overall, the 33 Bcf injection keeps the storage picture balanced heading deeper into the injection season. Stocks are no longer running ahead of last year, but the surplus versus the five-year average remains intact and provides a solid cushion as we move through the rest of summer. Henry Hub has been grinding around the mid-to-upper $2s (spot recently near $2.60–$2.80 range). Storage continues to build at a healthy clip. The latest EIA numbers show inventories sitting comfortably above the five-year average in many recent weeks, with solid injections even as summer demand kicks in. Production remains robust—Lower 48 dry gas is running near record territory—so the supply side is not the problem.

What is interesting is the demand side, and here we turn to the Fox Weather / forecast models. Both the GFS and ECMWF are painting a stretch of above-normal heat across key demand hubs over the next 7–15 days. Cooling degree days look strong, especially if the hotter GFS solution verifies. Midwest and East Coast power burn should stay elevated as air conditioners work overtime. That kind of weather support is exactly what gas needs when storage is comfortable and LNG exports, while strong, aren’t enough by themselves to drain the surplus.

So the setup is classic late-summer gas: ample supply and healthy inventories keep a lid on prices, but persistent heat keeps a floor under power demand. Watch the weekly storage numbers and whether the models stay hot. If the heat dome hangs around, we could see some short-covering rallies. If it breaks cooler, the bears stay in control.

Make sure you download the fox weather app to keep up on the weather and also stay tuned to the Fox Business Network because they’re invested in you also if you get a chance Sign up today for the Phil Flynn daily trade levels and to open your account you can call 888 2645665 you can also e-mail 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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