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The Energy Report

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


Rejected. The Energy Report 05/11/2026

It was a nice try, but President Trump rejected Iran’s counter proposal to end the war as Iran cannot seem to give up on their dreams. Iran had hefty wishlist that includes hefty war reparations from the US, full recognition of Iranian sovereignty over the Strait of Hormuz, they also want to stricken the letter “E” from the English language. Oops, that last one was Steve Martin. They did ask for a complete lifting of sanctions, release of frozen assets, and an immediate end to the American naval blockade of its ports without realizing that they have already lost this war.

President Trump rejected Iran’s counterproposal via a post on Truth Social shortly after it was conveyed through Pakistani mediators:

“I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it — TOTALLY UNACCEPTABLE!”

Tehran rejected the US proposal, calling it nothing short of a degrading “demand for surrender.”

Now, Tehran is standing firm, requiring that all incentives be provided in advance before agreeing to reopen the strait or engage in substantial nuclear negotiations. The rejection has intensified concerns about ongoing conflict and persistent disruption in the Strait of Hormuz. Yet at the same time, it seems the reaction is more subdued than you might think with oil having a hard time staying over $100 a barrel. Brent crude did surgy more than $4 per barrel (approximately 4–4.65%) during early Asian trading, with prices approaching $100 or higher and some reports noting a brief peak at around $103.50.

At the same time, the back end of the oil futures curve remains confident that supply will come back online soon. Traders are pricing in a relatively swift normalization, with steep backwardation in WTI contracts signaling expectations that spot prices will ease significantly by late 2026 as disruptions fade.

In March 2026, global oil supply disruptions surged to around 9.1 million barrels per day (mbd), widening to an estimated 13.7 mbd in April amid the effective closure of the Strait of Hormuz following the U.S.-Iran conflict. This represents one of the largest supply shocks in oil market history, with cumulative losses already exceeding 1 billion barrels and projections of 1.2–2 billion barrels total if normalization drags on.

Even if the conflict were to end immediately, analysts warn it would take weeks to several months for production and shipping to ramp back up fully. Storage tanks in the Gulf have filled rapidly, infrastructure has been curtailed or damaged, and tanker routes, insurance, and logistics would need time to normalize. Gulf producers (Saudi Arabia, Iraq, Kuwait, UAE, etc.) shut in roughly 7.5 mbd in March, rising toward 9+ mbd in April, with broader ripple effects including refinery outages.

Offsetting this tightness, non-OPEC+ producers—particularly in the Americas—are stepping up where they can. U.S. output has held near record levels (around 13.5–13.7 mbd for crude and liquids), though it is now plateauing in 2026 due to capital discipline, maturity in key basins like the Permian, and a shift toward returns over aggressive growth. Canada continues to see modest gains (supported by projects like the Trans Mountain expansion), adding hundreds of thousands of barrels per day in recent forecasts. Mexico’s production remains challenged but contributes to regional supply stability.

Other bright spots include incremental boosts from Brazil, Guyana, and Norway, helping non-OPEC+ supply grow overall even as OPEC+ volumes crater. Libya has also managed production surges amid the chaos, capitalizing on higher prices. And as of early May 2026, the U.S. Strategic Petroleum Reserve (SPR) has seen ongoing releases totaling around 17.5+ million barrels from the current 172-million-barrel drawdown announced in March 2026.

The market is walking a tightrope: Near-term physical tightness has driven prices higher (Brent around $100–115/bbl range recently, with volatility), inventories are drawing sharply (hundreds of millions of barrels already pulled in Q1–Q2), and demand has been forced lower in some regions. Yet the curve’s optimism reflects faith in eventual resolution—plus North American resilience—preventing outright panic. Risks remain elevated: any prolongation of the Hormuz issues could push the back end even higher, while a quick peace deal might flood the market with pent-up supply and trigger a sharp correction.

In short, the front end feels the pain of today’s shortfall, but the back end is betting on tomorrow’s barrels—and North American producers are quietly doing their part to make that bet pay off. The coming months will test whether reality matches the curve’s confidence.

Natural gas futures are showing some resilience this morning, hovering near recent support levels around the $2.75–$2.85/MMBtu zone for the June contract after a lighter-than-expected storage build and a constructive short-term Fox Weather Outlook. While shoulder-season fundamentals remain heavy with ample supply and storage well above average, the market is finding a floor on any signs of lingering demand and production discipline.

The EIA reported a +63 Bcf injection for the week ending May 7, landing below consensus expectations around +72–74 Bcf and lighter than the five-year average build. Working gas in storage now sits at about 2,205 Bcf — still roughly 139 Bcf (or ~6–7%) above the five-year average, but the miss provided a bullish surprise that helped prices stabilize after recent pressure.

Production remains robust near record levels, but there are signs of some curtailments and maintenance helping to balance the market. LNG exports continue to provide a solid floor, even as some terminals see seasonal maintenance.

Fox Weather is highlighting an unseasonably cool pattern lingering across the Northeast, Mid-Atlantic, Great Lakes, Ohio Valley, and parts of the Midwest through the middle of the week. Highs in the 50s to mid-60s with overnight lows dipping into the upper 30s–40s in spots could keep a bit of late-season heating demand alive longer than expected. This moderates what would otherwise be aggressive storage injections heading deeper into shoulder season.

Beyond the next 5–7 days, the outlook trends milder to warmer across much of the Lower 48, with above-normal temperatures building in the South, West, and eventually the East. Early cooling demand could start to pick up in Texas and the Southwest, but overall, the pattern supports moderate-to-low demand in the near term before summer heat potentially ramps up power burns later in May/June. Download the Fox Weather app for the latest maps — it’s been spot-on for these shoulder-season shifts.

Short-term (this week into next): Expect continued volatility around weather. Cooler-than-normal shots could slow builds and support a “buy the dip” tone, especially with prices testing oversold levels. A follow-through storage print next Thursday will be key.

Medium-term (into summer): Fundamentals lean bearish-to-neutral with fat storage and strong production, but LNG exports, any heat waves, and potential export strength could provide upside spikes. Analysts eye Henry Hub averages near seasonal norms around $3.00–$3.10/MMBtu in Q2/Q3 if weather cooperates, though downside risks remain if injections stay heavy.

Warmer-than-forecast temps or sustained high output could pressure prices lower. On the flip side, stronger power demand, LNG flows, or any production surprises could spark a rally from these depressed levels.

Natural gas isn’t out of the woods fundamentally, but the lighter storage print and Fox Weather’s cooler near-term outlook are giving bulls a little breathing room. At current levels, the risk/reward favors nimble trading — buy dips with an eye on selling rips unless we get a sustained weather or demand catalyst. Stay tuned to Fox Business Network for updates, and keep an eye on those weather maps. Shoulder season can flip fast!

Questions? Call me at 888-264-5665 or email pflynn@pricegroup.com to discuss strategies.



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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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