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The Energy Report

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


The Hormuz Houdini Act: Super Tankers Vanish Through the Strait. The Energy Report 08/13/2026

Now you see it, now you don’t. Oil prices are falling on a huge 17.4 million-barrel weekly surge in U.S. crude supply—the biggest since January 2023—and on talk of weakening demand, as both OPEC and the IEA lowered their 2026 oil-demand forecasts yesterday. But prices are also falling on reports that the U.S. is creating an illusion that would make David Copperfield jealous.

Just step right up, ladies and gentlemen, and watch us make these oil supertankers disappear right before your very eyes. Not only will we make these oil tankers invisible to the enemy and tanker-tracking companies, but we’ll also make them reappear outside the Strait of Hormuz, undetected. Abracadabra—get the oil in and out in the middle of the night, no straitjacket required.

The reports which are probably true based of the fact that oil inventories are ow in the us just 2 % below the five-year average gained credence after Energy Secretary Chris Wright said that “ In coordination with the U.S. military, the U.S. Department of Energy maintains the best available data related to oil and oil products leaving the Arabian gulf. Many private businesses undercount the number of ships leaving the Strait of Hormuz due to ships moving covertly through the waterway.” Poof!

Mr Wright says that , an average of 9 million barrels of oil are passing through Hormuz daily, while between 5 million to 7 million barrels are reaching consumers through “newly upgraded pipelines and export facilities.”

That news will of course put more pressure on what is left of the Iranian regime. The Strait of Hormuz is their last shed of hope that they can keep the war that they have already lost.

Of course, there are some that do not believe that our Energy Secretary is telling the truth. Thet are many saying that this is just an attempt to manipulate oil prices. Yet the oil makes especially in the back end believe in magic.

Bloomberg News reported today that Iraq’s state oil marketer, SOMO, said Abu Dhabi’s main energy company was among the firms buying Iraqi crude and moving cargoes through the Strait of Hormuz. “Adnoc is one of the buyers SOMO deals with,” along with other companies, SOMO Director-General Ali Nizar said in a text message. He added that SOMO sells to any buyer able to load the oil and exit the strait.

Bloomberg reported Wednesday that Abu Dhabi National Oil Co.’s trading arm is offering Iraqi crude to Asian buyers by shuttling cargoes through Hormuz and typically transferring the oil to vessels just outside the waterway. Tankers often switch off their transponders to avoid detection, helping Middle East oil continue flowing to global markets.

Yet Iran still thinks it runs the Strait of Hormuz. The newly appointed head of Iran’s Basij paramilitary force said Thursday that the strategic waterway remains “under Iran’s control and management” — just one day after President Trump declared the United States has “total control” of it. Hossein Taeb claimed the U.S. tried to undercut Iran’s regional influence by starting another fight in the Strait, only to get beaten again. Never mind that Tehran keeps pretending it somehow has no real air force or navy while still talking tough about the world’s most important oil chokepoint.

While the EIA and OPEC have lowered their global oil demand forecasts for this year partly due to China, next year looks better. In the US, EIA data shows demand remaining very robust, reflecting a strong economy. Refining capacity is still the key bottleneck: US refiners are running well above long-term average utilization rates, Ukraine’s hits on Russian refiners have kept diesel tight, and although crack spreads have eased some, they remain just off record highs. Crude oil might not need as much time to recover after the conflicts as refined products will. This should be a wake-up call for the world to add refining capacity. Demand forecasts Recent agency reports show downward revisions to 2026 global demand growth, with China a notable factor in the softer outlook, while 2027 looks stronger in several projections.

EIA (August 2026 STEO and related comparative analyses) has revised 2026 global liquids demand growth lower (examples around 0.6 mb/d in some assessments, with OECD contraction offsetting non-OECD gains). China contributions have been moderated in places. For 2027, EIA sees stronger expansion (around 1.6 mb/d in one comparative view).

OPEC has held or shown relatively firmer 2026 growth near 1.4 mb/d (non-OECD led, including China/India/Other Asia), with similar levels into 2027. Some earlier comparative notes flagged mixed or downward China tweaks in certain months. Broader context includes economic/macro factors and higher prices weighing on consumption in some regions; non-OECD (especially Asia) still drives most growth.

In the US, the picture is stronger. EIA data and STEO commentary highlight robust petroleum demand tied to a solid economy. Recent weekly figures show total products supplied in the ~20.6–20.7 mb/d range (four-week averages), with distillate product supplied up year-over-year in recent periods. US GDP growth is projected positive (around 2.0% for 2026 in recent STEO summaries), supporting domestic fuel use. Refinery crude inputs have been running at elevated levels (highest since 2019 in the first seven months , consistent with healthy demand.

Refining capacity remains the constraints refiners are operating well above the long-term average utilization rate. Latest weekly EIA data (week ending ~Aug 7, 2026) shows operable capacity utilization around 96.2–96.5%, with crude inputs near 17.2 million b/d. Historical average utilization sits closer to ~90%; recent readings are in the mid-to-high 90s and near the top of historical ranges. Some operators have deferred maintenance to capture strong margins and demand.

Ukraine’s ongoing drone/missile campaign against Russian refineries has significantly tightened diesel (and other products). Multiple sources report widespread hits (dozens of facilities, covering a large share of Russia’s capacity), with offline refining at times estimated in the multi-million b/d range (e.g., processing rates down sharply, diesel/gasoline/jet output reduced 20%+ in some periods). This has cut Russian product exports (diesel loadings sharply lower; temporary or considered export bans), forced use of domestic reserves, and created regional shortages inside Russia. The result is tighter global distillate balances, especially in the Atlantic Basin/Europe, with buyers competing for alternative supplies (including from the US).

Crack spreads (refining margins) have eased from peaks but remain elevated and just off record territory. Reports noted 3-2-1 cracks approaching ~$67/bbl near end-July before trading lower (around the mid-$50s in early August examples), still historically high. Diesel cracks in particular have been strong amid the Russian disruptions. High margins are supporting elevated US runs but also highlight the structural shortage.

Crude oil supply can recover faster once geopolitical disruptions ease (e.g., Middle East flows, Russian crude availability), but refined products face a longer lag because lost or offline refining capacity takes time to repair/rebuild and new builds are limited. Global net capacity additions have been subdued relative to historical norms, with closures and insufficient new projects amplifying tightness—especially for middle distillates.

This situation is a clear wake-up call: the world needs more refining capacity. High utilization, strong margins, and product tightness (despite softer crude in some scenarios) underscore that simply producing more crude is not enough if it cannot be processed into gasoline, diesel, and other fuels at scale. US refiners are already running hard and exporting to help fill gaps left by Russian outages; sustained high margins may eventually incentivize more investment, but the lag is real. In short, demand is resilient in key markets like the US even as global forecasts are tempered for 2026 (China-related softness), refining bottlenecks and product tightness (diesel especially) dominate the near-term story, and the structural need for more refining capacity is clearer than ever.

The EIA drops its weekly natural gas storage numbers this morning at 10:30 a.m. ET for the week ending August 7. Last week we got a 33 Bcf injection that left working gas at 3,117 Bcf — still sitting about 195 Bcf (roughly 6.7%) above the five-year average and only 12 Bcf under year-ago levels. Early estimates are clustering around a 35–36 Bcf build this time. That’s right in line with the five-year average injection for the period (around 33 Bcf) and a touch heavier than last week’s print.

If the number comes in near that range, the surplus to the five-year average should edge a little higher and the year-over-year deficit will widen a bit further. It was a relatively quiet week on the demand side. Temperatures ran closer to normal across much of the Lower 48 during the survey window, wind generation picked up, and LNG feedgas stayed soft thanks to ongoing maintenance at a few Gulf Coast terminals. Production remains robust, so the market continues to put more gas in the ground than it’s taking out.

Looking at the Fox Weather outlook, that quieter pattern is about to change.

Fox Weather say that a strong heat ridge is settling in over the South-Central and Southeast, with widespread 90s to low 100s and heat indices pushing into the 105–115 range. Models show this heat hanging around well into next week, which should drive higher power burn and air-conditioning demand just as we head deeper into injection season.

The North and Midwest look closer to seasonal, but the southern heat is the real demand driver to watch. Zoom out and the bigger picture is still the same one the EIA highlighted in this month’s Short-Term Energy Outlook: inventories are on track for the highest pre-winter levels since 2016 — potentially near 3,985 Bcf by the end of October. Strong domestic production plus lower-than-expected LNG demand has the storage cushion looking very comfortable heading into the shoulder season.

A build right around the five-year average shouldn’t light any fires under prices. Henry Hub has been stuck in the mid-to-upper $2 range, and the market keeps reminding us that surplus gas is the dominant theme right now. Anything noticeably lighter than 33–35 Bcf would give the bulls a little oxygen; anything heavier just reinforces the bearish storage math. The incoming southern heat from the Fox Weather outlook could start firming demand in the weeks ahead, but for now the storage math still rules. We’ll get the official number in a few hours. Until then, the fundamentals still favor the path of least resistance being sideways-to-lower until the weather or LNG demand decides to change the story. Download the Fox Weather ap to keep up with the wild weather and stay tuned to the Fox Business Network. Get my trade levels and open our account by calling 888-64-5665 or 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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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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