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The Energy Report

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


The Crack Back. The Energy Report 09/29/2026

The diesel crack is finally giving something back.

After weeks of triple-digit heat, the spread is coming off the highs as a few things that actually matter to the physical market showed up at the same time: barrels from Joliet, a flicker of diplomacy from Tehran, and a quieter tape on Russian refining. There have been no fresh headline attacks on Russian refineries in the latest session even as Moscow’s diesel export ban for producers is being walked through October. That is not the same as Russian diesel coming back to the world. It is a pause in the damage after a summer of Ukrainian drone hits that already knocked several of Russia’s big diesel plants — Kirishi, Volgograd, NORSI and others — down hard enough that three of the six largest diesel producers were running at a fraction of capacity or offline. Russia used to ship about 10 percent of seaborne diesel. Those barrels have been missing. The ban that was due to expire September 30 is being extended to October 31 so Moscow can rebuild domestic stocks and get through delayed autumn maintenance.

President Trump has already told Zelenskyy to stop knocking out Russian diesel infrastructure because the shortage is “hurting the world.” A few quiet nights does not refill Europe’s tanks. It does take some of the panic out of the next barrel.

ExxonMobil’s Joliet refinery — the Midwest workhorse that can put roughly 11 million gallons a day of gasoline and diesel into Illinois, Indiana, Iowa, Michigan, Ohio, Wisconsin, and points east — is coming back after the September 13 ComEd power outage that tripped the plant and forced a full shutdown. Power was restored that same evening, but a refinery is not a light switch.

Units had to be stabilized, then floodwater overwhelmed a pump mid-week and delayed the restart. By last week the FCC and reformer were coming up; third-party monitors had the plant nearing completion of the restart.

That is real Midwest distillate that was missing from the system while U.S. inventories were already running well below the five-year average and Europe’s diesel crack was printing over $100 a barrel against North Sea crude for the first time on record. When a 260–275 kb/d plant that feeds the pipelines you actually drive on starts making product again, the crack has a reason to breathe.

The other reason the crack is backing off is Iran. President Trump rejected Iran’s seven-day peace plan over the weekend — the one that wanted sanctions lifted, ports unblocked, frozen assets released, and Hormuz reopened on a timetable Tehran liked. He called it the deal they might have gotten a year ago. They overplayed their hand.

Then the tone shifted. A U.S. official said Monday that President Trump is open to sanctions relief and unfreezing funds if Iran delivers concrete progress on the nuclear file. Later that was denied. Mediators were talking separately with both sides. President Trump said he reached out and expects more talks this week. Mixed reports circulated that Iran might trade away nuclear ambitions for sanctions relief; some Iranian outlets later walked that back. That is how these things always start — leak, denial, another leak.

Do not confuse “talks” with “done.” Trust is the whole problem. What’s left of the Iranian regime has a long record of saying one thing in English and another in Farsi.

The Trump team has made clear there is no deal unless the nuclear issue is actually addressed, not papered over. At the same time, the economic pressure is no longer theoretical. Official Iranian inflation has been running in the high 60s to nearly 90 percent year-over-year depending on the month; food prices have been far worse.

The rial has been in free fall. Exports and imports were already slashed by the blockade. People who watch the numbers believe the regime cannot sit in this vise for many more weeks without something giving. That is why both sides are looking for an off-ramp even after the last proposal was thrown back. So the market is doing what it always does when the worst-case supply story starts to fray at the edges: it takes some of the panic premium out of the crack. Joliet barrels coming home, a possible path — however narrow — to less disruption through Hormuz, and a pause in new hits on Russian plants while the export ban runs through October is not a guarantee we have seen the high though it is looking possible.

Distillate stocks are still thin. Russian restrictions are still on the books. Fall maintenance is still on the calendar. But if you have been waiting for a reason to believe the diesel crack might have put in a top, this is the first combination of physical supply and diplomatic noise that actually looks like one.

Natural gas: up on the pipes, then back on the repair talk , Nat gas spent the back half of last week doing what it always does in late September — trading the pipes, not the weather. TC Energy’s Columbia Gas Transmission declared force majeure after a leak at the Saunders Creek regulator on the Mountaineer XPress Line 100 in West Virginia. Early talk was as much as 1.8 Bcf/d of Appalachian gas hung up; the realized production hit came in closer to 1.4 Bcf/d. That was enough to squeeze the screen to a 13-week high. Then Columbia said it hoped to finish the work over the weekend and keep the force majeure only through the September 28 gas day. Futures gave most of Thursday’s rally back on Friday. That is the whole story in one sentence: the outage was real, the line-pipe integrity scare was smaller than the first headline, and the market sold the repair.

It was not the only bottleneck. ANR’s Mermentau and Grand Chenier compressor work cut Lake Arthur southbound capacity by nearly 0.70 Bcf/d for the better part of a week and widened the ANR Southeast discount to Henry before flows snapped back when the units came up. Boardwalk’s Texas Gas Transmission had a 16-inch rupture and fire near Jennings, Louisiana, on September 18 — homes evacuated, U.S. 90 shut, PHMSA on the scene, no injuries. Trunkline posted Longville station maintenance. El Paso Natural Gas rolled out an updated October calendar with more station work and line remediation on the Southwest system. Fall pigging and unit outages are stacked into early October on Southern Natural and the Rockies lines as well. None of that is a winter crisis. All of it is a reminder that this grid still runs on 50-year-old compressors and single-station corridors while LNG and Permian takeaway keep adding load.

Storage is not the bull case. Working gas through mid-September was about 3,351 Bcf, a shade above the five-year average. Henry Hub has been living in the high $2s to low $3s; the prompt was back near $3.08–$3.20 after the Columbia squeeze faded. The next EIA print and whether Mountaineer XPress actually holds rates will tell you if last week was a one-day short-covering event or the first real tightness of the injection-season tail. Watch the weather app. A cold first half of October with more pipe work still on the board is how $3 becomes $4. A mild week with the West Virginia leak behind us is how the screen goes back to sleep.

that’s why the Fox Weather outlook is key for nat gas. Fox Weather has been tracking an early-season nor’easter off the East Coast — days of onshore wind, coastal flooding, and beach erosion from the Carolinas into New England. It’s not a deep freeze, but it is the first real taste of fall weather in the biggest heating-demand corridor in the country. Those systems matter: they pull the first heating degree days into the Northeast and Mid-Atlantic while the South is still running late-season power burn.

The bigger picture is the winter outlook. NOAA and Fox Weather both flag a very strong El Niño heading into 2026–27 — the kind that often means a milder, wetter winter for much of the East and a delayed start to the heating season. Storage is already set up fat: EIA has inventories heading toward about 3,969 Bcf by Oct. 31, 5% above the five-year average and the highest pre-winter level since 2016. Production is running near record, around 111–112 Bcf/d. AGA says households heating with gas could spend about 14% less this winter than last.

Don’t get too comfortable. The polar vortex is starting the season stronger than normal. Models have it holding through December and then potentially weakening in January — that’s when you get the surprise Arctic shots that empty the East region storage that started the injection season already behind. A nor’easter in late September is a reminder: one stalled coastal storm can flip the short-term balance overnight.

So watch Fox Weather, not just the 6–10 day maps. The first nor’easter tells you when heating demand actually shows up. The El Niño winter outlook tells you whether that demand sticks. That’s the whole nat gas story right now — fat storage, record supply, and weather that can still steal the show.

Make sure you download the Fox Weather app to keep up on the market-moving weather. Also stay tuned to the Fox Business Network. Invested in You. Get the trades 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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Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com.