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The Energy Report

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


The 11th Day. The Energy Report 11/11/2026

At the 11th hour of the 11th day of the 11th month, we pause to remember, pray for and thank every veteran who has sacrificed so much for our country. That’s the moment the guns went quiet at the end of World War I in 1918, and it’s still the perfect time to stop and count our blessings. If you look at oil and gasoline prices this Veterans Day, we also owe a big thank-you to the men and women serving right now. They’ve helped push this market back toward normal. More oil is moving out of the Middle East, and refined products, which have been the Achilles’ heel of this market, are finally starting to flow. You can already see it at the pump. As Bloomberg’s Javier Blas pointed out, the national average for gasoline fell below $4 a gallon yesterday, to $3.9788, for the first time in 114 days. Blas notes that’s still about 30% above pre-war levels, but it’s a whole lot better than the 53% jump we saw at the peak in May. Diesel has eased to about $6.16 a gallon. We’re not out of the woods yet, but we’re on the path.

It’s not just crude that’s flowing again, either. Blas reports that Middle East exports of refined products, and even LNG, started picking up in late October and have accelerated in early November. As he put it, “Every day, Iran loses leverage as it cannot stop the flow via Hormuz and bypass routes. Yes, Iran can escalate. Would it?” That’s the million-dollar question, or maybe the $90-a-barrel question.

Oil is bouncing this morning with a bit of a risk-on feel after getting hit hard yesterday. At one point Tuesday, crude was down more than $3 a barrel. The hotter-than-expected CPI report weighed on it, and so did growing hopes for a peace deal after US officials played down the need for more strikes on Iran. President Trump, after meeting with Qatar’s prime minister, said he sees “positive momentum.” Then Iran pushed back. Security chief Mohsen Rezaee called reports of talks in Qatar “a pure lie” and said the Strait of Hormuz stays shut until the US meets Tehran’s seven conditions. Foreign Minister Abbas Araghchi said it could reopen within two days if those demands are met. Talk about mixed signals.

This morning, Iran turned the rhetoric up another notch. Bloomberg reports that Rezaee told Al Mayadeen that Iran won’t remove “a single atom” of enriched nuclear material from the country. He said Iran told Russia the material stays home for domestic use, including designing nuclear-powered ships and submarines. He also warned that any US attack would trigger strikes on US military bases, “including those far away,” and said ending the war on all fronts, especially in Lebanon, is a key condition for any talks. That’s not the language of a regime ready to cave, and it’s helping put a floor under oil this morning. But tough talk is one thing, and stopping the flow is another. Kemp Energy Reported that GLOBAL TANKER charter rates are slumping despite continued attacks on shipping in and around the Strait of Hormuz and the ambiguous state of no war no peace between the United States and Iran. The Baltic Exchange’s Dirty Tanker Index has fallen in 18 of the last 20 trading days. The index has retreated by nearly 40% from its peak on October 13 to the lowest for almost two months.

Still there are risks, yet they seem to have less impact on the market. The Washington Institute for Near East Policy counted 37 ships attacked in and around Hormuz in October, the most in any month of the war, with 10 more so far in November.

A tanker was hit northeast of Lima, Oman, and Iran’s Revolutionary Guards said tankers caught fire after hitting mines on what they called an “unauthorized route.”

The Houthis are also claiming new strikes on Saudi targets. And LSEG Oil Research points out that even if there’s a deal, ships won’t come rushing back until the mines are cleared, the insurance costs come down and shipowners feel safe.

Technically, though, oil still looks like it has more downside to go, and that downside is already showing up at the gas and diesel pumps. The American Petroleum Institute reported a hefty 9-million-barrel build in US crude supplies, and we get the official Energy Department numbers Tomorrow it’s veteran’s day delays the report. . If the government confirms anything close to that, the bears will have a little more ammunition.

Here’s something that should make every American proud. The Energy Information Administration’s Short-Term Energy Outlook projects US oil production will hit a record 13.9 million barrels a day in 2026. That’s the fourth consecutive year of record output. I’ll admit I was rooting for an even 14 million, because it’s a lot easier to write. The good news is that it’s coming. The EIA has the fourth quarter at about 13.99 million barrels a day and sees a record 14.3 million in 2027. Still, 13.9 million barrels a day is an incredible achievement for the US energy industry and for the country. American ingenuity changed the course of history.

I don’t think people realize how much the shale revolution has done for the average American. Sometimes we take things for granted in this country, and honestly, I think we’re all a little spoiled. I’m guilty of it myself. But think about the blessings we have here and how many of them come from the oil and gas industry, which has been a backbone of our economy. Even in the middle of this war, the EIA expects the US to be a net exporter of more than 4 million barrels a day of crude and petroleum products this year.

President Trump put it his own way at a rally in Perry, Georgia, when he said “We’re making a freaking fortune.” Back in the 1970s, oil prices like these would have been a death blow to the economy.

Sure, high energy costs are showing up in inflation data. Yesterday’s CPI showed that, and diesel is still painful for truckers and farmers. But compare where we are with Europe and I’ll take our seat every time. The oil and gas industry is adding a lot to our GDP. The key now is that the industry keeps reinvesting, so production keeps growing and prices keep coming down.

The EIA isn’t expecting much relief on crude this year. It expects Brent to stay near $100 a barrel through the end of 2026. Prices rose for a third straight month in October as global inventories fell, tankers were attacked in the Persian Gulf, shipping capacity got tight and transportation costs went up. The EIA assumes most Middle East production outside Iran returns to pre-war levels by the middle of next year. As the world refills its depleted inventories, it sees Brent drifting down to about $77 by the fourth quarter of 2027. For the full year, the EIA has Brent averaging $97 a barrel in 2026, before falling to $86 in 2027. I for one think that’s going to be a little bit on the high side myself.

At home, inventories are tight. US commercial crude stocks fell to 410 million barrels at the end of October, the lowest end-of-October level since 2014. A wide Brent-WTI spread has made it very profitable to ship American crude overseas, so exports rose and imports fell. Refiners have also been running hard. The EIA expects stocks to stay below the five-year average until about the middle of next year. But again I don’t know if uh the EIA is being too negative because I have a big belief that the US energy industry could rise to the occasion quicker than people believe especially if we end the war with Iran and if we can get some type of a ceasefire between Russia and Ukraine.

For drivers EIA says that there’s some good news and some bad news. The EIA expects gasoline and diesel prices to come down in 2027, just not as much as it thought a month ago. Diesel is now forecast to average $5.03 a gallon next year, 12% higher than last month’s forecast. Gasoline is forecast at $3.73, up 5%. The EIA now assumes global product markets stay constrained through the end of 2027. That keeps crack spreads wide and US refineries running hard. The IEA agrees, saying the tightness in diesel markets will continue into 2027.

Natural gas is the opposite story. A warm start to November has cut heating demand, and storage will be fuller than expected. The EIA cut its winter Henry Hub forecast to $2.87 for November through March, 16% below last month’s call. Meanwhile, gas prices overseas are at their highest since December 2022. US LNG terminals are running near full capacity, and the EIA sees LNG exports reaching 19 Bcf a day in 2027, up 26% from 2025. American gas is cheap at home and in demand abroad.

On power, the EIA sees US electricity generation up 2.7% this year to almost 4,390 billion kilowatt-hours, driven by commercial demand and a hot summer. Most of the growth comes from utility-scale solar. Coal consumption falls 7% this year, but exports are holding up. That’s helped by China’s commitment to buy 10 million metric tons of US coal in both 2027 and 2028.

Neither agency has put out its November report yet. The IEA’s November Oil Market Report is scheduled for Friday. OPEC’s report should also be out soon. The IEA is as always the most bearish one on demand. In October it forecast world oil demand to fall by 2.5 mb/d y-o-y in 4Q26 and 2.6 mb/d on average in 2026. It still has the market in deficit through year-end, because supply losses are running ahead of the drop in demand. It also warned that renewed US-Iran hostilities could derail projections for an oil market surplus next year.

OPEC sees it very differently. It cut its 2026 demand growth estimate for the sixth month in a row, to just 180,000 bpd. But it raised its 2027 forecast to 2.55 million barrels per day next year, bringing average consumption to 108.3 million bpd, betting the world will need a lot of oil to rebuild inventories after the war. That’s a big gap between the two agencies. This week’s reports will show whether the IEA starts to see demand coming back or OPEC starts to scale back its optimism. The market will focus on any adjustments that it sees to these two agency reports.

Natural gas finally found its spark, and the shorts are feeling the heat. December natural gas rose 7.8 cents yesterday to settle at $3.296, its highest close since Sept. 24. That’s three straight up days and a gain of almost 35 cents, nearly 12%, on top of Monday’s jump of more than 7%, the biggest one-day gain in about six weeks. This morning December is hanging around $3.29 to $3.31. Money managers were sitting on a record 636,576 short-only positions across Henry Hub contracts, and the first real cold forecast of the season sent them running for the exit.

Speaking of cold, Fox Weather says winter is knocking on the door. Fox Weather meteorologists are tracking a storm that moves out of the Great Lakes and Ohio Valley today and could strengthen into a nor’easter late this week. It would bring wind, rain and the first snow of the season to parts of the Northeast and New England. Kiyana Lewis says interior and higher-elevation spots in New England and New York could see up to a foot and a half of snow from Thursday through Saturday, while the I-95 corridor mostly gets rain and gusty winds. Steve Bender is watching for lake-effect snow around the Great Lakes. Once the storm clears, temperatures plunge across the East, possibly as far south as the Gulf Coast and Florida, and about 160 million people could see below-average temperatures on Saturday. That’s music to the ears of the natural gas bulls.

US LNG is the other big piece of this rally. Feedgas averaged a record 19.3 billion cubic feet a day, and BloombergNEF counted net flows to export terminals at a record 21.6 billion cubic feet a day on Saturday. American gas is heating the world.

The bears haven’t packed up yet, though. Storage is around 3,801 billion cubic feet, 54 Bcf above normal, and NOAA’s November outlook still leans warm under a strong El Niño. The EIA just cut its Henry Hub forecast for this winter to $2.87 after a mild start to the month. If the cold doesn’t show up, this squeeze could unwind as fast as it started. Some technical traders say a close above $3.35 opens the door to $3.50, and maybe even $3.80.

Meanwhile, look at what the rest of the world is paying. Europe’s TTF jumped 2.7% this morning to about €87 per megawatt-hour, roughly $28 per MMBtu, on the renewed Hormuz attacks, and Asian LNG is near $29. That’s more than eight times what we pay here. Middle East LNG may be flowing again, but every tanker attack reminds Europe and Asia why American shale gas is such a blessing. Iran can’t block it.

One more story you won’t want to miss: you know the economic pressure on Iran is working when Tehran goes after the guy who designed it. Fox Business correspondent Edward Lawrence reports that a senior administration official told him Treasury Secretary Scott Bessent has moved out of his house and onto a military base because of threats from Iran. According to that official, the Secretary had to move because his economic blockade on Iran is working, and Iran wants to get to the architect of that strategy. A Treasury spokesperson told Lawrence, “The Secretary will not be deterred by the Iranian regime’s threats,” but wouldn’t say when the move happened. To me, that says Washington’s squeeze is hitting Iran where it hurts and Tehran is getting desperate, which is one more reason this market can turn on a dime. Hats off to Edward Lawrence for the scoop, and to Secretary Bessent for standing firm.

So today we give thanks for our blessings, and most of all for the people who sacrificed to protect them. Our veterans helped protect the American dream: the dream of building something and earning a profit, the dream of making our country stronger, and the ingenuity that comes from trying to make the world a better place. To every veteran out there, thank you.

With a nor’easter brewing and the cold coming, the weather could flip the script in a hurry, so download the Fox Weather app and stay ahead of the storm. Watch me on Fox Business Network, and sign up for the wildly popular Phil Flynn Daily Trade Levels. Then call me at 888-264-5665 to open your Price Futures Group account today, or email me at pflynn@pricegroup.com. Don’t wait for the market to move without you!



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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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