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The Energy Report

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


We’ve Got the Strait. So, Bring on the Oil Glut. The Energy Report 11/13/2026

For President Trump, it’s straight talk, and to be honest with you, he’s pretty much right. “We don’t need a deal with Iran. Those days have long since passed. We’ve got their money, Hundreds of Billions of Dollars, and we’ve got their Strait!” he said in a Truth Social post. Gasoline prices have dropped a lot. Oil did bounce yesterday on worries about the peace talks, but there’s more and more evidence that Iran has lost its grip on the Strait of Hormuz, and that could set us up for a glut a few months after the war ends.

The International Energy Agency agrees with me, and I don’t say that very often. I’ve had my issues with the IEA because I think a green-energy bias shapes their forecasts. But now even the IEA says global oil markets are swinging to a surplus for the first time since the Iran war started, because Persian Gulf exports are coming back despite the fighting.

If that sounds familiar, it should. Back on August 21, I wrote “The Coming Oil Glut” here in the Energy Report. Oil was on the verge of a two-week gain then, and many were calling for $100-plus oil. I warned that the back end of the oil curve was starting to price in a glut. My point was that oil wasn’t the problem; refining and transportation were.

More oil was getting out of the Strait of Hormuz than people knew. Saudi Arabia was pumping through its East-West Pipeline to Yanbu on the Red Sea. The UAE was moving 1.5 to 1.8 million barrels a day around Hormuz on its Habshan-Fujairah line. And a “shadow highway” of shuttle tankers, ship-to-ship transfers and dark vessels was moving more than 4 million barrels a day out of the Gulf. On top of that, U.S. production was running near 13.8 million barrels a day, Venezuela was trying to climb back, and the UAE had broken with OPEC after 59 years, effective May 1, to produce without limits. So where are we now? The glut I warned about is showing up on schedule. Gulf exports have rebounded to 74% of prewar levels, U.S. output is steady at about 14 million barrels a day according to the EIA, and Brent has gone from calls for $100-plus to a nearly 20% drop this month alone. The back end of the curve was right, and now the front end is catching up.

Shipments from the region, not counting Oman, reached 18.4 million barrels a day last month. Saudi Arabia raised crude output to 10 million barrels a day in October, and Iraq got to a seven-year high of 4.6 million. “Gulf exports recovered much faster than global oil demand,” the IEA said. That takes the market from shortage to surplus almost overnight.

The IEA raised its 2026 global supply estimate by a hefty 920,000 barrels a day. It now sees a surplus of roughly 2 million barrels a day this quarter, when just a month ago it was forecasting a deficit of about the same size.

For 2026 as a whole, it now sees a deficit of 685,000 barrels a day, down from the 1.7 million it forecast last month, which makes the shortfall 60% smaller. Observed inventories rose in October for the first time since June, and the IEA expects the surplus to get a lot bigger next year On top of that, consuming nations are adding barrels. IEA members will speed up their emergency stockpile releases and send out another 71 million barrels through the end of February. European countries promised to move faster last month after the U.S. called them out for dragging their feet. Demand is the other side of the glut. And even though I am more optimistic on demand the IEA sees global oil demand falling 2.68 million barrels a day this year to 102.3 million, a slightly bigger drop than it forecast last month.

They say consumption should bounce back next year, but it still won’t get back to 2025 levels. Most of the growth will come from petrochemical feedstocks, while “high prices, electrification and fuel efficiency” hold back demand for vehicle fuel.

The market isn’t totally loose yet, though. Most of October’s inventory build was oil sitting on tankers at sea, and onshore stockpiles are still at their lowest in a decade. The IEA says the outlook for diesel and gasoil has only “marginally improved,” and that’s because high prices have cut consumption. Here at home, the EIA reported commercial crude inventories rose 4.7 million barrels last week, and gasoline and distillate supplies rose too, MUFG noted. Before long, Gulf producers will be fighting each other for customers. Saudi Arabia reported a 26% jump in October output, more than its OPEC quota allows, and OPEC+ meets November 29 to set 2027 targets. Get ready for a price war. We may have seen a major top in oil for a while, but the headlines can still whipsaw us along the way. The market isn’t totally loose yet. Most of October’s inventory build was oil at sea.

Still gasoline prices are falling like a rock. AAA shows the national average for regular unleaded at $3.8724 a gallon this morning, down 3.6 cents from yesterday, almost 20 cents in a week and about 47 cents in a month. Regular cost $4.34 a month ago. It’s still about 79 cents higher than a year ago, but it’s moving in the right direction just in time for Thanksgiving travel. Mid-grade is down to $4.4025 from $4.8549 a month ago, and premium is down to $4.7966 from $5.2456. E85 has dropped below $3, to $2.9818.

Diesel is still the sore thumb. It’s at $6.064 a gallon, down 3.4 cents from yesterday, 16.7 cents in a week and 21.5 cents in a month, but still a whopping $2.30 higher than the $3.7648 of a year ago. That means farmers, truckers and anybody who buys anything that moves on a truck are still paying a war premium. Diesel is falling much more slowly than gasoline, and those costs will keep showing up in food and freight prices for months. . Diesel’s still stuck in traffic.

Still the headlines will keep the market jumpy, and we could see sharp spikes on any attack in the Strait. But the fundamentals are turning bearish, and a postwar glut is coming into view. Trade the headlines carefully, sell the spikes, and watch the OPEC+ meeting on November 29. The EIA’s Weekly Petroleum Status Report backs up the glut story. The report came out a day late yesterday because of the Veterans Day holiday, and it was bearish across the board.

Commercial crude inventories rose 4.7 million barrels to 414.4 million in the week ended November 6. Analysts in a Reuters poll had expected a 1.1 million-barrel draw.

Crude supplies are still 4% below the five-year average, but the direction has changed. Cushing, Oklahoma, the delivery point for WTI, rose 106,000 barrels. Crude imports jumped 325,000 barrels a day to 6.7 million, and the four-week average is running 14% above a year ago. Those Gulf barrels are finding their way to our shores.

Refiners are running hot, and that’s filling up the tanks. Refinery crude runs rose 322,000 barrels a day to 17 million, and utilization hit 95.2% of capacity. Gasoline inventories rose 1.8 million barrels to 210.8 million, against expectations for a small draw, and they’re now 1% above the five-year average. No wonder pump prices are falling like a rock. Gasoline demand is soft, with the four-week average down 1% from a year ago at 8.7 million barrels a day.

Diesel is still the pressure point, but it’s getting some relief. Distillate inventories rose 4.1 million barrels to 103.3 million, compared with expectations for a 1 million-barrel drop. That’s the good news. The bad news is that distillate supplies are still 8% below the five-year average and down 6.8% from a year ago. On the East Coast, they’re down more than 12% from last year as we head into heating season. Distillate demand is up 4.2% from a year ago at 3.9 million barrels a day, so diesel stays stubborn. Total commercial petroleum inventories rose a whopping 11.4 million barrels in a week. When you build crude, gasoline and distillates all at once, that’s the sound of a glut knocking at the door.

Crude, gasoline and diesel all built last week It’s just too bad that it couldn’t have happened a few weeks ago before the midterm elections. Natural gas is the market that’s feeling the chill, and Fox Weather says Old Man Winter is moving in this weekend. Natural gas funds are shorter than a November day in Chicago, and Fox Weather just told them to grab a coat.”

The Fox Forecast Center says the most widespread and powerful blast of cold air so far this season is pouring in behind the nor’easter. By today, more than 230 million people in over 30 states east of the Rockies will see below-average temperatures, and many cities will get their first freeze. Omaha and Kansas City are expected to lock in their first hard freeze, with lows in the mid-to-upper 20s. Chicago and Detroit will drop below freezing for the first time this year, with Great Lakes highs stuck in the low 40s and some overnight lows well below 20. Louisville, Indianapolis and Roanoke get their first freeze Saturday and Sunday mornings. Even northern Florida could see lows in the upper 30s and patchy frost. The nor’easter is bringing the season’s first significant snow to the interior Northeast and higher elevations, with some spots possibly getting up to a foot and a half, plus lake-effect snow near Chicago and northern Indiana. Fox Weather says the chill will hang on in the East into next week, while the central U.S. warms up.

That cold sent December natural gas up 12.5 cents, or 3.9%, yesterday to settle at $3.340. It stayed just under Wednesday’s 8-month high, according to Barchart.

This morning it’s giving back about 7 cents, near $3.27, ahead of today’s storage report. The Commodity Weather Group says the outlook is trending cooler across the Midwest and Northeast for November 22 to 26. Prices have been running in overbought territory, and part of this rally is short covering. Speculators built their biggest net short since March 2020, and when it gets cold, shorts get nervous.

The EIA storage report comes out today at 9:30 AM CT instead of Thursday because of the holiday. Estimates for the week ended November 6 range from about 65 Bcf (Investing.com) to the low to mid 70s. That compares with a five-year average of about 40 Bcf and 43 Bcf a year ago, so it’s a bearish number on paper. Storage stood at 3,801 Bcf last week, 1.4% above the five-year average, and analysts expect the surplus to grow to about 2.1%. Supply is easing, though. LSEG says Lower 48 output has dropped to 112.3 Bcf a day in November, from 113.4 in October and a record 115 in August. LNG feedgas is running near record levels as Europe races to fill storage for winter. The South Central region, home to the LNG export hub, is still 1.1% below its five-year average.

Here’s the bottom line for natural gas: a big injection could knock prices down this morning, but the market is looking ahead to winter, not back at last week. With the first real cold of the season, record LNG demand, falling output and a mountain of fund shorts, dips could be a buying opportunity. Yet Spike could be a sell. The wild card is the “Super El Niño,” which could still bring a milder winter. Expect fireworks either way.

Before you head out into the cold, download the Fox Weather app and stay tuned to the Fox Business Network. Sign up for the wildly popular Phil Flynn Daily Trade Levels, and get the Manic Metals Report. Follow me on X at @EnergyPhilFlynn, and call 888-264-5665 or email pflynn@pricegroup.com to open an account at Price Futures Group.



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