Daily Energy Market Update-August 20, 2026 Tim's Market Views

Interim Analyst:

· With regular analyst Mark Schaefer out of the office, interim market commentary will be provided by Tim Evans, founder of Evans on Energy.  Tim has experience writing daily market commentary on crude oil, heating oil, gasoline, and US natural gas since 1995, including 17 years as the Energy Futures Analyst at Citigroup.

The Petroleum Markets

The US-Iranian conflict remains the key background fundamental support for global petroleum prices, with no easy path to a stable agreement that would open the Strait of Hormuz and allow a recovery in upstream crude oil production.  With Ukrainian drone attacks shutting subtantial Russian refinery capacity, there has been an offsetting reduction in crude oil consumption but also a drop in refined product supply that has transferred the tightness downstream.

Crude Oil

Wednesday’s DOE inventory report for the week ended August 14 showed a a build of 4.4 mmbls in commercial crude oil stocks that we rate as a supportive rebalancing compared with the 17.4 mmbls jump in the prior week.  The increase in commerical stocks was just slightly less than the 5.3 mmbls decline in the US SPR to its lowest level since December 1982.

Last week’s rebalancing included a 215,000 bpd increase in US refinery crude runs that pushed the operating rate to 97.2% of estimated capacity.  With crack spread refining margins at record levels we expect that seasonal maintenance work will be deferred if possible, keeping rates relatively high even through September and October.

With the recent increase in stocks, US total commercial crude oil inventories have pulled even with the five-year average for this time of year.  The tightness is all in the refined products, especially the distillate markets.

Wednesday’s price action kept the upside open with a minor new three-week high.  The market may be ready for some consolidation or a short-term downward correction, even while we continue to see potential for nearby Brent to review the $98-102 highs from mid July.

Heating Oil (ULSD)

Heating oil prices remain well supported by international refinery outages, including the Ukrainian drone attacks on Russian refineries.  Although US total distillate inventories typically build over the summer, stocks fell 1.5 mmbls last week and are now 13% below their five-year average.

The expanding year-on-five-year average deficit in distillate inventories remains supportive.  At the same time, we note the October heating oil crack spread premium over WTI crude is already trading at a record $96.50 per barrel.  A technical correction in the crack spread may be possible from this record high level if buying is exhausted.

Physical demand may also be weakening in the face of rising prices.  In the four-week period ended August 14, US distillate demand of 3.719 mmbpd was 0.8% lower than a year earlier.

RBOB Gasoline

US total finished gasoline inventories increased 0.7 mmbls in the week ended August 14, a counter-seasonal build on the back of increased refinery output.  Inventories remain tight at 5% below their five-year average, although this was a smaller deficit than the week before.  Four-week average implied demand of 8.931 mmbpd was 0.9% lower than a year earlier.

Once the summer driving season draws to a close, implied demand will step lower, taking some of the pressure off gasoline supplies.  Refinery gasoline production will also step lower on scheduled seasonal maintenance although high ongoing crack spread margins provide an incentive to minimize downtime.

The confirmed build in US gasoline inventories for last week translated into a weaker price performance, with the October edition of the RBOB gasoline crack spread premium over WTI falling back to $39 per barrel.

US Natural Gas

Thursday’s DOE natural gas storage report will be the next focal point, with market expectations centered around 12 bcf in net injections for the week ended August 14.  This would be modestly supportive compared with 19 bcf last year and the five-year average of 29 bcf.

With storage little changed from a year ago, the nearby futures price is holding a step above both the $2.622 low from last August and the $2.495 low reached back in April.  While we can’t rule out a further decline as storage fills ahead of the winter with risk the physical price drag futures lower, we see the nearby market as already conservatively valued.

At the same time, with the winter strip trading at a premium to the nearby price, there is more latitude for a further decline.  For example, December futures probed below the $3.50 mark this week and has greater scope for a further decline.

About:

Evans on Energy founder Tim Evans has been writing daily market commentary on crude oil, heating oil, gasoline, and US natural gas since 1995, including 17 years as the Energy Futures Analyst at Citigroup.  The report brings a fundamental perspective informed by a Penn State degree in Mineral Economics that puts recent developments within their larger historical context.