Daily Energy Market Update-August 21, 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

There remains no easy resolution to the US-Iranian conflict, with both sides increasingly prepared for a longer-term contest of wills.  Iranian leadership has become dominated by hard-liners determined to surpress domestic unrest and wait out the remaining years of the Trump administration.

For its part, the US looks to be pivoting from military operations toward economic warfare, with President Trump threatening “tremendous economic consequences” on any nation that does busines with Iran.  Although no specific measures were mentioned, Iran’s largest trading partner has been China, followed by Turkey, Pakistan, and Iraq.  India and the UAE have also done significant business with Iran historically, but have already greatly reduced dealings.

The hope is that the increased economic pressure will bring Iran to the negotiating table ready to accept US terms for peace.  However, it also risks widening the conflict to Iran’s trading partners.  And to the extent that it translates into higher oil prices, it adds to inflationary pressures on consumers, undermining support for the campaign.

Crude Oil

The increased geopolitical tensions have contributed to this week’s rally in crude oil and could well support further gains.  At the same time, we note there is some chance of weekend developments that might change the immediate outlook, such as a renewed diplomatic effort for talks aimed at opening the Strait of Hormuz.

The US crude oil market has been cushioned from the impact of the war with Iran so far by the release of 122 mmbls from the Strategic Petroleum Reserve, an additional supply that has allowed commercial crude stocks as of August 14 to match their five-year average.  At least domestically, the tightness has been all in the refined product markets.

The impact on oil prices has included a widening backwardation, with the October-January Brent and WTI spreads firming to their highest levels since July 31.  This internal strengthening is consistent with an intermediate-term uptrend in outright prices.  October Brent settled Thursday at its highest level since July 24, keeping the upside open toward 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 that have put pressure on US supplies.  For the week ended August 14, US total distillate inventories declined 1.5 mmbls and are now 13% below their five-year average, making this the tightest element of the global petroleum complex.

The tightness in distillate stocks has already translated into a strong valuation, with October heating oil settling Thursday at 437.35, a crack spread premium over WTI crude oil of $96.86 per barrel.  The upward momentum has been weakening, suggesting some potential for a period of technical correction or consolidation.

RBOB Gasoline

The gasoline market has had a strong price run of its own, although it has lagged far behind the surge in heating oil, reflecting a smaller degree of physical tightness.  US total finished gasoline inventories posted a counter-seasonal 0.7 mmbls build for the week ended August 14, reducing the year-on-five-year average stock deficit to 5%.

Concern over gasoline supplies is also easing as the time remaining in the traditional summer driving season draws short.  Demand will be stepping lower after the upcoming Labor Day holiday, taking the pressure off supplies.  Scheduled refinery maintenance will provide an initial offset, but inventories will trend higher seasonally into the winter.

October gasoline, the first month representing winter specification fuel, settled Thursday at 300.91 per gallon near the top of its recent range and relatively overbought.  The settlement was also a crack spread premium of $39.55 per barrel over the WTI futures price.  With the strong refinery profit margins for both gasoline and heating oil we expect refiners to defer any scheduled maintenance they can.

US Natural Gas

Thursday’s DOE natural gas storage report showed a slightly larger-than-expected 16 bcf net injection for the week ended August 14.  At the same time, the build was marginally supportive compared with the 19 bcf increase from last year and the five-year average of 29 bcf.  The new total of 3,169 bcf was 0.9% lower than last but comfortably 6.2% above the five-year average.

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.  December futures continues to struggle for traction after having fallen below $3.50 this week.

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.