Daily Energy Market Update-August 25, 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

Oil prices eased on Monday but held within reach of last week’s highs as tensions with Iran remained high as the market awaited fresh details of US sanctions on Iran’s trading partners from US Treasury Secretary Scott Bessent, in what has been desribed as an “economic D-day.”

Treasury Secretary Bessent has been taking the lead on a number of fronts recently, with a campaign to support the bond market and stem a decline in the  dollar after US debt reached the $40 trillion mark.  And now the Trump administration has asked him to take the lead in the new campaign to pressure Iran’s economy by curtailing its trade opportunities.

Iran has not been silent in the face of these prospects, warning their trading partners against cooperation with the US program and tightening its control of tanker traffic through the Strait of Hormuz.  Taken together, these latest developments suggest both the US and Iran are settling into a longer-term campaign rather than renewed diplomatic efforts for a negotiated peace.

Saudi Arabian tanker traffic through the Bab-El-Mandeb Strait at the southern end of the Red Sea is also at risk from Yemen’s Iranian-backed Houthi rebels, who have been waging a campaign to take control of the port city of Mokha overlooking the Strait.

Crude Oil

Beyond the larger geopolitical picture, the wider market will also factor in the weekly US inventory data.  While not always representative of the global supply/demand balance, we still value the weekly numbers as an indication of what’s been happening at the margin of the market.  This has included 122 mmbls of crude oil drawn from the US Strategic Petroleum Reserve since March that has helped hold commercial crude stocks at their five-year average level.  The more critical developing tightness has been in refined products.

The recent crude oil inventory data included the surprise 17.4 mmbls build for the week ended August 7.  This was followed by a rebalancing to a smaller 4.4 mmbls gain in the report covering the week ended August 14.  We see potential for this to set up a further tightening that might yield a 4-6 mmbls draw in Wednesday’s DOE report for the week ended August 21.

The market’s minor retreat helps set interim technical resistance at $94.82 basis October Brent crude oil, with any new highs expanding the upside toward the $98-102 highs from mid-July as the next high-profile target.  For October WTI, last week’s high tick of $87.69 was a near match with the $88.07 peak from July 23, adding to the sense of resistance at that level.

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.  These international outages have pressured US supplies, with US total distillate inventories declining 1.5 mmbls in the week ended August 14 to a new low of 13% below their five-year average.

Over the past month, US distillate inventories have declined by an average of 1.0 mmbls per week and so we’d anticipate a further draw on the order of 0.5-1.5 mmbls in the DOE data for the week ended August 21.  This decline has come at a time of year when refinery rates are high to meet gasoline demand, normally adding to distillate stocks.  Thus, the decline in distillate stocks has expanded the year-on-five-year average deficit.

While distillate stocks are extremely tight and may tighten further, heating oil prices have already achieved a recover valuation that may prove difficult to sustain.  October heating oil futures have already settled for as much as $97.50 per barrel over WTI crude oil on August 18.  As we have noted since last week, declining upward momentum was a hint that a technical correction was a possibility.

RBOB Gasoline

The US gasoline market has been less affected by the international refinery outages than the distillate side, and supplies look at least somewhat more comfortable after the DOE posted a 0.7 mmbls build in US total gasoline inventories for the week ended August 14.  At the same time, stock levels remain on the lean side, roughly 5% below their five-year average benchmark.

Although the overall refinery operating rate remains high at 97.2% as of August 14, suppliers are typically drawing down inventories of summer specification fuel at this time of year, and that may be accelerated this year after the EPA announced the requirements would be phased out two weeks early this year.  Overall, we’re anticipate a 0.5-1.5 mmbls draw from US gasoline stocks for the week ended August 21, following the established seasonal pattern.

October gasoline continues to trade at a crack spread premium over WTI crude oil near $40 per barrel, a valuation close to where it was a month ago.  The upcoming Labor Day holiday represents the traditional end of the summer driving season, with demand set to fade.  But at least initially, the September-October cycle of seasonal refinery maintenance will result in an offsetting decrease in supply. 

US Natural Gas

In contrast with the petroleum complex, the US natural gas market continues to trade on its typical blend of storage and weather.  Early estimates for Thursday’s DOE report for the week ended August 21 are centered around 19 bcf in net injections, less than the 33-bcf five-year average for the date.

Nearby September natural gas futures continue to consolidate within the range of the past four weeks.  With US working gas in storage 0.9% lower than a year ago, the price is holding a modest premium over the $2.622 low trade from last August.  The market is also trading a step above the $2.495 low reached last March.

The forward market and winter strip remains at a premium to the nearby futures, with associated risk of a further decline.  December futures broke below the $3.50 level last week but are attempting to build a base of technical support near the lower boundary of the established declining price channel.

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.