Evans on Energy Weekly Update-November 7, 2026

Evans on Energy Weekly Update

The Geopolitical Context

After the rally of the past three weeks, crude oil prices have tipped into a downward correction as diplomats work to head off the planned US-Israeli attacks that would renew hostilities with Iran.  The back-channel talks reportedly continued even after a US strike on Iran’s Qeshm Island in the Strait of Hormuz in response to Iranian attacks targeting US aircraft and commercial shipping.  A reported rebound in shipments through the strait has contributed to the weaker sentiment.

The threat of escalation may have added urgency to talks but It’s far from clear that positions have shifted from earlier cycles that failed to reach an agreement, or even sustain a temporary cease-fire.  There are even reports that some Iranian clerics are in favor of abandoning Iran’s commitment to nuclear non-proliferation, arguing that obtaining a nuclear weapon would serve as an effective deterrent.  In the near term such a move would likely draw renewed attacks on Iran’s nuclear sites.  In contrast, any deal that includes the transfer of highly enriched uranium out of Iran would represent a real breakthrough, effectively bringing the war to an end.

The US mid-term elections may also have some impact on the course of the war, with Democrats taking control of both the House of Representatives and Senate, with the possibility of fresh legislative limits on the Trump Administration’s conduct.  However, this shift would not even begin to take effect until January, and would likely be resisted both through the president’s veto power and by assertion of executive authority that has largely sustained the conflict so far.  In the near term, President Trump may opt to take advantage of the residual Republican control of Congress.

Overall, both the US political landscape and the war with Iran may have reached a tipping point, but significant risks remain, with renewed conflict still a strong possibility.  We are reminded of an episode just before the 1990 war to push Iraq out of Kuwait, when last-minute talks between US Secretary of State James Baker and his Iraqi counterpart Tariq Aziz went on longer than expected raising hopes of progress.  But as soon as Baker said “regrettably” at the news conference, oil prices spiked and the stage wa set for the war that followed.

Beyond the war with Iran, we don’t want to lose sight of the other conflicts putting oil supplies at risk.  Saudi Arabia and the Iranian-backed Houthi rebels in Yemen continue their fight.  While Houthi drone and missile attacks have mostly been intercepted, they continue on an almost daily basis.  There have also been some reports of Houthi forces conducting raids into Saudi territory along their shared border.

The war between Russia and Ukraine also remains a key element supporting oil prices, as Ukraine continues to target Russian refineries and oil terminals to undercut both Russia’s direct military effort and its critical export revenues.  International support for Ukraine has turned mixed, with the US backing turned soft ahead of a possible summit between US President Donald Trump, Russia’s Vladimir Putin and China’s Xi Jinping.

The pullback in nearby Brent crude oil has left behind the recent high of $117.43 as technical resistance, a step down from the $126.10 peak reached in April on the initial reaction to the war with Iran.  We would look for resistance in the $105-106 area on the way back up.  Brent has fallen to a level last seen in August, but may be finding support in the $94-95 area that equates roughly with a late September low and prior failed resistance.

As tends to be the case, the selling has been focused at the front of the curve, with the January-April calendar spread that settled at $10.84 on October 23 falling as low as $6.35 on a closing basis.  This may be already taking hold as a support level, roughly matching prior congestion from September and early October valuations.  The recovery in the calendar spread both reasserts that the physical market remains tight and supports renewed strength in the outright price of Brent crude oil.

Crude Oil

The US WTI crude oil futures remain supported by declining US commercial crude stocks with the DOE confirming a moderate 0.9 mmbls draw for the week ended October 30 to 409.8 mmbls, the lowest total since July 31.  Inventories were 11.4 mmbls (2.7%) lower than a year earlier and 17.1 mmbls (4.0%) below the five-year average.  This year-on-five-year average deficit was slightly smaller than the week before, suggesting a modest easing on a seasonally adjusted basis.

Inventories at the Cushing, Oklahoma delivery point for WTI futures increased 0.3 mmbls on the week to 27.3 mmbls and remained relatively comfortable.  For example, the total was 4.4 mmbls (19.2%) higher than a year ago and 2.5 mmbls (9.9%) above the five-year average.  The tightness is focused on the Gulf Coast (PADD 3) and the West Coast (PADD 5).

The supply of crude oil for last week included a 0.4 mmbls transfer out of the Strategic Petroleum Reserve that reduced the remainder to 282.2 mmbls, the lowest level since 1982.  The SPR was 127.4 mmbls (31%) lower than last year and down 133.3 mmbls (32%) from their March peak.  US crude oil production increased 11,000 bpd to a record 14.003 mmbpd according to the DOE’s latest estimate.  The lagging four-week average of 13.736 mmbpd was 96,000 bpd (0.7%) higher than last year.

Imports of crude oil were unchanged at 6.374 mmbpd last week, while the four-week average of 6.139 mmbpd was 534,000 bpd (9.5%) more than a year ago.  Exports dropped 1.179 mmbpd on the week to 3.675 mmbpd, retracing most of the prior week’s increase.  Four-week average exports of 4.135 mmbpd were 214,000 bpd (4.9%) less than last year.  Taken together, US net imports of crude oil increased 1.179 mmbpd on the week to 2.699 mmbpd, while the four-week average of 2.004 mmbpd was 748,000 bpd (60%) more than over the same span of 2025.

The SPR release, the increased US crude oil production and higher net imports are all going to support increased refinery throughput in response to record profit margins.  Refinery runs increased 199,000 bpd last week to 16.725 mmbpd, the highest rate since the week ended September 18.  This raised the four-week average crude runs to 16.629 mmbpd, an increase of 1.295 mmbpd (8.4%) from a year earlier.  Refinery runs typically walk higher seasonally through year-end with little scheduled maintenance on the agenda.  At the same time, with the operating rate already at 94.5% there’s less headroom than usual for higher rates.

Looking ahead to the next round of data we see potential for a week-to-week drop in net imports to offset an incremental further rise in refinery runs, leaving commercial crude oil inventories little changed or as much as 2.0 mmbls lower.  While reflecting a relatively stable balance, we note comparisons with the 6.4 mmbls build in the same week of 2025 and the 5.2-mmbls five-year average increase would look bullish.

The price action is likely to remain driven by the swings in perceived geopolitical risk to supply, even as declining inventories remain a supportive background feature.

Heating Oil (ULSD)

The heating oil futures have weakened in sympathy with the drop in crude oil prices, even after the DOE reported a larger-than-expected 3.6 mmbls draw from US total distillate inventories for the week ended October 30.  The new total of 99.3 mmbls was 12.3 mmbls (11.0%) lower than a year ago and 14.8 mmbls (13.0%) below the five-year average.  The year-on-five-year average deficit was the largest since October 9.

At the same time, inventories in the East Coast (PADD 1) region surrounding the NY Harbor delivery point for ULSD futures posted an increase of 0.7 mmbls to 22.6 mmbls, the largest Cushion since August 7.  Even so, East Coast stocks remain tight, down 3.8 mmbls (14.5%) from last year’s level and 7.1 mmbls (23.9%) below the five-year average.

Despite the increase in refinery crude runs for last week, distillate output declined 7,000 bpd to 5.154 mmbpd, the lowest rate since the week ended September 25.  This still represents a strong overall supply effort, with the four-week average rate of 5.184 mmbpd up 576,000 bpd (12.5%) over the same period in 2025.  Refiners continue to maximize distillate output in response to what remain record margins for the fuel.

Distillate trade flows are contributing to the US tightness at the margin, with imports declining 40,000 bpd on the week to 117,000 bpd and exports rising 21,000 bpd to 1.341 mmbpd.  Taken together, US net exports increased 61,000 bpd in the week ended October 30 to 1.224 mmbpd.  This was a near match with the four-week average net export of 1.219 mmbpd that was 97,000 bpd (8.6%) higher thana year ago.

US product shipments of distillate increased 232,000 bpd last week to 4.439 mmbpd, the highest level since last February.  While there was a definite seasonal element to the increase, the four-week average of 4.175 mmbpd implied demand 333,000 bpd (8.7%) higher than a year ago, certainly a bullish statistic.  At the same time, we think this overstates the resilience of demand in the face of high prices.  The more careful accounting of the revised monthly data series from August (the most recent figure available) showed offtake of 3.705 mmbpd, a decline of 67,000 bpd (1.8%) from a year earlier.

While we expect refiners to continue making and shipping as much distillate as possible there’s also a good chance that the market came back into a closer balance in the week ended November 6.  This could leave distillate inventories little changed, with a more neutral comparison with both the 0.6 mmbls draw in the same week of 2025 and the 0.8-mmbls five-year average decrease.

The nearby December heating oil (ULSD) crack spread premium over WTI crude oil continues to consolidate near $90 per barrel.  Concern over supplies peaked at $107.45 back on October 13 and it looks as though a market top has been established.  At the same time, this looks like an orderly retreat with a limited downside from current levels, as opposed to a bubble that has burst.

RBOB Gasoline

The US gasoline futures continue to flash signs of seasonal weakness with inventories holding above their end of driving season lows.  The DOE reported a 0.2 mmbls decline in US total gasoline inventories for the week ended October 30, but at 209.0 mmbls stockpiles were 2.9 mmbls (1.4%) higher than a year ago and just 4.2 mmbls (2.0%) below the five-year average.  This was the smallest year-on-five-year average deficit since April, extending the established trend of easing tightness.

The overall decrease in gasoline stocks was driven by a larger 1.9 mmbls drop in the East Coast (PADD 1) regions surrounding the NY Harbor delivery point for RBOB futures.  While the weekly draw might suggest support, we note that it followed a 2.3 mmbls build in the prior week.  The latest total of 52.1 mmbls was 0.4 mmbls (0.8%) higher than last year and 1.4 mmbls (2.6%) below the five-year average.  These are similar comparisons to the national picture, rather than anything exceptional.

US refinery production of gasoline increased 463,000 bpd on the week to 9.704 mmbpd, a recovery following the drop of 509,000 bpd in the prior period.  Four-week average output of 9.482 mmbpd was 112,000 bpd (1.2%) lower than a year ago, a contrast with the corresponding 8.4% increase in crude runs that underscores refinery efforts to maximize distillate production in response to record margins on that side of the business.

Gasoline trade flows were supportive in the week ended October 30, but little changed overall from a year ago.  Imports declined 48,000 bpd on the week to 351,000 bpd and exports rose 172,000 bpd to 1.017 mmbpd.  The net result was a 220,000-bpd week-to-week increase in net exports to 666,000 bpd.  Four-week average net exports of 510,000 bpd were 9,000 bpd (1.7%) lower than over the same stretch of 2025, a modest shift.

US domestic product shipments of gasoline increased 450,000 bpd on the week to 8.808 mmbpd, a partial recovery after the 624,000-bpd drop in the prior period.  The four-week average implied demand of 8.639 mmbpd that was 38,000 bpd (0.4%) less than a year earlier.  As we noted in our distillate market overview, the weekly data only provides a first take on gasoline demand.  The more careful accounting in the revised monthly data for August showed demand averaging 8.980 mmbpd, a decline of 246,000 bpd (2.7%) from a year earlier.

With refiners still riding the brakes on production and gasoline shipments holding up well, we could see a moderate 0.5-1.5 mmbls draw from gasoline inventories for the week ended November 6.  The actual data will compare with both a 0.9 mmbls decrease from a year ago and a larger 2.6-mmbls five-year average drop, and so would not necessarily look supportive on a seasonally adjusted basiss.

The December edition of the RBOB crack spread premium over WTI crude oil has already registered a sharp decline from the $42.42 level peak settlement from October 1 to recent trade below the $25 mark for the first time since June.  While we continue to see this decline as primarily seasonal, we note the decline signals refiners to trim gasoline output further, although overall runs will remain strong given the distillate crack at $90.

US Natural Gas

The US natural gas futures demonstrating some sense of buoyancy despite the break to new lows posted October 30 in the December futures, the lowest level for a nearby contract since April.  While the price action looks like constructive base building, December futures would need to clear recent resistance at $3.09-3.10 and failed support at $3.23-3.25 to make a more confident bullish statement.

The DOE reported 77 bcf in net injections into US working gas in storage for the week ended October 30, roughly in line with consensus expectations.  Total storage of 3,801 bcf was still 109 bcf (2.8%) less than a year ago but 54 bcf (1.4%) above the five-year average.  After trending lower over a ten-week period, the year-on-five-year average storage surplus has increased the past two weeks as robust production and moderate weather-related demand has shifted the balance in a bearish direction.

The bearish comparisons look set to continue over the balance of November, even as seasonally rising heating demand brings net injections to a close and tips the flow into net withdrawals.  For the week ended November 6 this could mean another net injection in the 75-80 bcf range, well above the 40-bcf five-year average rate.  This would lift the year-on-five-year average surplus to 89 bcf or more, the highest level since September 18.

While it would only take an early December cold snap to erase the storage surplus and send prices higher, the current forecast implies a limited upside and at least some degree of renewed downside risk.  Ongoing moderate seasonal heating demand extending into December would add to the possibility that December futures expire weak, converging with a soft physical market at the lower level.

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.

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