Evans on Energy Weekly Update-September 14, 2026

Evans on Energy Weekly Update

The Geopolitical Context

Crude oil prices have surged to their highest level since May as escalating conflicts in the Middle East are putting increased pressure on dwindling inventories.  Over the past week, the US and Iran have traded attacks on tankers in the Strait of Hormuz, adding a further obstacle to a negotiated cease-fire, let alone a lasting peace deal.

The brewing war between Saudi Arabia and the Iranian-backed Houthi rebels in Yemen also saw escalation, including attacks on oil facilities in southern Saudi Arabia.  The Houthis have also reportedly taken control of the port city of Mokha, obtaining closer access to the Meb al-Mandeb strait controlling shipping through the southern end of the Red Sea.

As one measure of the impact of the regional unrest on oil supplies, Saudi Arabia reported to OPEC that it’s oil production fell 1.9 mmbpd to average 6.238 mmbpd during August, the lowest monthly figure since 1990.  We note this is even lower than the OPEC estimated Saudi supply to the market of 7.122 mmbpd.

On Friday, it was also reported that Saudi Arabia shut its East-West Pipeline to move crude oil to the Red Sea after an attack that was launched from inside Iraq, possibly broadening the conflict that much further.  The Iraqi government has denied involvement and is investigating, but the presence of a militia group with this kind of regional reach is troubling, nonetheless.

OPEC Developments

While OPEC and the broader OPEC+ alliance remains a key factor in regulating the physical balance in the petroleum markets over the longer term, its influence has been weakened by recent events.  The UAE quit the group in May and founding member Venezuela has signaled its willingness to withdraw in hopes of attracting fresh investment.

OPEC+ production targets are being left unchanged for October, but with output constrained by war these nominal targets are less relevant to forecasting the arc of actual production.

On Thursday, OPEC also released its Monthly Oil Market Report including its latest demand assessment.  Despite the higher prices, global petroleum demand is still seen increasing 0.4 mmbpd in 2026, with offtake next year seen growing 2.4 mmbpd.  The forecast also serves as a reminder that second half offtake is seasonally stronger than over the first six months of the year.

Crude Oil

While the geopolitical risks may be keeping pressure on global inventories, US total petroleum inventories edged higher last week, possibly reflecting a stronger effort to hold on to the stocks necessary to maintain supplies.

On the crude oil side, supplies included the latest release of 1.2 mmbls from the Strategic Petroleum Reserve to 285.4 mmbls, the lowest level since 1982.  This brings the cumulative release since March to 130.1 mmbls (31%).  The flow from the SPR helped limit the draw from US commercial crude stocks to just 0.4 mmbls to 424.1 mmbls, just 0.6 mmbls (0.1%) less than a year ago.  Commercial crude stocks were also 2.7 mmbls (0.6%) above the five-year average.

The data for last week included a 0.7 mmbls decrease at the Cushing, Oklahoma delivery point for WTI futures.  Cushing inventories of 21.8 mmbls were still a step above the July lows but remain tight, down 2.0 mmbls (8.5%) from a year earlier and 6.0 mmbls (21.6%) below the five-year average.  These were both expanded deficits compared with the week before.

In our view, refiners are working to maintain normal working inventories to support strong refinery runs in an era of record crack spread margins.  For the week ended September 4, crude runs increased 90,000 bpd to 17.586 mmbpd.  This helped sustain a four-week average of 17.468 mmbpd that was 524,000 bpd (3.1%) higher than a year ago. 

Even with record margins, refiners will need to perform at least some cycle of scheduled seasonal work over the next eight weeks or so.  At the same time, we expect refiners will defer any work that can be deferred, and to minimize downtime.  Even so, we’d expect four-week average crude runs to fall to perhaps 16.2 mmbpd by the end of October, even as this would mark a significant year-on-year increase.

The next round of data for the week ending September 11 will span the Labor Day holiday, which can distort trade flows and refinery shipments of product.  Overall, we’d look for commercial crude stocks to be little changed for a second week, with product inventories showing a further short-term build.

Overall, the surge in crude oil futures prices to the highest level since May looks well supported by the ongoing geopolitical risks to supply.  The market may now be short-term overbought, but we’re not yet seeing a loss of momentum that would signal vulnerability to a technical correction.

Friday’s pullback from a new high for nearby November Brent of $110.41 set at least interim technical resistance at that level, with any break beneath the $103.48 low representing a daily reversal.  But we would look for additional support associated with failed resistance in the $98-102 zone.

For nearby October WTI, Friday’s $98.48-104.46 range will be pivotal and we see additional support in the $93-95 area.  Scanning the forward market suggests there may be relative bargains out the curve.  With October settling Friday at $100.05, November was $95.94, December was $91.43, and January settled at $87.68 per barrel.

Heating Oil (ULSD)

Heating oil prices remain the strongest component of the global petroleum complex despite a weekly uptick in US total distillate inventories.  DOE distillate stocks increased 2.1 mmbls in the week ended September 4 to 106.3 mmbls, their highest level since August 7.  Even so, inventories were also still tight, off 14.4 mmbls (11.9%) from a year ago and 14.3 mmbls (11.8%) below their five-year average.  The year-on-five-year average deficit was the smallest since July 31.

The build for last week was focused in the East Coast (PADD 1) inventories surrounding the NY Harbor delivery point for NYMEX ULSD futures, where stocks rose 2.4 mmbls to 21.7 mmbls.  While this narrowed the gap with historical levels, East Coast stocks were still 8.6 mmbls (28%) less than a year ago and 11.0 mmbls (34%) below their five-year average. 

With nearby futures and retail prices alike surging to record levels, demand is under pressure but showing only a moderate decline.  Distillate product supplied increased 288,000 bpd last week to 3.678 mmbpd, helping sustain a four-week average of 3.715 mmbpd that was just 98,000 bpd (2.6%) lower year on year.

Given that refiners routinely cut back on shipping schedules over the Labor Day holiday, we see potential for a further 1-2 mmbls build in DOE distillate stocks for the week ended September 11.  Any relief may be temporary, however, as seasonal refinery maintenance will reduce supply over the next 8 weeks or so, typically resulting in new lows in distillate inventories.

Nearby ULSD futures have set new records with a surge beyond the $5 mark that has also resulted in a record October heat crack spread of more than $110 per barrel.  These elevated levels in a thinly traded element of the market carry significant risk of a volatile technical correction.  Cutting back on position size or rolling forward into more moderately priced contracts may help to adjust for this possibility.

RBOB Gasoline

The US gasoline market is lagging a bit behind the gains across the rest of the petroleum complex now that the traditional summer driving season has ended and DOE total gasoline inventories rose by 1.3 mmbls for the week ended September 4 to 206.9 mmbls, the highest level since August 14.  Although far less tight than the distillate inventories, gasoline inventories were still 13.1 mmbls (5.9%) lower than a year ago and 10.5 mmbls (4.8%) below their five-year average.  This was the smallest year-on-five-year average deficit since May 29, and so easing tightness is the larger theme.

The East Coast (PADD 1) inventories surrounding the NY Harbor delivery point for NYMEX RBOB futures shared in the larger pattern, with a 0.4 mmbls increase to 53.0 mmbls.  At that level, East Coast stocks were 2.7 mmbls (4.8%) lower than last year and 2.5 mmbls (4.5%) below their five-year average.  As with the overall US figures, this reflected an easing tightness on a seasonally adjusted basis.

Soft apparent demand is behind the easing, with refinery shipments declining 371,000 bpd last week to 8.551 mmbpd, the lowest figure since February.  Four-week average shipments implied demand of 8.801 mmbpd, a rate 126,000 bpd (1.4%) lower than over the same span of 2025.

Apparent demand is likely to remain soft in the next round of data as refiners typically cut back on shipping schedules over the Labor Day holiday.  We think this might allow a further 1-2 mmbls build in US gasoline inventories for the week ended September 11.  The comparable five-year average result is a 1.1 mmbls gain.

While demand will be seasonally weaker in the months ahead, we note that scheduled refinery maintenance will result in lower production.  As a result, gasoline inventories typically hit their lows for the year in November, then rebuild easily once refinery turnarounds have been completed and production ramps back up.

With the October gasoline crack spread oscillating in the $38-42 range, the market seems to be taking its cues from the upstream WTI crude oil direction more than from the direct gasoline data and we’d expect that behavior to continue.  As with other elements of the market, we note forward values are at least somewhat lower, offering a somewhat different risk/reward profile.

US Natural Gas

The US natural gas market continues to express its characteristic independence, both from the petroleum market and the international price of natural gas.  Storage levels and US weather patterns remain the dominant factors with seasonality coming into sharper focus.

Thursday’s DOE storage report for the week ended September 4 added 40 bcf to working gas in storage to 3,254 bcf, a level 79 bcf (2.4%) less than a year ago but 148 bcf (4.8%) above the five-year average for the date.  This was the smallest year-on-five-year average surplus since May 29, extending the larger firming trend of the past month.

As an early estimate, data for the week ended September 11 is seen featuring a further 45-50 bcf net injection.  Anything less than the five-year average 74 bcf build will extend the recent firming of the market on a seasonally adjusted basis.

Storage will also be trending higher seasonally through the end of October, with the DOE Short-Term Energy Outlook projecting a peak of 3,969 bcf, about 5% above the five-year average level.  It’s worth noting that while the end of October marks the traditional end of the storage injection season, the actual peak may be slightly higher and somewhat later.  For example, the five-year average peak will arrive November 13.  A later peak effectively shortens the withdrawal season.

Nearby natural gas prices have turned lower this week after probing above the $3.00 mark, leaving behind a high of $3.026 as technical resistance.  This consigns the market to further base building above both the $2.622 low from August 2025 and the $2.495 low from March.

As we’ve been noting, the winter months trading at higher levels carry a different risk/reward profile.  December futures continue to grind lower to new lows near the bottom of their established declining price channel.  December trading $3.40 or January at $3.80 may continue to slip.

Disclaimer: 

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. 

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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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