Evans on Energy Weekly Update-September 28, 2026

Evans on Energy Weekly Update

The Petroleum Markets

Geopolitical uncertainty remains the top issue for the global petroleum complex, with the US conflict with Iran still limiting tanker traffic through the Strait of Hormuz, the ongoing contest between Iranian-backed Houthi Rebels and Saudi Arabia pinching the Bab El-Mandeb strait at the southern end of the Red Sea, and Ukraine maintaining pressure on Russian oil refineries.

On Thursday, Iran made the fresh offer to reopen the Strait of Hormuz within seven days if the US released Iranian assets, with the promise of nuclear talks to follow.  The offer dangled the possibility of related price relief in time for the US mid-term elections.  However, by Saturday US President Donald Trump rejected the offer as “unacceptable.”  But on Sunday, Iranian Foreign Minister Abbas Araghchi said he was still waiting for “the definitive views to be conveyed to us through the intermediaries” rather than relying on the President’s word.

Overall, we see some ongoing chance of a diplomatic breakthrough for an updated variation on the memorandum of understanding (MOU) that failed to hold over the summer.  However, the established lack of trust on both sides suggests any deal will be fragile, at least initially.  Ongoing conflict seems more likely.

With only days left to trade, nearby November Brent futures have remained volatile within a recent $97.36-110.41 range, with the $103.89 midpoint as a defined pivot.  The substantial backwardation in the calendar spread structure suggests ample potential for the deferred contracts to step higher in the event the physical market remains tight.  Strong crack spreads also support solid ongoing refinery demand for crude oil.

Crude Oil

WTI crude oil futures continue to track closely with the international Brent benchmark and thus remains driven primarily by the day-to-day fluctuations in the perceived geopolitical risks to supply.  In contrast, the US physical crude oil market has remained well stocked as the result of refinery efforts to support high operating rates in response to record margins.

After the 3.0 mmbls build in the week ended September 18, commercial inventories of 426.4 mmbls were 11.6 mmbls (2.8%) higher than a year ago and 7.2 mmbls (1.7%) above the five-year average, the largest year-on-five-year average surplus since April.

Refinery crude runs declined 519,000 bpd last week to 16.811 mmbpd, as scheduled seasonal maintenance resulted in the lowest level since May.  Even so, the four-week average runs of 17.306 mmbpd were 659,000 bpd (4.0%) higher than last year, illustrating the overall response to record margins on a seasonally adjusted basis. Over the next 8 weeks we anticipate a further decline in runs to perhaps the 16.0-16.2 mmbpd level, which may take some pressure off inventories.

Looking ahead to the data for the week ending September 25 we see a further 1-2 mmbls build in US commercial crude stocks as likely.  The actual result will compare with a 1.8 mmbls gain in the same week of 2025 and a 0.6-mmbls five-year average draw, so we anticipate little fresh pressure on prices in either direction.

Thursday’s $96.78 high in nearby November WTI futures looks like a pivotal resistance level, with a move above that point setting up a review of $101.69 high trade from September 15.  Last week’s $88.67 low trade from September 22 looks increasingly important as technical support.

Heating Oil (ULSD)

Heating oil prices have eased from record levels as the market evaluates the odds of a potential US ban on distillate exports.  As part of a similar discussion, India has opted to honor existing export contracts rather than ban them in defense of the domestic market.  As we’ve noted, US four-week average net exports of distillates of 1.435 mmbpd were 269,000 bpd (23%) higher than a year ago, so blocking this flow would have a definite impact on US marginal supply and prices.

After a 0.4 mmbls draw for the week ended September 18, DOE total distillate inventories of 107.4 mmbls as of September 18 were 14.6 mmbls (12.7%) lower year-on-year and 15.8 mmbls (12.8%) below the five-year average. With US refiners conducting seasonal maintenance, we think the data for the week ending September 25 could show a 1-2 mmbls draw, similar to the 1.2-mmbls five-year average decrease.

The November edition of the heating oil crack spread premium over WTI crude oil that settled for as much as $112.50 per barrel on September 16 closed at $95.00 on Friday.  We expect heating oil to remain highly volatile at what have been unprecedented levels.  After failing to sustain record valuations, we can’t rule out a deeper correction.

RBOB Gasoline

The gasoline futures softened further in Friday trade, with the November RBOB crack spread premium over WTI that settled at $48.14 on Wednesday ending the week at $41.47 per barrel.  Even so, this was a significant step up from the $34.63 level from September 14.

Seasonal factors may dominate the US gasoline market, with softer demand following the summer driving season tending to be offset by lower refinery production due to scheduled maintenance.  Inventories typically chop sideways to lower, with the five-year average bottoming out in November.

The DOE reported a 1.7 mmbls decline in US total gasoline inventories for the week ended September 18.  At 206.0 mmbls, the total was 10.5 mmbls (4.9%) lower than last year and 12.9 mmbls (5.9%) below the five-year average, both larger deficits than the week before.

Looking ahead to the next round of figures, we see potential for a further 0.5-1.5 mmbls draw, comparable to the 0.8-mmbls five-year average decrease, as scheduled refinery maintenance may continue to offset softer seasonal demand.

In terms of technical support, gasoline prices may also attract buying interest as a rotation away from the heating oil, given its more conservative relative valuation.

US Natural Gas

The US natural gas futures market scored a clear breakout to the upside last week as nearby futures jumped above the $3.00 mark for the first time since July as storage rose less than the five-year average for a sixth consecutive week.  Total storage of 3,351 bcf was still 95 bcf (2.9%) above the five-year average, but this was the smallest surplus since April 3.

Storage refills are expected to continue lagging the five-year average in the weeks ahead, even as modest shoulder seasonal demand allows more robust injections.  For the week ended September 25 we put the consensus expectation at 66-67 bcf in net injections, still less than the 80 bcf five-year average gain.  Near-average storage may not seem particularly bullish, but the declining surplus still confirms the market is trending at least somewhat tighter on a seasonally adjusted basis.

Nearby October natural gas futures have now cleared the $3.00 level by a sufficient margin that this failed resistance level should now offer support.  Weekly highs from June and July in the $3.35-3.40 range will be the next hurdle for the market.

December natural gas left behind Thursday’s $3.709 high as technical resistance.  We anticipate support in the $3.45-3.50 area, well ahead of the $3.342 low trade from September 21.

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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